Andhra Pradesh Review of Solar Tender – Problems, Pricing and Opportunity

Introduction

Indian states have been coming out with solar policies and tenders at a feverish pace in recent days thanks to falling solar panel prices and massive brownouts due to inadequate power capacity. Tamil Nadu announced a massive solar promotion policy targeting 3 GW in 3 years through a mix of ground and rooftop solar plants. The state already has a tender for 1 GW of solar power plants > 1 mw in size which is opening in January. After massive delays, the desert state of Rajasthan too has unveiled a solar park policy for 200 MW. Now Andhra Pradesh another power deficient southern state has announced a 1160 MW tender for solar power plants. The state is seeing a huge increase in power tariffs as it is being forced to import expensive merchant power. Already a large number of industrial units have started closing down unable to run their machines profitably by buying power at heavy costs. Note India is seeing a major migration of industries from power hit states to power rich states. Gujarat has been a big beneficiary as industries from across the country sick of the power problems, are migrating to Gujarat en masse from states like Punjab and Maharashtra.

Andhra Pradesh Solar Policy

AP had earlier announced a solar policy in which it had given a number of sops such as there will be no wheeling and transmission charges for wheeling of power generated from the Solar Power Projects, to the desired location/s for captive use/ third party sale within the state through 33 KV system, subject to industries maintaining their demand within its contracted demand. Cross subsidy surcharge shall not be applicable for Open Access obtained for third party sale within the state subject to the industries maintaining their demand within its contracted demand with the DISCOMs.

All Solar Power projects will be exempted from paying Electricity Duty for captive consumption and third party sale within the state. All projects developed with the above incentives will also be eligible for REC benefits. Deemed injection into the grid for in-house captive solar generation plant (in the same premises) will be considered for issue of REC. Solar projects will get refunds on value-added tax paid for equipment and on land duty and registration charges for sites. Fast Track Approval Process permits to build grid connections within 21 days. These incentives will be in force for a period of seven years from the date of implementation. New and Renewable Energy Development Corporation of A.P. Ltd (NREDCAP) shall be the State Govt. Nodal Agency for clearance, facilitation and implementation of the proposed Solar Power Policy. These incentives will be available for 7 years for solar power plant developers building a solar panel plant till June 2014.

The Policy has been tweaked now with the government giving out solar power plants using a reverse auction tender for 1160 MW to make the process more transparent.

Read more about Solar Panels in India – Complete Guide on Buying Low Cost PV Panels.

1160 MW Andhra Pradesh Solar Tender – Highlights

1) Tender submission date is January 19, 2013 – Close to the last dates of submission of solar tender in TN which will lead to complexity and confusion. I think this could have been avoided but collaboration between different arms of the governments in India is non-existent.

2) Nodal Agency is APTransco – The state owned transmission and distribution company APTrasco will be the nodal agency responsible for the entire process of tender opening, awarding and execution. The agency has already allocated transmission capacity by reservicing substations. This is a good move as evacuation of solar energy to the power grid is a major headache for solar developers.

3) Size of the Solar Power Plant – Solar energy ground plants can be built in minimum 1 MW and maximum 20 MW.

4) Technology – There is no difference in the price being given for different solar technologies. This means that the expensive solar thermal technology is effectively out of the race.

5) PPA Term – The winning solar developer will get a Power Purchasing Agreement for 25 years.

More DETAILS

1) Capacity – Selection of Solar power projects in Andhra Pradesh under competitive bidding route for a capacity about 1,000 MW is as per the AP Solar State Policy.

2) Net worth – The net worth of the bidder should be equal to or greater than the value calculated at the rate of Rs 1 Crore per MW.

3) Technical – The bidder shall deploy commercially established solar PV/STP technology.

4) Lowest Bid Price will have to be matched – Selection of eligible bidders will be based on least quoted price per commercial unit of electricity.

Andhra Solar Energy Policy Problems

1) Solar Power Purchase price too low – There are number of issues that have already cropped up with the solar energy policy. The state owned power generation company AP Genco has decided not to bid even for a single MW blaming the subsidy price for buying solar power as too low. The generation company says that the price of 12-14c/ Kwh will not allow decent returns.

2) Lack of clarity on timely payments – This is another problem faced by all power producers (fossil fuel and renewable alike). Most of the distribution utilities in the country are bankrupt due to the crazy uneconomic policies followed by the state government . Getting money from them becomes a tough game as wind power developers in TN will attest too.

3) High processing costs – The solar developers are also finding problems for the high processing costs being charged by APTransco.

4) Differential tariffs depending on region – The state wants to give different feed in tariffs depending on the location’s solar insolation. This is a good measure in my view which should be followed by all governments. However solar developers unaccustomed to differential geographic tariffs are finding faults.

You can get more details about the solar policy and tenders.

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