Grid- interactive solar power projects in India: risks and bankability
Student name: Mr Ashok Kumar Thanikonda
Guide: Prof R.L.Sawhney
Year of completion: 2011
Host Organisation: Bridge to India Energy Pvt. Ltd.
Supervisor (Host Organisation): Dr Tobias Engelmeier
Abstract: Indian government aimed at generating 20GW grid connected power by 2022
through the launch of its ambitious Jawaharlal Nehru National Solar Mission
(JNNSM) in 2009. The programme was designed to make solar power viable by
bundling it with less expensive grid power (of the central unallocated quota) by
NVVN (NTPC Vidyut Vyapar Nigam Limited), a central PSU and selling it to
state utilities. A slab of 5MW for Solar PV projects and 50 MW for CSP projects
was imposed. A feed-in tariff of INR 17.91/kWh and INR 15/kWh were
announced by the Central Electricity Regulatory Commission (CERC) for these
based on their calculation of capital costs. Due to tremendous response from
project developers at the selection stage, reverse bidding was employed to award
projects based on the highest discounts of tariffs. Aggressive discounts were
offered by new entrants into the industry and hence they got selected. These
highly discounted tariffs raised concerns about viability of highly capital
intensive solar power projects in India, especially in the light of no previous
installations in the country.
This study was done to understand the risks perceived by banks and other
financial institutions in funding solar power projects in India. Methodology
includes literature review, attending industry conferences and interviews with
financial institutions. Results reveal that lack of reliable solar radiation data and
risk of payment default to be the main risks perceived by lenders. Solar industry
is expected to take off in another three year, when a critical mass of projects that
give sufficient data for banks‟ project appraisal come into existence.
This is supported by the fact that developmental banks like KFW and ADB are
allocating some funds for these projects along with strengthening the project
appraisal capacities of the Indian banks.
Key words: JNNSM, Solar PV, risk, bankability, reverse bidding, tariff, RPO, REC
