Indian states are competing with one another in announcing massive solar subsidies through reverse auction tenders. AP had announced a huge 1 GW tender as it tried to beat the massive power crisis affecting the state. However, Indian governance remains a massive problem for Indian development and solar power is no different. We have already spoken about the problems being faced in the implementation of TN’s ambitious solar program, AP is now mired in even worse problems. The execution of the solar policy has been found to be deficient in almost all respects which have led several solar power developers rethink their bids.

Problems faced by Andhra Pradesh Solar Power Projects

The major problems being faced by Andhra Pradesh solar power projects are:

1) No clarity on how compensation will be given to solar energy providers. AP Transco is the nodal agency for managing the solar power policy. The government has not been clear on how the dispatching of the solar power will be done and how the money will be given. Note Indian discoms are notorious for being late in payments are most of them have accumulated billions of dollars in losses.

2) Low Feed in Tariffs – Many solar power developers are finding the 12c/Kwh to be too low, especially in areas with difficult terrain and low solar insolation. Many developers don’t think they will get a decent IRR at this tariff. Note Indian debt is also very expensive.

3) Problems in Raising Debt – This has been a recurring problem with Indian banks already having a big exposure to the electricity sector. Solar energy being a new sector, banks have been even more reluctant to lend.

I think many of these problems will be resolved as they inevitably are in India, but the delays are galling especially given the huge power problems being faced by normal people.

Read about Andhra Pradesh Solar Energy Policy only on GWI.

Solar photo-voltaic companies, setting up projects in Andhra Pradesh, are faced with implementation hurdles, due to the lack of clarity on banking and settlement issues.Even though more than 300 MW capacity will be ready and operational within a short time if these issues are sorted out, there are delays in addressing them, according to sector players.

Gautham Nalamada, Executive Director of Photon Energy, told Business Line, “The Government is treating solar energy as power generated from fossil fuels. Issues relating to sale of power, its settlement, are key for bankers to lend money.”“Once these are sorted out, banks will release funds to facilitate implementation of projects,” he felt.AP Transco and State Load Despatch Centre have to provide clarity on settlement to complete projects. There is some sort of ad-hoc settlement code for payment of power supplied. The issue of sale to third parties mustaddressed.

Srinivas Ayyadevara, Executive Vice-President of the Federation of Andhra Pradesh Chamber of Commerce and Industries, said, The tariff offer of Rs 6.49 paise offered under the solar policy bids is financially not viable. “We do not expect good response to the bids even though over 180 applications have been made,” he said.