India reveals draft of new program to support 20 GW of large PV projects by 2020

India’s Ministry of New and Renewable Energy (MNRE) has released a draft of a program to establish 25 new solar parks over the next five years. Each park will have a capacity of 500 to 1000 MW, allowing for a total of around 20 GW.

The draft policy document cites the success of Gujarat’s Charanka Solar Park, and partnership with state governments is a key aspect of the program. States would supply the land and set up the infrastructure for the solar parks, and will be obliged to buy at least 20% of the electricity from the projects.

In exchange, MNRE would provide grants up to Rs 20 lakhs (US$33,000) per MW or 30% of costs for setting up the parks, as well as grants of Rs 25 lakhs (US$41,000) per park for related expenses. MNRE estimates that the total cost of these programs and a processing fee to Solar Energy Corporation of India (SECI) will come out to Rs 4046 crore (US$665 million).

The program also appears to emphasize state governments and the central government’s SECI as developers. Private developers would have the option to partner with state governments and/or SECI, but government entities would retain 51% of the equity in the projects.

Mercom Capital CEO Raj Prabhu says that overall the program is a good sign for the incoming administration of Narendra Modi. “Opening up a new avenue of 20 GW of solar projects is India is very positive,” notes Prabhu.

However, he expresses concerns with several aspects of the program, including the emphasis on government development and ownership of the projects. Additionally, Prabhu questions the focus on very large projects.

“Since the whole world is going towards distributed energy because of the drop in prices, why is India going in the opposite direction?” asks Prabhu. “India has 25-30% transmission losses, among the highest in the world. How does it make sense to have these sorts of centralized huge projects?”

However, he emphasizes that this program is still in the early stages of planning. “This is a very preliminary draft, and I’m sure there are going to be other iterations coming and this policy is going to evolve.”