India to cover costs of solar plant construction

30 April 2013

NEW DELHI: The Government of India has announced that it will cover almost a third of the costs for solar plant construction, in proposed guidelines released last week.

According to the Ministry of New and Renewable Energy’s guidelines, the government will cover the equivalent of 30% of a project’s construction costs, as long as the project's solar capacity is between 10 and 50 megawatts.

The funding will be provided via a new form of reverse bidding, which requires the project developer to quote the estimated cost requirements in order to qualify for the viability gap funding (VGF). Under the VGF, developers must sign a power purchase agreement for 25 years that states they will sell electricity for a fixed tariff.

The grants will help India reach its goal of building 750 megawatts of grid-connected solar capacity, a target which is part of the national Jawaharlal Nehru National Solar Mission’s second phase of auctions. The Mission aims to produce 20,000 megawatts of solar energy by 2022.

Under the Mission, Indian states’ solar capacity has continued to grow. This week, the Indian state of Rajasthan announced that it had become the second state to boast operational solar power capacity of more than 500 megawatts. Rajasthan follows the state of Gujarat, which achieved the milestone last year thanks to its ambitious solar policy.

Aditi Dass, Director of Technology Programs, The Climate Group, said: “These new proposals are the first of their kind for the Indian Government, in that they have been so much more extensive than usual. But it is about time. If we are to prepare and adapt to the more frequent power outages we can expect as our surging economy puts the strain on an ageing energy infrastructure, we must have the most reliable, efficient technology in place for our people. For India - with 300 sunny days a year - that is solar power.

“Despite foreign suppliers possibly losing out on their market share, such healthy grants mean India can finally build itself a more secure solar industry with fewer market-damaging blackouts. However, it remains important that the government ensures the solar projects maintain reliable capacity for the long term. ”

Read the Indian Ministry's guidelines.

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