Do Indian State Governments’ Plans of building massive Solar Power Plants, on their own make sense?

State Governments in India have been driving the growth of solar energy in India by giving subsidies and auctioning capacities at favorable electricity tariffs. Some states particularly Gujarat have achieved huge success beating the Indian federal subsidy mission JNNSM in terms of capacity built. However almost all of the solar farms built till date have been built by private developers using subsidies from the State Governments. While GWI is not greatly in favor of building big ground mounted solar power plants instead favoring solar arrays on rooftops, however these policies have helped develop a solar power ecosystem in India.

Also the solar power development has not led to windfalls for solar developers unlike the subsidy programs in Europe where massive profits were made by big investors and developers due to poorly designed subsidy programs. This was because the subsidies were mainly due to reverse auctions where competition amongst market players led to profits being normalized and even led to losses for a lot of the weaker companies. So all in all, the current subsidy programs for solar energy in India have been a decent success especially compared to the rest of the power sector which is a total mess.

Now State Government and their power utilities have decided to enter the field of building the power plant themselves. While the AP Government is planning to build 100 MW of solar capacity, the Gujarat Government wants to build a monster 1000 MW solar farm. Note, the Government has very little capability in building of solar power plants and the associated problems with procurement and corruption are well known. The Government decision to build such huge projects which is perfectly capable of being built at reasonable cost by private companies makes no sense. The Government should act as an enabler and a regulator rather than competing with the market entities especially in an industry where capabilities already exist.

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DNA

With renewable energy the in thing nowadays, the state government is exploring the possibility of setting up a 1,000 MW solar power project. The government has initiated talks with International Finance Corporation (IFC), a World Bank arm, seeking its support for the project.

“The project is still in the conceptual stage. We have initiated talks with the IFC to seek its support for the project. We will go ahead with it depending on their response,” said DJ Pandian, principal secretary, energy & petrochemicals department.

At the current costs of Rs8 to 9 crore per MW, the 1,000 MW project could cost anywhere between Rs8,000 to 9,000 crore.
The scale of the project can be gauged from the fact that total solar power generation capacity in the country presently stands at around 1,000 MW, including more than 600 MW in Gujarat alone.

The Hindu Business Line

The Andhra Pradesh Government has agreed to permit state-owned power utility Generation Corporation of Andhra Pradesh to set up 100 MW solar power plants close to the existing thermal and hydel power plants.

This move is part of the State Government plan to encourage renewable energy projects both solar and wind energy farms.

The Genco has been allowed to set up 100 MW of solar power projects at its existing sites. It has been authorized to raise funds from Power Finance Corporation and Rural Electrification Corporation.