By Jerri-Lynn Scofield

Considerable scepticism has been expressed in recent months as to whether India’s developers can make good on the low bids tendered during phase 1 bidding for 450 million MW of CSP produced power, under the Jawaharlal Nehru National Solar Mission (JNNSM). 

India is confident that it can achieve low cost construction and implementation by leveraging its comparative advantage in engineering and cheap labour, says Anil Kumar Lakhina, chairman and managing director, Forum for the Advancement of Solar Thermal (FAST).

This contrasts with the US approach, where government policy mandates that CSP projects incorporate either technological, or R&D innovation — a policy that tends to initally drive up costs. 

Lakhina says India has had little option but to take rely on its existing advantages, due to funding constraints that preclude big R&D investment.  “Indian policy is not looking for any type of technological coup, but instead, to incorporate the designs of commercially proven existing plants.”

He believes that if Indian developers can bring these projects on-line, at agreed costs, on schedule, the India model will gain broader traction. “I personally believe this is the model which will sell to all the other developing countries, in Africa and the Middle East, as and when they open up.” 

No favouritism for CSP

Both the Indian government and the key state of Rajasthan recently reaffirmed their major commitments to developing solar power capacity.  These commitments, however, are technologically agnostic, and in order for CSP to flourish, tariffs must be competitive with PV production.

The second phase of bidding for 4,000 MW of solar energy generation under the JNNSM is expected to begin in the third quarter of this financial year, Shashi Shekhar, joint secretary in the Ministry of New and Renewable Energy (MNRE), said at a recent CSP Today conference in New Delhi.  PV and CSP will be weighted equally, although further details of the bidding process are not yet available.

The Indian government is committed to supporting solar and other forms of renewable power, via a recently-agreed National Clean Energy Fund (NCEF) that would support R&D, as well as the development of indigenous technologies in India. 

The fund is to be financed by a levy of INR 50 per tonne of coal, lignite and peat.  So far, INR 3124 crore (US$694 million) was collected in 2010, with the fund expected to top INR 6,500  crore (US$1.44 billion) in 2011-12.  The disposition of these funds has not yet been decided, but it is expected to include R&D under the JNNSM.

Rajasthan: Abundant DNI and land 

Rajasthan, which boasts the highest DNI ratings in India, separately announced on April 14 a new state solar policy to develop 50 MW of solar PV, and 50 MW of solar thermal power, via competitive bidding. The desert state is committed to becoming a hub for solar power generation, not only to supply its own energy needs, but also to meet those of other Indian states, by creating 10,000-12,000 MW in solar capacity over the next 10-12 years.  

Rajasthan will encourage power projects to supply electricity directly to state distribution companies in two phases, starting with 200 MW by 2013, and adding an additional 400 MW capacity between 2013 and 2017. Rajasthan has also called for further development of solar power plants connected to 33 kV and above, under the JNNSM.

Under the new policy developers would be allowed to bundle solar power with the equivalent amount of power from non-renewable sources, generated anywhere in India.

“The state intends to achieve grid parity in the next five years, through a transparent competitive bidding process, for economy of scale development, and this will put particular pressure on high-cost CSP developers,” says Gopal Lal Somani, president, ERA Energy Ltd.   CSP developers currently cannot match the cost of production of PV projects, and states may lack patience to allow them to catch up.

Ball in developers’ court

CSP developers face strongest competitive pressures from PV producers. Somani predicts the next phase of reverse bidding in JNNSM phase 2, coupled with competitive bids under Rajasthan’s solar policy, will achieve solar energy at INR 7 per Kwh (PV) in India.

“PPAs with FIT support facilitated by a strong policy in recent time across the globe resulted in bankable propositions for developers to make investment decisions. High Spanish FITs paved the way for large scale solar energy projects, but suppliers of the solar technology and equipment adjusted the capital cost to absorb benefits,” he says.

The challenge for Indian developers is to discover and offer real technology cost breakthroughs, concentrate on development of local resources, R&D, and technical skill.  In addition, they must optimise efficiency through innovative measures on thermal storage, he notes.

If developers fail to rise to this challenge, Somani warns “the high cost of CSP, and the long gestation of projects, will lead this technology to die”, as it did once before in the US, from 1989-2006. 

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