ThiscontentisforthesoleuseofSanjayBhallaworkingforInfrastructureLeasingandFinancialServices

Limited.

Indiabeingatropicalcountry,hashugepotentialforsolarpowergeneration.Thetotalinstalledcapacityof
solarenergyinthecountryasofMarch2015increasedto3,700MWascomparedtoanegligible4MWatthe
endofMarch2011,drivenbyGujaratstatesolarpolicyandJawaharlalNehruNationalSolarMission
(JNNSM).

JawaharlalNehruNationalSolarMission(JNNSM)
JNNSMwaslaunchedaspartofIndia'sNationalActionPlanonClimateChange(NAPCC)in2010.This
missionaimsatestablishingsolarpowerinIndia.AsofMarch2015,1,049MWcapacityhasbeeninstalled
underthisscheme.Themissiontargetsinclude

20GWofgridconnectedsolarpowergenerationcapacityby2022
2GWofoffgridsolarapplicationsby2022
20millionsquaremetresofsolarthermalcollectorarea
Creationoffavourableconditionsfordevelopingsolarmanufacturingcapabilityinthecountry
SupportingR&Dandcapacitybuildingactivitiestoachievegridparityby2022

Sofar,inJNNSMPhaseI,underthesolarPVtechnology,450MWwastenderedoutintwobatches150MW
(BatchI)and300MW(BatchII).Inaddition,470MWwasofferedunderthesolarthermaltechnology.

UnderPhaseII,MinistryofNewandRenewableEnergy(MNRE)issuedrevisedguidelinesforsettingup750
MWgridconnectedsolarphotovoltaic(PV)projectsbasedonVGF(viabilitygapfunding)underBatch1
(PhaseII).VGF(capitalsubsidy)hasbeenintroducedinPhaseIIduetolimitedavailabilityofconventional
powerfromunallocatedquotaofNTPCplants.MNREhasestablishedSolarEnergyCorporationofIndia
(SECI)astheexecutingagencyunderPhaseII.Underthisscheme,inOctober2013,thegovernmentfloateda
tenderfor750MWgridconnectedsolarprojectsforwhichPPA'sweresignedinthemonthofMarch
2014.Thecommissioningscheduleoftheseprojectswas13monthsfromsigningofPPAs(i.e.byApril
2015).Thetenderwasdividedinto2parts:Domesticcontentrequirement(DCR)andopencategory.The
DCRcategory(375MW)mandatedprocurementofindigenouslymanufacturedcellsandmodulesfor
crystallineandthinfilmtechnologywhereasnorestrictionwasplacedundertheopencategory(375MW).

SomeofthekeyfeaturesoftheJNNSMPhaseIIBatchIareasfollows:

Tariff

SECIshallsignaPowerPurchaseAgreement(PPA)foraperiodof25yearswiththeprojectdeveloper.
AFixedtariffofRs.5.45perunitwillbepaidtothedeveloperforaperiodof25yearsifaccelerated
depreciationisnotavailedandRs.4.75perunitincaseaccelerateddepreciationisavailed.
ThedeveloperwillsignpowerpurchaseagreementwithSolarEnergyCorporationofIndia.(SECI).The
commissioningtimelineis13monthsfromthedateofsigningofPPA,whichisthesameasJNNSM
PhaseI.Incaseofdelay,theperformancebankguaranteeofRs.2millionperMWalongwithearnest
 moneydepositofRs.1millionperMW(convertedintoperformanceguaranteeoncePPAissigned)will
beencashedbySECIaspenaltydependingontheextentofdelay.

Biddingprocedure

Developerwouldbidforviabilitygapfundingrequiredtomaketheprojectviableatthefixedtariff.
Selectionofprojectsforallotmentwillstartfromlowestbidder(L1)andgouptothelevelwhere750
MWisreachedorL1bidplus10percentisreached,whicheverisearlier.Forexample,ifaplayerbids
forviabilitygapfundingofRs.20millionperMW,playersbiddingaboveRs.22millionperMWwould
notbeallottedcapacities.
Viabilitygapfundingfundingwillbeprovidedtothedevelopertoamaximumof30percentofthe
projectcostorRs.25millionperMW,whicheverislower.

Capacities

Theminimumandmaximumcapacityperprojecthasbeenraisedto10MWand50MWrespectively.It
was5MWand20MWrespectivelyinPhase1.
Capacitieswillbeawardedbasedoncompetitivebiddingforviabilitygapfunding(VGF).Allotmentof
capacitieswillstartfromthebidderwithlowestVGFrequirementandgouptothecapacitythreshold,
i.e.375MWundereachcategory.TheVGFwillbereleasedbySECIinaphasedmannerasmentioned
below
50percentoftheVGFfundingwillbereleasedonsuccessfulcommissioningofthetotalcapacity.
Balance50percentwillbeavailedequallyoverthenext5years(10percenteachyear)subjectto
plantmeetinggenerationrequirements.
Theplantcapacityshallremaininmultiplesof10MWascomparedwith5MWearlierinPhase1.
ThetotalcapacityofSolarPVProjectstobeallocatedtoaCompany(includingitsparent,affiliateor
ultimateparentoranygroupcompany)hasbeenincreasedto100MWfrom50MWascomparedwith
JNNSMPhaseI.

Execution

Theprojectdevelopershallachievefinancialclosurewithin210daysfromthedateofsigningPPA.
IncaseofSolarPV,theprojectshallbecommissionedwithin13monthsofthedateofsigningofPPA.
TheProjectDevelopershallprovidebankguaranteetoSECIasfollows:
EarnestMoneyDeposit(EMD):Rs.1millionperMW(Inphase1,itwasRs.2millionperMW)
PerformanceBankGuarantee:Rs.2millionperMWatthetimeofsigningofPPA(inPhase1,it
wasRs.3millionperMW)
Incase,theprojectdeveloperfailstoexecutethePPAwithinthestipulatedtimeperiod,thebank
guaranteesshallbeencashedbySECIaspenalty.
Theresponsibilityofgettinggridconnectivitywiththetransmissionutilitywillliewiththeproject
developer.

Otherprovisions

ThedeveloperwouldhavetobringinminimumequitycontributionofatleastRs.15millionperMW.
Theremainingamountcanberaisedasloanfromanysourcebythedeveloper.
Iftheprojectfailstogenerateanypowercontinuouslyfor1yearoritsassetsaresoldortheprojectis
dismantledduringthetenureoftheproject,SECIwillhavearighttoclaimassetsequaltothevalueof
VGFgrantedandpaid.
Letterofcreditforaperiodof12monthswillbeprovidedtodevelopers,whichwillberenewed
annually.AfundofRs.1.7billion,whichwillcover3monthspayments,hasbeenallocatedfrom
NationalCleanEnergyFundtoensurepaymentsecurityfordevelopers.Thisfundshallbemaintainedat
thesameleveloveraperiodof25yearsthroughinfusionfromNationalCleanEnergyFund.
UnderthePhaseIIBatchIIscheme,MNREproposestoaddsolarPVcapacityof15,000MWinthreetranches
throughopencompetitivebiddingprocess.

1.ThroughTrancheI,MNREenvisagestosetup3,000MWbetween201415and201617,bybundling
thiscapacitywith1,500MWcapacityfromunallocatedNTPCpower
2.ThroughTrancheII,itplanstosetup5,000MWcapacitybetween201516and201718,
3.andthroughTrancheIII,itplanstosetup7,000MWcapacitybetween201617and201819.

ProjectsdevelopedunderTrancheIwillbeimplementedbyNVVNonsolarparksthroughan
associationofcentralandstateagencies.UnderPartIofTrancheI,1,000MWofprojectswillbedeveloped
byaJVcompanyofSECI,NEDCAPandAPGENCOinKurnool,AndhraPradesh.

Offgridapplications
Incaseofoffgridapplicationsofsolarpower,a30percentcapitalsubsidyand/or5percentannualinterest
bearingloanshasbeenapprovedforgeneralcategorystates.Capitalsubsidyofupto90percentofbenchmark
projectcostisavailableforthespecialcategorystatesofSikkim,Jammu&Kashmir,HimachalPradeshand
Uttarakhand.

Statesolarpoliciesandincentivesprovidedbystategovernments

Till201112,onlyGujaratandRajasthanhadastatesolarpolicy.PostthesuccessofGujaratstatesolar
policy,variousstatessuchasAndhraPradesh,TamilNadu,KarnatakaandMadhyaPradeshhavealso
announcedsolarpoliciesandinvitedbidstosetupsolarprojectsinpast2years.

Statewisedetails

AndhraPradeshstatesolarpolicy

Thestateannounceditsstatesolarpolicyon26thSeptember2012,whichwastoremainapplicabletill
2017.However,inFebruary2015,afterthebirfurcationofthestate,APannouncedarevisedstatepolicy.Some
theimportantpolicyhighlightsareasfollows

SolarPVprojectsshallbeeligibleforincentivesforaperiodoftenyearsfromthedateof
commissioning.
Allregisteredcompanies,governmententities,partnershipfirms,individualsandconsumersof
AndhraPradeshdiscomswillbeeligibleforsettingupsolarprojectsforsaleofelectricity/captiveuse.
PPAshallremainoperationalforaperiodof25years
Theevacuationlinefrominterconnectionpointtogridsubstationshallbelaidbythestateatthecostof
theprojectdeveloper.
Landacquisitionwillbetheresponsibilityofthedeveloper
Wheelingandtransmissioncharges,electricitydutyandcrosssubsidysurchargeareexemptedfor
captiveusers
100percentbankingispermittedforacalendaryearatthecostofbe2percentofbankedenergy.The
bankedunitscannotbeadjustedduringFebruarytoJuneandduringeveningpeakhours6.30PMto
10.30PM.

Haryanastatesolarpolicy

Thestateannounceditssolarpolicyin2014,anditwillremainapplicabletill31stMarch2017.Somethe
importantpolicyhighlightsareasfollows:
 Promotionandinstallationof100MWcapacityofscalegridconnectedsolarpowerprojectsintwo
phases.
SolarPVprojectsshallbeallowedacommissioningperiodof12monthsfromthedateofsigningPPA.
PPAshallremainoperationalforaperiodof25years.
WheelingfacilitywillbeavailabletosolarpowerprojectsandchargeswillbeleviedasperHaryana
ElectricityRegulatoryCommission(HERC).
Stateshallpromoteinstallationofsmallcapacityrooftopgridconnectedsolarpowerplantsofroofsof
industries,commercialinstitutions,residentialbuildingsetcfortheircaptiveuseandsaletopower
utilities.

MadhyaPradeshstatesolarpolicy

ThestateannounceditsstatesolarpolicyinSeptember2012.Sometheimportantpolicyhighlightsasfollows

SolarPVprojectsshallbeallowedacommissioningperiodof17monthsfromthedateofsigningPPA
whereassolarthermalprojectswouldbeallowedalongerperiodof24months
PPAshallremainoperationalforaperiodof20years
Minimumcapacityof1MWforasolarthermalprojectand0.025MWforPVprojectandamaximum
capacityof100MWforboth.
Thedevelopershallberesponsibleforlayingofpowerevacuationlinefromgeneratingstationtothe
nearestsubstationorinterconnectionpoint.
Exemptioninelectricitydutyforaperiodof10yearsfromdateofcommissioning
EquipmentpurchasedforinstallationofsolarpowerplantsshallbeexemptedfromVAT
Bankingforafinancialyearispermittedatacostof2percentofbankedenergy

TamilNadustatesolarpolicy

Thestatesolarpolicycameintooperationon26thSeptember2012andshallremainapplicabletill2017.
Howeverin2014,thestatereleasedacomprehensivetarrifforderthattookeffectfrom12thSeptember
2014.Thestatehasasetatargettosetup3000MWsolarcapacitiesby2015.Someofthesalientfeaturesof
thepolicyare

Solarprojectsshallcommissionwithin8monthsfromthedateofsigningPPA
PPAshallremainoperationalforaperiodof20years
Theevacuationlinefrominterconnectionpointtogridsubstationshallbelaidbythestateatthecostof
theprojectdeveloper
Landacquisitionwillbetheresponsibilityofthedeveloper
Fullexemptionfromelectricitytaxforsolarpowerusedforcaptiveusewillbeallowedfor5years

UttarPradeshstatesolarpolicy

UttarPradeshcameoutwithadraftsolarpolicyinSeptember2012.Thispolicyshallremaininoperationupto
March31,2017.Thestatetargetsaninstalledcapacitybaseof500MWtillMarch2017.Someofthesalient
featuresofthepoliciesare:

Aminimumcapacityof5MWandamaximumcapacityof50MWsolarpowerprojectswillbecovered
underthispolicy.
PPAshallremainoperationalforaperiodof10years
TimeframeforcommissioningofsolarPVprojectswillbe13monthsandsolarthermalprojectswould
be28monthsfromdateofsigningPPA.
Landacquisitionwillbetheresponsibilityofthedeveloper
Theresponsibilityofgettingconnectivitywiththetransmissionsystemownedbythediscomwilllie
 withtheprojectdeveloper.
Solarpowerprojectswillbeexemptedfromtransmission/wheelingandopenaccesschargesforthird
partysaleandcaptiveunits

Rajasthanstatesolarpolicy

ThepolicyshallcomeintooperationwitheffectfromOctober8,2014.Underthepolicy,thestateaimsto
developcapacityof25,000MWtomeetitsenergyrequirement.Sometheimportantpolicyhighlightsareas
follows

PPAshallremainoperationalforaperiodof25years
Aminimumcapacityof5MWforbothsolarthermalandsolarPVprojects.Maximumcapacity10MW
willbeallowedforsolarPVprojectsand50MWforsolarthermalprojects
Solarprojectsshallcommissionwithin12monthsfromthedateofsigningPPA.
Thepowerevacuationtransmissioninfrastructureshallbelaidbythestateatthecostofthedeveloper
Captiveusersshallbeexemptedfrompaymentoftheelectricityduty

Chhattisgarhstatesolarpolicy

ChhattisgarhreleasedthesolarenergypolicyonNovember20,2012.ThispolicywillbeoperativetillMarch
31,2017.Thestateaimstoachieveatargetsolarpowergenerationcapacitybetween500MWto1,000MWby
March2017.Someofthesalientfeaturesofthepolicyare

Developersshallberequiredtocommissiontheprojectwithin24monthsfromthedateofsigningletter
ofintent
Landacquisitionwillbetheresponsibilityofthedeveloper
Gridconnectivityandevacuationfacilityshallbeprovidedbythestateatthecostofprojectdeveloper.
Exemptionfrompayingelectricitydutyonauxiliaryconsumptionandcaptiveconsumptionwithinthe
state.
Crosssubsidysurchargeshallnotbeapplicableforopenaccessandcaptiveusers.
DeveloperwillhavetofurnishabankguaranteeofRs.1millionperMWatthetimeofPPAsigning.

Karnatakastatesolarpolicy

ThestatesolarpolicycameintoeffectfromJune1,2011andwasrevisedinSeptember2013.Thestate's
currentsolarpolicywillremainineffectfrom2014till2021.Underthepolicy,thestateaimstoaddsolar
generationof2,000MWby2021.Someoftheimportantpolicyhighlightsareasfollows

shallbeallowedacommissioningperiodof12monthsfromthedateofsigningPPAwhereassolar
thermalprojectswouldbeallowedalongerperiodof24months
MinimumcapacityofsolarPVpowerprojectshallbe3MWinrespectofsolarPVandmaximum
capacityshallbe10MW.Minimumcapacityshallbe5MWinrespectofsolarthermalproject.

Gujaratstatesolarpolicy

Thestateintroducedthesolarpolicyin2009.Somethesalientfeaturesofthepolicyareasfollows

Aminimumcapacityof5MWforboth(thermal&PV)andamaximumcapacity500MWwillbe
allowed
SolarPVprojectsshallcommissionwithin12monthsfromthedateofsigningPPA.
PPAshallremainoperationalforaperiodof25years
Landacquisitionwillbetheresponsibilityofthedeveloper
 Thepowerevacuationtransmissioninfrastructureshallbelaidbythestateatthecostofthedeveloper
Exemptionfromtheelectricityduty.
Wheelingchargeof2percentoftheenergywillbelevied
Crosssubsidysurchargeshouldnotbeapplicableforopenaccessconsumers
DeveloperwillhavetofurnishabankguaranteeofRs.5millionperMWatthetimeofPPAsigning.

Telangana

Thestatehasnotintroducedastatepolicy,however,thestatediscomsnamelySouthernPowerDistribution
CompanyofTelanganaLimited(TSSPDCL)&NorthernPowerDistributionCompanyLimitedofTelangana
(TSNPDCL),signedPPAsfor500MWcapacityprojectsthatwerefloatedundertariffbasedcompetitive
biddinginJanuary2015.Further,inFebruary2015,itinvitedbidstosetup1,000MWofsolarpower
generationprojectsthroughareversebiddingprocess.Thegovernmentexpectstheseprojectstobe
commissionedby2016,andthensetupafurther5,000MWofsolarprojectsinthenextfiveyears.

TheRECoptionanalternativefortherenewableenergygenerator

TheCentrehaslaiddownsolarspecificrenewablepurchaseobligations(RPOs)withintheoverallRPOtarget
inordertopushdemandfortherelativelyexpensivesolarpower.Ithasspecifiedthat0.25percentofthe
overallpowerconsumptionmustbemetbysolarpowerinphase1,toincreaseto3percentby2022.
Subsequently,fewofthestateshavespecifiedtheirownsolarRPOtargets.However,enforcementofRPOsis
acriticalfactorforthesector'sdevelopment.

Inordertofacilitatepurchaseofsolarpowerbystateswhichhavelittleornosolarpowerpotential,solar
renewableenergycertificates(RECs)havebeenintroduced.TheseRECsareeligiblefortradingonthepower
exchangeswithinapricebandofRs3,5005,800perREC.Hence,asolarpowergeneratorhastheoptionto
choosebetweentwobusinessmodels

SignPPAwithstatedistributionutilitiesorNVVNatapreferentialfeedintariff
Sellthepowerataveragepooledpowercost(APPC)tothestateutilityor,tothirdpartiesatmutually
agreedpriceoronamerchantbasis.TheenvironmentalattributeissoldseparatelyasanREConthe
exchangeatthecurrentpricebandofRs3,5005,800perREC.

RECmechanism

Note:
APPC:Averagepowerpooledcost
Othersincludediscomsotherthanhomestatediscom,powerexchangesandopenaccessconsumers

Source:CRISILResearch

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