Now Solar Park Scheme would Available only through SECI. A way of removing the Critical Elements

The Ministry of New and Renewable Energy (MNRE), Government of India has issued a memorandum regarding modifications in the existing Solar Park Scheme to remove the critical elements of land acquisition and evacuation of power generated from solar parks approved under the 40,000 MW Solar Park Scheme.

Pavagada Solar Park (2000 MW) in Karnataka

Developers of solar projects are obliged to identify and acquire the land along with all the necessary statutory clearances required from the local State Government, arrange other infrastructure facilities, for example, road, water, telecommunications etc., and construct the transmission infrastructure to connect the output of the solar park to the nearest grid substation. This process generally takes project developers a long time to complete and all these procedures delay completion of the project.

  • Solar projects scattered in multiple locations lead to higher project costs per MW and also increased transmission losses. Hence, the total cost of a solar project depends on multiple factors such as solar insolation at a particular site, infrastructure facilities required to be developed, logistics, cost of funding, prevailing prices of solar cells/modules and related State Government policies.

  • Solar Parks can be instrumental in overcoming all the bottlenecks otherwise faced by independent power producers of solar PV projects. These can include land availability, developing the evacuation infrastructure, its funding and other financial challenges. To overcome these challenges, the scheme for the development of Solar Parks and Ultra-Mega Solar Projects was introduced in December, 2014. Thereafter, in March 2017 the capacity of the Solar Park Scheme has been enhanced from 20,000 MW to 40,000 MW to set up at least 50 solar parks.

Rewa Solar Park (750 MW) in Madhya Pradesh

  • The concept of solar parks has indeed emerged as a powerful tool for the rapid development of solar power projects in India. Assured availability of land and transmission infrastructure are the major benefits of a solar park. The recent downward trends in solar tariff may be attributed to the factors like economies of scale, assured availability of land and power evacuation systems under solar park.

  • As on Jan, 2019 MNRE approved 47 solar parks in 21 different states of India with the aggregate capacity of 26,694 MW.

  • However, in the many states where solar parks approved in 2014-15, 2015-16 are not able to identify clear land and transmission plan for approved solar parks that create a large gap to complete the development of solar park, commissioning of solar projects and external transmission system. Based on the progress made so far MNRE has already cancelled some solar parks in Assam, Odisha, Haryana, Himachal Pradesh, Tamil Nadu, Jammu & Kashmir and West Bengal. Now the approved capacity under the Scheme is only around 23349 MW in 16 States.

The land and power evacuation are the two most critical elements for successful achievement of the target of 100 GW by 2022. If these two inputs are facilitated by the Government, then the private developers would be enthused to participate in establishment of RE projects in this country. Recognizing these critical factors, Ministry constituted 5 teams for detailed planning of identified solar and wind zones. Accordingly, different teams visited the renewable rich states like Andhra Pradesh, Gujarat, Madhya Pradesh, Karnataka, Rajasthan, Tamil Nadu and Telangana. The teams have identified potential sites for development of renewable energy projects in the above states and have also assessed the transmission requirement for the same.

Based on the identified land, MNRE has introduced a new mode (Mode-7) for the development of renewable energy (RE) parks that include wind, solar and hybrid energy through the Solar Energy Corporation of India (SECI).

The strategies and key points for implementation of RE parks under Mode 7 are as under:

  • SECI will act as the Solar Power Park Developer (SPPD) including other renewable energy sources.

  • With assistance of the State Government, SECI will make both government and private land available to be used by successful bidder for setting up RE power projects. The State Government providing such facilitation for land identification and making its right of use available to SECI would be paid a facilitation charge of Rs 0.02/unit of power being generated in these parks. This facilitation charge would be paid by the RE project developers for setting up projects in these lands, in addition to any land cost in terms of outright sale or lease rent. No funds from CFA will be used for procurement of land.

  • SECI will get the external power evacuation infrastructure of the parks developed by External Transmission Development Agency (ETDA) like CTU, STU as the case may be. However, the internal infrastructures of the RE park like internal power evacuation system, road, water, levelling of land, fencing, telecommunication & other facilities as mentioned in the Solar Park Scheme and also battery storage if required would be done by the RE project developers at its own cost and would be factored in the tariff to be bid by the RE project developers. The RE project developers will not be provided with any CFA for development of internal infrastructures of the RE park. However, the essential components of internal infrastructure which need to be put in place by the RE project developers may be indicated separately by the RE project developers and the same may be eligible for availing line of credit if the financial institution has separate product to fund the RE parks.

  • Under the existing Solar Park Scheme, there is a provision of providing CFA of Rs. 20 lakh per MW or 30% of the project cost whichever is less for setting up of both internal infrastructure and external power evacuation infrastructure. Presently, around 13,300 MW capacity is still to be allocated under the scheme. The entire CFA available for this spare capacity under the Solar Park Scheme would now be utilized for Mode-7 except for special cases under approval of Hon’ble Minister, NRE. Further, there is scope of cancellation of few solar parks due to its slow progress. Those cancelled capacity may also be included under the present proposal. Under Mode-7, the entire CFA would be apportioned for setting up external power evacuation infrastructure as laid down in para (v) below.

  • The funds available for the spare capacity under the Solar Park Scheme will be utilised for development of external power evacuation infrastructure by the External Transmission Development Agency (ETDA) for putting up the external transmission network, and instead of 60:40 ratio between internal works and external transmission, the new ratio would be 0:100. Since Rs. 20 lakhs per MW provided under Solar Park Scheme may not be enough to set up transmission system, the following additional mechanism is proposed:

  1. The total cost of any transmission network for any parcel of land would be divided by the total capacity of RE projects planned to be set up on that land parcel and utilizing the said transmission capacity to get the per MW cost.

  2. 40% of the cost of transmission system, subject to a minimum of Rs. 10 lakh per MW (or the total cost if it is less than Rs. 10 lakh per MW) and a maximum of Rs. 30 lakh per MW would be borne by the RE project developers. The successful RE project developers selected through competitive bidding process shall be charged as upfront charges and collected by SECI. SECI will make this amount available to the ETDA for putting up the external transmission system.

  3. The balance CFA for spare capacity under the Solar Park Scheme would be made available at the rate Rs 20 lakh/MW or 30% of the total cost for development of external power evacuation system, whichever is less, [provided that the total of (b) & (c) above does not exceed the total cost for development of external power evacuation system] to the ETDA for putting up the external transmission network.

  4. Remaining cost, if any, shall be socialised as is done presently for RE projects.

  • Further, to make the setting of RE projects in such parks more attractive, it is proposed to set up a Payment Security Mechanism, to ensure continuous payment to the power developers and mitigate any payment risk due to default in payment by the DISCOMs in any month. This will be in the form of a common dedicated Payment Security Fund (PSF) for all projects in the RE parks created under the scheme. This PSF would be build up over time by SECI by levying a charge of Rs. 0.02/unit from the RE project developers setting up projects in these RE parks.

  • The facilitation charges of Rs 0.02/unit to the State Governments, the share of cost of transmission system and Payment Security Fund charges of Rs. 0.02/unit from the RE project developers would be included by SECI while calling bids for selection of RE project developers.

According to industry experts the proposed modifications are much needed. However, making SECI only the SPPD would be an effect on SECI as the SECI cannot develop any solar projects under the EPC Mode due to conflict of interest. Further, earlier MNRE modified its solar park scheme to developer solar parks through CPSU that now a close chapter for SECI. In addition, lot of burden of charges and fee on project developers may also affect the tariff and ultimately the customers of DISCOMs.

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