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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