27 Mar 2019

MNRE has issued a new viability gap funding (VGF) scheme for setting up 1,000 MW grid-connected solar PV projects in north-eastern states. The government intends to provide VGF support of up to INR 10 million/ MW for these projects. Power is proposed to be sold to DISCOMs at a fixed tariff of INR 3.00/ kWh through SECI. Minimum bid size shall be 5 MW and commissioning timeline is specified at 21 months.

The VGF scheme was formulated in 2013 to make solar power affordable for DISCOMs when tariffs ranged between INR 7.00–8.00/ kWh. The scheme was revised progressively as module costs and solar tariffs came down to INR 3.00/ kWh. A total utility scale capacity of 3,935 MW was allocated between 2014 and 2016 with total VGF support of INR 30,899 million (USD 441.41 million).

But as solar capacity has grown rapidly, it has got more concentrated predominantly in south-western states including Karnataka, Andhra Pradesh, Rajasthan, Gujarat, Maharashtra, Tamil Nadu and Telangana. These states enjoy favorable conditions like high irradiation, land and grid connectivity availability, and supportive policies. But progress in the north-east has been limited. Total installed capacity across the seven states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Sikkim and Tripura stands at just 17 MW. The pipeline capacity is 85 MW under an auction conducted by Assam Power Distribution Company Limited.

Slow progress in north-east is mainly attributable to low irradiation, land availability constraints and hilly terrain. Land acquisition possesses a unique challenge as free hold land occupation is not permitted for non-tribal consumers. Most of the land, typically hilly with poor road/ rail connectivity, is owned by government or local tribes and restricted for farming or forestry use. The region is also prone to frequent civil unrest and insurgency.

The MNRE scheme aims to overcome these challenges with VGF support to make solar power affordable for the states. We believe that this is a good initiative to make solar power accessible in the region. But the scheme size seems ambitious as total peak power requirement in the region is only 2,700 MW. To make the scheme effective, the government would also need to make dedicated efforts to solving some of the specific regional challenges around land and transmission availability.

Comment

Latest tenders