Indian Solar Industry takes a step ahead with Madhya Pradesh Solar Policy
The Madhya Pradesh Power Trading Company (MPPTC) released its draft solar policy and Request for Selection (RfS) document last month. The policy, unlike the existing solar policies in other states, has laid out detailed guidelines for most procedures and stands out from the existing solar policies in the country for reasons which make a case for a better and more enterprising policy.
The size of projects to be allocated can vary from 5MW to as much as the complete capacity to be allotted, viz. 200MW. This is the first time any policy in India has not mandated any upper limit on the size of a plant. This means unlike other policies there is also no mandate on the capacity of projects one company can bid for. Another main deviation from the previous state policies has been on the location of the projects. The MPPTC specifically says the project can be located in any state, provided if it is outside the state of Madhya Pradesh; its capacity must be at least 10MW.
The commissioning deadline for projects up to 25MW is 13 months whereas beyond that different deadlines have been distinctly specified for projects larger than 25MW with a 24 month deadline for 200MW PV projects and 28 months for the solar thermal projects. A capacity based deadline is again, for the first time specified in any policy.
The deviations on the size and location of project, in particular, make this policy lucrative to the larger companies looking to set foot in the Indian industry. This could spark off interest from many larger players who have often expressed concern on the small size of projects offered in case of NSM, Karnataka and Odisha. The flexibility provided with respect to the location of the plant means that a developer can setup a plant in the neighboring states of Rajasthan and Gujarat with a Power Purchase Agreement (PPA) with the MPPTC.
On the domestic content guidelines unlike the states of Rajasthan and Gujarat, it has followed the NSM in this regard. Cells and modules must be sourced locally with the exception for thin film modules; imported thin films will be allowed. For solar thermal too, 30% of the content has to be sourced locally.
Another high point of this policy is that the penalty clause for delayed project completion has been broken down into a series of delayed deadlines. The Performance Bank Guarantee (PBG) will be encashed, but in three steps, 20% of PBG after delay by first month, 40% of PBG after second month and 100% after third month. The policy also specifies the provision for completion of project after the initial 3 months of delay. The party with the PPA can choose to finish the project by paying monthly liquidated damages (LD). A tabulated list shows the maximum delay allowed for a particular project with the LD charged. This is clearly a lesson from the Gujarat Solar Policy and an improvement over it. The deadlines for the project allotted under the second phase of Gujarat Solar Policy were twice extended and eventually led the delayed projects adhere to revised FiTs, much lower than what was offered earlier.
The projects if completed by their stipulated deadlines by end of next fiscal year will help MPPTC meet its target for Renewable Purchase Obligations (RPOs) for the year 2013. Madhya Pradesh is the one of the largest power consuming states in India with its peak demand of about 8GW with deficit of close to 10%. The state’s RPO demand for solar power is expected to be close to 400MW by 2016. As the state does not have any solar power generation capacity, there is no share of solar power in the power supplied within the state.
The deadline for bid submissions is 21st March, 2012. A pre-bid meeting is scheduled for 2nd March, 2012 for any clarifications the bidders might need. The processing fee of submitting the bid documents is INR 10,000 ($200) plus an Earnest Money Deposit (EMD) of INR 20, 00,000 per MW will be needed. The projects will be allocated based on the discounts offered by the bidders against the base FiT of INR15.35 per kWh (INR13.94 per KWh including accelerated depreciation. Based on the discounts offered, the companies will be required to deposit further bank guarantees.
The cost of land in Rajasthan and Gujarat being significantly lower than land cost in Madhya Pradesh, might seem like a very good incentive but setting up plants in another state will also increase the cost of wheeling. Not just that, grid evacuation can also prove to be an issue. Plants usually depend on the nearest 33KV substation which is provided and owned by the electricity board of the state where it is located. If a plant outside Madhya Pradesh which has a PPA with MPPTC fails to get an evacuation from its native state, the cost of transmission lines leading to the closest substation owned by MPSEB will have to be incurred by the project owner. MPPTC must lay down the evacuation arrangements and guidelines clearly for such plants to avoid any administration issues in the future.
Author: Mr. Shishir Basant,
Solar Industry Expert