In 2013, the Indian government approved the scheme for the development of an additional 750 MW of grid-connected solar power capacity as part of Phase II of the National Solar Mission (2012-2017) and mandated that SECI serve as the offtake counterparty to purchase the solar power under 25-year PPAs with the solar power producers. In the Batch I of Phase II, the power will be purchased by SECI at a fixed levelized tariff of INR 5.45/kWh, or INR 4.75/kWh in case of power plants utilizing accelerated depreciation, for onward sale to state or distribution utilities at INR 5.50/kWh. The competitive bidding process for subsequent Batches under Phase II have resulted in a lower tariff for those batches. The solar power plant is entitled to receive viability funding support in an amount determined through a competitive bidding process. Such payment is made to the solar power plant over a five-year period from the date such solar plant commences operations and is funded by India’s National Clean Energy Fund. The National Clean Energy Fund is financed through a tax of INR 400 per ton of domestic or imported coal used in India.
After completing Batch I of Phase II of the National Solar Mission, in March 2015 the MNRE issued guidelines for implementation of Batch II of Phase II of the National Solar Mission. Batch II of Phase II is currently being implemented under the bundling scheme. Under this Batch, the Indian government proposes to set up 15,000 MW of solar projects through NVVN in three tranches: (a) 3,000 MW under the bundling scheme; (b) 5,000 MW with some support from the Indian government, the quantum of which is to be decided based on results under the bundling scheme; and (c) 7,000 MW that will be implemented without any financial support from the Indian government.
In addition, in August 2015 the Indian government issued guidelines for implementation of Batch III of Phase II of the National Solar Mission, consisting of 2,000 MW of capacity, and in March 2016 the Indian government issued guidelines for Batch IV of Phase II of the National Solar Mission, consisting of 1,250 MW of capacity. These Batches are currently being implemented under the variable gap funding scheme.
In addition to the National Solar Mission, various Indian states have also initiated procurement of power from solar power projects through competitive bidding. In April 2015, Telangana issued bid documents for procurement of 2,000 MW of capacity. Similarly, Karnataka, in its latest solar policy, has made it mandatory for distribution utilities to purchase power from solar projects with a capacity of 3 MW or above under the competitive bidding regime. Various Indian states have also implemented policies to promote the generation of solar power. For instance, Gujarat exempts solar power plant developers from payment of electricity duty on the sale of electricity and payment of cross-subsidy surcharges for sale to open access consumers.
Wind power plants
MNRE provides a generation based incentive implemented through the Indian Renewable Energy Development Agency Limited for grid connected wind power plants (excluding plants undertaking third-party sales) commissioned on or after April 1, 2012. This incentive is currently available until the end of the 12th plan period (2012-2017). Generation based incentives are limited to INR 0.50/kWh of electricity fed into the grid and are available for a maximum period of 10 years with a cap of INR 10 million per MW. The total disbursement in a year to eligible wind power producers cannot exceed one-fourth of the maximum limit of the incentive, i.e., INR 2.5 million per MW during the first four years. Generation based incentives are in addition to the tariff approved by SERCs and available only if the benefit of accelerated depreciation is not utilized by the wind power plant.
In addition, state specific policies also provide for various incentives, such as exemption in payment of electricity duty, reduction of VAT, providing land at concessional lease rentals, and reduced wheeling and transmission charges. Additionally, an excise duty exemption is also available on wind operated electricity generators and concessional custom duty is applicable on import of specified components of wind turbines, subject to fulfillment of prescribed conditions.
To further optimize India’s wind power resources, MNRE recently introduced a series of important policy measures such as the National Offshore Wind Energy Policy 2015, Draft National Wind-Solar Hybrid Policy, 2016 and Policy for Repowering of the Wind Power Projects, 2016. The Indian government has also recently launched a competitive bid process for the development of wind power projects with a cumulative capacity of 1,000 MW. This highlights a significant shift in the wind industry in the country, as currently electricity from wind power projects is sold at tariffs determined by the electricity regulatory commissions as opposed to tariffs determined through a competitive bidding process.
All renewable energy power plants
India’s National Tariff Policy 2006 requires the SERCs to fix a minimum percentage of the electricity that must be purchased by utilities operating in their jurisdiction from renewable energy generators (such as solar power plants), taking into account availability of such resources in the region and its impact on retail tariffs and procurement by distribution companies at preferential tariffs. This obligation to purchase electricity from renewable sources is known as a renewable purchase obligation (“RPO”). This policy was amended in January 2011 to prescribe a minimum solar specific RPO of 0.25% in 2012 to be increased to 3% by 2022. States such as Gujarat, Chhattisgarh, Haryana, Madhya Pradesh, Bihar and Goa have fixed solar power RPO requirements at levels above the minimum level prescribed by the National Tariff Policy 2006. The National Tariff Policy, 2006