India’s JNNSM 2 receives Big Response

India’s landmark central solar subsidy mission JNNSM received a very good response for the Phase 2 reverse auctions. More than 2100 MW of bids were put in for 750 MW of solar PV projects on offer. Note Phase 2 has been late by nearly one year, as the government could not decide on how to fund the large utility scale solar farms as bundling of solar with cheap coal power was not possible. Major companies had raised concerns about the fact that there was little payment security as most distribution utilities in India are bankrupt and notorious for delaying payments. The government has assuaged concerns by giving a corpus of more than $300 million to the implementing agency SECI, for providing viability gap funding (VGF) for solar power plant developers. The government had set aside 375 MW of solar projects, which should be built exclusively using domestic solar cell and modules (this includes thin film solar PV technology), while the other 375 MW has been kept aside for foreign made solar cells and modules. The foreign component received a much bigger response in the number and size of bids, as it is cheaper and easier to procure solar module from foreign companies than the Indian ones. Indian solar manufacturing has been badly hurt by the lack of DCR in the earlier phase. They are unable to compete on costs, technology, reliability and other parameters with the large Chinese and USA solar panel suppliers. They also don’t have the benefit of vendor financing from EXIM and China Development Bank.

68 bidders have put in bids to build solar power plans according to MNRE. The large solar power developers such as Welspun, Essel Infra, Azure etc. have put in bids for 100 MW plus projects. These companies are extremely active in the solar power space in India and actively participate in solar power tenders across different states in India. The central solar mission is much safer in terms of payment security as well as stability in policy making. In comparison some of the state solar auctions have drawn a tepid response (Tamil Nadu and Andhra Pradesh). Tamil Nadu is facing a peculiar problem as the Appellate Tribunal of Electricity has overturned the state government order for 6% SPO in the state. This means that 700 MW of PPA signed by TANGEDCO is in limbo. Andhra Pradesh too has messed up with its 1 GW solar policy. There had been issues with the tariffs and then there are issues in connectivity and other factors. The price bids will be opened on Feb 20, 2014 and the lowest bids will be awarded the projects. The prices of solar power have declined to as low as Rs 6-7/ KWh and I expect that companies will bid quite low at Rs 6-7 crores/ MW, while the domestic content may have bids which are around 10% higher as domestic modules are more expensive than the imported ones.

Business Line

The latest round of bidding for solar projects under the Jawaharlal Nehru National Solar Mission (JNNSM) has attracted an overwhelming response from solar project developers — bids were received from 68 companies for 122 projects for a total of 2,170 MW, against the allocation target of 750 MW.der the ‘JNNSM Phase II’, rolled out for bidding by the Government-owned Solar Energy Corporation of India, project developers bid for a capital grant from the Government, or ‘viability gap funding’. Winning bidders will be those who ask for the least amount of funding for selling their power at a fixed tariff of Rs 5.45 per kWhr to the Corporation.