India’s Phase 1 CSP projects “will be built”

CSP Today speaks to Gopal Lal Somani, President, Era Energy Ltd, about why India will succeed in driving down the cost of concentrated solar power.

Interview by Rikki Stancich

If you are looking for insight into India's solar energy market potential, look no further than Gopal Lal Somani. From the electrification of 85 remote rural villages with off grid PV,  to bringing the 140MW ISCC Mathania Project in Rajasthan to the point of financial close, Mr Somani has steered some of the most pioneering solar energy projects in India to date.

And having worked shoulder-to-shoulder with India’s Ministry of New and Renewable Energy over the years on establishing renewable energy policies and bankable feed-in tariff structures, he enjoys a unique vantage point of India’s solar sector, the policies that govern it, and the country’s capacity to meet its renewable energy objectives.

As India enters Phase 1 of a National Solar Mission to install 20 gigawatts of solar power by 2022, CSP Today catches up with Gopal Lal Somani, President of infrastructure and engineering firm, Era Energy Ltd. -  which has 75MW of CSP plants in the pipeline in Rajasthan - to learn why he believes India’s CSP projects will be built, and why India will be successful in driving down the cost of concentrated solar power.

CSP Today: There is some debate over whether the bidding process for the first phase of India’s Solar Mission drove the bid prices to an unrealistically low level. What are your views on this?

Gopal Lal Somani: You may be aware that the transparent process of selection of developers by NVVN in under NSM has been outcome of holding series of discussions, workshops and presentations with participation of renowned suppliers, manufacturers, consultants in CSP technologies from all over world.

The participant developers had sufficient time to understand the technologies as they travelled to various CSP facilities across US and Europe before making competitive bidding.

Being involved in CSP technology since 1998, I am confident that hard job done by Indian government through NVVN, the technology will have no problem to establish in Indian market at this cost now.

CSP Today: Are bidders’ prices unrealistic?

Gopal Lal Somani: I have a strong feeling that CSP suppliers have so far been adjusting the capital cost on technology to absorb the explosive FIT provided by Spanish government and are expecting the same cost in the Indian market.

Central and state regulators are issuing benchmark tariffs for all types of technologies including coal, gas, wind, biomass, solar etc., as their statutory responsibilities under Electricity Act 2003. The regulations do not become the mandate for electricity supply utilities as the Act states that the electricity utilities will purchase the power through competitive bidding process prescribed under Tariff Policy of GOI 2005.

Lanco, Reliance, and KVK are well aware of the regulatory framework governing the power sector and I believe that they decided to offer the discount in the CERC Tariff after a thorough cost economic and technology analysis. I congratulate these companies and wish them success, as they will now lead the Indian market for affordable solar energy supply.    

CSP Today: Are you saying that CSP prices been inflated and artificially sustained by the Spanish FiT?

Gopal Lal Somani: Yes, I confirm that the cost on CSP solar block equipment is inflated.

CSP Today: Industry insiders have voiced their concerns that the first phase projects may not see the light of day. Is this a possibility?

Gopal Lal Somani: I am excited that the outcome of the NVVN process will avoid the process followed by Spanish federal government. The fact remains that India’s market holds allure in that it offers a cheap and abundant, technically skilled labour market; capability in the fabrication and manufacture of support structures, fittings hardware, actuators and tracking accessories, fasteners etc.; and because it offers land and infrastructure at a low cost.

Exploiting all these local resources and BOS supplies, the CSP installation cost will fall sharply, allowing developers like Reliance and Lanco to succeed in penetrating India’s CSP market at an affordable cost.

I have studied and engineered the cost break up scenario for CSP technology as given in IEA CSP ROAD MAP 2010 and have worked out the cost estimation in the Indian context for implementation of 50 / 100 MW CSP plant with provision of solar thermal storage of 4 – 6 hours. The picture below represents the details for application to implement the CSP project in India. However solar block supplies chain items like mirrors, HCE, HTF circuit will come from respective suppliers for integration. 


CSP Today: Are we likely to see local Indian developers partnering with international EPC contractors?

Gopal Lal Somani: The power sector giants like Reliance, Lanco and KVK Energy have taken the challenging task and hopeful to bring in the strength on all fronts. These efforts will break the overseas cartel and will pave the way to develop the projects in Indian environment. The net worth and credentials of these companies shall result into bringing overseas lenders with low cost funding. 

CSP Today: Can these companies partially fund their projects off their own balance sheet?

Gopal Lal Somani: There is nothing special in taking up the EPC by these companies or even they have the arrangement for out sourcing. They are involved in large capacity Thermal Project EPC jobs and completing the projects on international standards. A good project-engineering agency with experience in integration would lead these projects to happen.

CSP Today: Which Indian banks have provided bank guarantees for the winning bids?

Gopal Lal Somani: Based on unconfirmed information SBI, PNB, AXIS Banks. I understand that in some cases a consortia of Banks has advanced the bank guarantee.

CSP Today: Where is the project finance for these projects likely to come from?

Gopal Lal Somani: Toward the end of January the developers signed the PPA's and were approaching lending institutions including access to Solar Express Funds from the US. Kfw and ADB are in negotiating with GOI for low cost funding to NSM projects.

CSP Today: The concept of CSP is not new to India; The Mathania ISSC project achieved financial closure in 2004, but never got off the ground. Is it ever likely to be realised?

Gopal Lal Somani: Yes, GOR is introducing the Solar Policy 2011 very soon (the Draft Policy is in circulation) and the RFP for this project is in the final stage. The RRECL shall carry it forward through competitive bidding route.

CSP Today: In light of the support for CSP back in 2000, why, until now, has the CSP sector stalled in India?

Gopal Lal Somani: Well, over the last two decades nothing has gone in India for CSP development to happen in spite that western region in Rajasthan has the highest Radiation in the Country and great 140 MW  ISCC Mathania project achieved the financial closer in 2003-04  with 35 -40 MW CSP Solar block. MNRE, Kfw, GEF, GOR and GAIL agreed for the implementation.

The only known reason for non-execution of the project is that foreign CSP technology suppliers have not matched the cost of power to the expected / affordable limit of Indian government. The capital cost of solar block equipment has remained prohibitive, and in addition, there has been lack of confidence in integration by suppliers of CSP technology. CSP costs have remained high, even as PV technology prices have taken a south dive.

Also, [CSP] suppliers have not, until now, seen any advantage in the concept of technology transfer.

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