25 GW Solar Capacity on Indian Border

India has been planning to set up huge solar capacities in the northern state of Jammu and Kashmir over the last two years. However, it is challenging to set up the capacities as the terrain is mountainous and there are no transmission capacities to evacuate the power from the state to the key consumption areas in other parts of India. Logistics too could be a problem as moving the panels and inverters over the hilly terrain would add to the costs.

However, the government wants to develop solar farms to accelerate the economic development of Jammu and Kashmir as it is highly strategic, given its borders with China and Pakistan. These two countries have an antagonistic relationship with India, and Pakistan has been supporting a terrorist insurgency against India in J&K for over 20 years. Economic development of the state is a key priority for the government in enhancing the security of the country.

Even in August, the power minister had stated that the state had a potential of almost 35 GW and there was a plan to develop 25 GW of solar capacity. Now finally after planning for over two years, the Indian solar nodal agency SECI has announced a tender for building 7.5 GW of solar capacity in Kashmir and Ladakh. Instead of the normal 25 years PPA that is generally given to the solar projects during the auction, the government is going to award a 35 year PPA to incentivize developers to build projects in that region. Also, another major difference is that the government will also include the development of the transmission capacity in the tender. This is expected to increase the power purchase cost as the cost of transmission capacity over hilly terrain is generally costly. Also, read solar reaches great heights to power IOC bottling unit in Leh.

It is expected that large Indian and foreign developers will try strongly for this project given the huge size of 7.5 GW and the very long project duration. Though project management will be challenging, the prize is huge in terms of the financial prize. Also if the government is able to astutely divide the risks between SECI and the developer, it could manage to get very good prices given the economies of scale that will kick. I also expect that there could be consortiums between transmission players and solar developers as huge investments will also be required in building the transmission lines to move the power from Jammu and Kashmir to the rest of India.

The size of 7,500 MW has been divided into 3 packages of 2.5 GW each.  Package-A will be in in Zanskar sub-division and Tai Suru block of Kargil in Kashmir. This is the region where India and Pakistan had fought their last low-level skirmish in 1999. Packages B and C will be developed in the Hanley Khaldo area of Nyoma sub-division in Leh in Ladakh.