New guidelines for national solar mission power projects

The Union government does not want to change what is tried and tested, especially when it comes to populating the country with eco-friendly solar power producing stations. In 2010, the Union Ministry of New and Renewable energy (MNRE) selected 37 power producers to produce 620 MW (150 MW photo voltaic and 470 MW solar thermal) power. On August 24, it issued a fresh set of guidelines to select another batch of power producers to produce 350 MW power. The new guidelines mirror the core strategy of the first set, albeit with minor changes.

, the apex body that adjudicates on inter-state electricity trading issues. The power producers who committed to provide power at the cheapest rates were selected. This was called reverse bidding. This method of selecting power producers have been retained in the second batch too.

Bharat Bhargava, director at MNRE and in-charge of solar power projects says that reverse bidding has been a success for the first set of allotments. “Despite giving discounts up to 25 to 32 percent on the CERC declared tariffs in the first batch, 28 out of total 30 PV (photo voltaic) power developers achieved financial closures,” he says. One was disqualified for providing wrong information; the other could not arrange the requisite finances. One of the reasons ascribed by Bhargava for the success of the bidding process is falling of prices of solar panels and cells globally. The price of solar panels has been steadily declining—from $1.7 in 2009 to about $1 at the beginning of 2011.

The downside

But experts are concerned that adventurous down-bidding may lead to unfulfilled commitments. “Though the method has been proved successful in the first batch, the adventurous bidding has inherent concerns. If the developers bid too low, there is a possibility of some projects falling through,” says Vijay Lakhanpal, CEO, Forum for Advancement of Solar Thermal (FAST).

To alleviate this concern, bank guarantee-based safeguards have been incorporated into the scheme to ensure solar power promoters stick to their commitments.

Developers have to submit Rs 1 lakh at the time of making the Request for Proposal which is non-refundable. Besides, a project developer has to give different kinds of bank guarantees to NVVN (NTPC Vidyut Vitaran Nigam), the electricity transmission company which will buy the power from solar farms set up under JNNSM. These include earnest money deposit of Rs 20 lakh along with Request For Submission; a bid bond that will depend on the offered discount in the reverse bidding (see table), and performance bank guarantee of Rs 30 lakh at the time of signing of power purchase agreement (PPA).