COURTESY  :  ieefa.org

Renewable energy

Renewable energy in India has taken
centre-stage when it comes to the
significant development of energy
infrastructure required to achieve
India’s economic goals.
In 2016, the Indian government set a
giant target of 175 gigawatts (GW) of
renewable energy by financial year
(FY) 2021/22 and 275GW by
FY2026/27 to transform the power
sector from an expensive, unreliable,
and polluting fossil-fuels based
system into a low-cost, reliable and
low-emission system based on
renewable energy. In February 2019,
the target was upgraded to 450GW by
2030 as per the Central Electricity
Authority’s latest draft report on
‘optimal generation capacity mix for
2030’.
1
India’s electricity sector transition had a promising start, driven by deflationary
momentum in the cost of solar and wind energy generation equipment, cheaper
financing and a favourable policy environment.
As of March 2020, India’s on-grid
renewable energy capacity stood at
87GW. Of the 30GW of renewable energy
capacity installed since the beginning of
FY2017/18 coupled with an additional
50GW awarded to date, more than 90%
has been contracted at tariffs ranging
between Rs2.43-2.80/kilowatt hour
(kWh) (~US$35-40/MWh) with zero
indexation for 25 years. This is 60-70%
1 CEA. Draft report on optimal generation capacity mix for 2030. February 2019.
A promising start,
driven by deflationary
momentum in the cost
of solar and wind energy
generation equipment.
India Is Home to the World’s Largest
Utility-Scale Solar Installations 2
less than the first-year tariff set for proposed new non-mine mouth coal-fired power
plants in India.
Solar Park Pioneers
India’s renewable energy sector has been facing policy headwinds for more than 18
months.2
After the addition of on average 13GW of renewable energy capacity in FY2016/17
and FY2017/18, India’s renewable capacity additions were expected to grow on
average at 20-25GW in line with the target of 175GW by FY2021/22. However, less
than 10GW of on-grid renewable capacity was added in FY2018/19. This was
expected to grow to 12-13GW in FY2019/20, but have only managed to reach
9.4GW thanks to global lockdowns enforced from March 2020 because of the
COVID-19 pandemic. (An additional estimated 2GW of behind-the-meter rooftop
solar capacity was added in FY2019/20.)
Amid myriad policy and project execution issues, India’s utility-scale solar park
model has firmly stood its ground. India now houses multiple ultra-mega solar
parks with capacity of more than 1GW, and two of them are the largest
commissioned in the world to date. The solar parks in India continue to attract
global capital and some of the most renowned domestic and international
renewable energy developers.
India pioneered the concept of the ultramega power plant (UMPP) in a single solar
industrial park. In 2016 India’s Ministry of
New and Renewable Energy (MNRE)
initially set a target for 40 industrial solar
parks with a combined capacity of 20GW,
and in 2017 doubled this target to 40GW by
2022.
The UMPP concept involves a state
government or local distribution company
facilitating a single central grid connection
and taking on the procurement and timedelay risks relating to land acquisition. This
approach has been instrumental in driving
economies of scale and attracting global
capital into India’s renewable energy over
the last five years, with an immediate boon
in the form of a halving of solar tariffs to a
record low of Rs2.44/kWh (at the exchange
of that time, this was US$39/MWh)
achieved in mid-2017.
2
IEEFA. India’s renewable energy policy headwinds. February 2020.
Solar parks in India
continue to attract global
capital and some of the most
renowned domestic and
international renewable
energy developers.
India Is Home to the World’s Largest
Utility-Scale Solar Installations 3
Utility-sale solar parks in India have successfully overcome the three major risks
associated with renewable energy development in India, namely project execution
risk, off-taker risk and operation and maintenance risk.
Project Execution Risk
India’s land acquisition process is one of the most critical roadblocks to
infrastructure projects. But state government renewable development energy
agencies have helped in acquiring large-scale government and privately-owned land
for the solar parks. The solar parks also have saved developers the bother of
arranging the connection of generation units to the nearest sub-station.
Off-taker Risk
The financial stress of state government-owned power distribution companies
(discoms) continues to be a major concern for the Indian power sector, with
overdue payments of more than Rs88,765 crore (~US$12 billion) owed to
generation companies in the 12 months to January 2020. The discoms’ weak
financial position magnifies the counter-party risk in new power projects.
The Solar Energy Corporation of India (SECI) and NTPC Ltd, both governmentbacked power companies, were brought in to underwrite power supply agreements
(PSA) with the new solar parks.
SECI and NTPC further signed power purchase agreements (PPA) with state-owned
discoms, which improved the quality of the contracts as SECI and NTPC take the risk
on their own balance sheets, which are much more robust than those of most stateowned discoms.
Operation and Maintenance Risk
The solar parks are mandated to build and maintain a road to make project sites
accessible. This in turn supports the projects’ construction and promotes
maintenance of the project for a lifespan of 25 years.
Reverse Bidding Auctions
The introduction of reverse bidding auctions has helped bring renewable energy
prices down. In reverse bidding auctions, developers bid for the lowest attainable
tariff at which to supply power. The auction mechanism drives prices down by
promoting competition, but also has introduced transparency and efficiency in the
process of contracting new renewable energy capacity.
Ultra-mega solar parks have attracted extremely low tariffs all across the globe. In a
recent tender in United Arab Emirates (UAE), 1.5GW of solar capacity was awarded
at a world record low solar tariff of AED0.0497/kWh ($US13.5MWh) to a
consortium led by EDF of France and Jinko Solar of China.3
3 PV Magazine. Abu Dhabi’s 1.5 GW tender draws world record low solar bid of $0.0135/kWh. 28
April 2020.
India Is Home to the World’s Largest
Utility-Scale Solar Installations 4
India Solar Park Update 2020
In May 2018, IEEFA’s report ‘Solar is Driving a Shift in Global Electricity Markets’
analysed more than 80 global solar projects’ execution models, technology,
financing and top developers.4 In this note, we update the Indian utility-scale solar
parks discussed in the earlier report.
Figure 1: India’s Ultra Mega Solar Power Parks
Source: MNRE, IEEFA.
Bhadla Industrial Solar Park, Rajasthan (2,245MW)
The Bhadla solar park in Rajasthan is world’s largest solar park to date, with total
capacity of 2,245MW.5
The Bhadla park is located at Bhadla village
in the Jodhpur district in Rajasthan,
covering more than 14,000 acres. It was
developed by several entities. Rajasthan
Renewable Energy Corporation Limited,
through its subsidiary, Rajasthan Solar
Park Development Company Limited, has
constructed 745MW of capacity. Saurya
Urja Company of Rajasthan, a joint venture
company of the government of Rajasthan
and IL&FS Energy Development Company,
has developed infrastructure for 1,000 MW
of solar projects. Adani Renewable Energy
Park Rajasthan, a joint venture between the
government of Rajasthan and Adani
Renewable Energy Park, (a subsidiary of
4
IEEFA. Solar is driving a shift in global electricity markets. May 2018.
5 Mercom India. With 2,245 MW of Commissioned Solar Projects, World’s Largest Solar Park is
Now at Bhadla. 19 March 2020.
The headline tariff
gave India’s renewable
energy mission a
profound impetus.
India Is Home to the World’s Largest
Utility-Scale Solar Installations 5
Adani Enterprises) has developed 500MW of solar capacity.
The Solar Energy Corporation of India’s auction bid for 500MW in May 2017 saw a
record-low tariff of Rs2.44/kWh, which has not yet been beaten. ACME quoted
Rs2.44/kWh to win 200MW, and SB Energy (SoftBank) quoted Rs2.45/kWh to
develop 300MW. In IEEFA’s view, the headline tariff turned global industry’s heads
towards India and gave India’s renewable energy mission a profound impetus.
Bhadla has attracted record low solar tariffs in India in the range of Rs2.44-
2.62/kWh (US$35-37/MWh) which remain among the lowest tariffs in India to date.
Figure 2: List of Developers of Bhadla Solar Park
Source: Mercom India.
Pavagada Solar Park, Karnataka (2,050MW)
Pavagada solar park in Karnataka with 2,050MW of operational capacity is the
second largest industrial solar park in the world.6
The project, also called Shakti Sthala, is spread across 13,000 acres in Karnataka’s
Tumkur district. Land for the solar park is being leased for Rs21,000/acre annually
(US$300).7
The facility has been developed by the Karnataka Solar Power Development
Corporation Ltd (KSPDCL), a joint venture between Karnataka Renewable Energy
6 Mercom India, World’s largest solar park at Karnataka’s Pavagada is now fully operational. 27
December 2019.
7 World Bank Blogs. Solar Energy to bring jobs and prosperity back to parched villages. 22
December 2015.
India Is Home to the World’s Largest
Utility-Scale Solar Installations 6
Development Ltd (KREDL) and SECI. KSPDCL acquired all the land and the required
approvals and then awarded contracts for the solar power capacity, a simplified
‘plug and play’ model. This facility illustrates how quickly renewable energy
infrastructure can be planned, financed and built when a suitable energy policy
framework is in place.
Of the total 2,050MW capacity, NTPC
installed 600MW of solar PV capacity,
SECI constructed 200MW and KREDL
implemented 1,250MW.
As of January 2018, 600MW was
already operational (priced back in
2016 at Rs4.79/kWh, or US$73/MWh).8
An additional 550MW was successfully
tendered in March 2018 at prices of
Rs2.91-2.93/kWh (US$42/MWh) —
39% lower than the first tender just two
years earlier.9
Leading Indian domestic renewable energy developers to win this round were
Renew Power (300MW), Avaada Energy (150MW) and Azure Energy (100MW). In
May 2018, SB Energy, the joint venture of Japan’s SoftBank, Taiwan’s Foxconn, and
Bharti Airtel won 200MW of solar park generation at an even lower tariff of
Rs2.82/kWh,10 taking the total tendered capacity of the solar park up to 1,250MW.
The remaining 650MW was tendered in May 2018.
Figure 3: List of Developers of Pavagada Solar Park
Source: Mercom India.
8 Live Mint. How the world’s largest solar park is shaping up in Karnataka. 6 March 2017.
9 Mercom India. Lowest tariff od Rs2.91/kWh quoted in KREDL’s 550MW Pavagada Solar Auction.
23 March 2018.
10 ET Energy World. SB Energy wins 200MW auction in Karnataka. 18 May 2018.
This facility illustrates how
quickly renewable energy
infrastructure can be
planned, financed and built
when a suitable energy
policy framework is in place.
India Is Home to the World’s Largest
Utility-Scale Solar Installations 7
Kurnool Ultra Mega Solar Park, Andhra Pradesh (1,000MW)
The 1,000MW Kurnool solar facility is India’s third largest operational solar project
and one of the earliest completed ultra-mega solar parks.
The project, located in Andhra Pradesh’s Kurnool district has attracted international
capital from firms such as SoftBank of Japan in partnership with Foxconn of Taiwan
and BHEL (trading as SBG Cleantech), as well as Indian investors such as Adani
Green Power and Azure Power.11
Andhra Pradesh Solar Power Corporation (APSPCL) led the development effort, first
by acquiring nine square miles of land for the project and then working to secure
funding of Rs500,000 ($7,700) per MW to improve roads, drinking water and
training facilities in surrounding villages. Local skilled and semi-skilled workers
were also given preference for jobs in the solar park.12
Under the UMPP scheme, the national
government provided a subsidy of
Rs200,000 (US$3,000) per MW to APSPCL
to develop the solar park.
The first 500MW was awarded to Sun
Edison at Rs4.63/kWh in January 2016
(this asset was later acquired by
Greenko),13 and 350MW was awarded to
SBG Cleantech at Rs4.63/kWh, 100 MW to
Azure Power of India at Rs5.12/kWh and
50MW to Adani Green at Rs5.13/kWh.
Just a year later, solar tariffs were set as
much as 50% lower,14 highlighting the
price deflation sweeping through the
Indian market.
Figure 4: List of Developers of Kurnool Solar Park
Source: APSPCL.
11 The Hindu Business Line. AP makes rapid strides: 1GW ultra mega solar park nearing
completion in Kurnool. 28 April 2017.
12 NRDC. The world’s largest solar park – Kurnool India. 31 October 2017.
13 Business Standard. Greenko buys SunEdison’s Indian assets for $392mn. 4 October 2016.
14 APSPCL. Kurnool Ultra Mega Solar Park.
A year later, solar tariffs
were set as much as 50%
lower, highlighting the
price deflation sweeping
through the Indian market.
India Is Home to the World’s Largest
Utility-Scale Solar Installations 8
Ananthapuramu – I & II Solar Park, Andhra Pradesh
(2000MW)
Ananthapuramu-I Solar Park is the largest under construction in Andhra Pradesh; it
is spread across two villages in the district of Ananthapuramu and Kadapa.
The 1,500MW project will be the largest solar power facility to be built from
domestically manufactured solar cells and modules, aligning with the Indian
government’s ‘Make in India’ program.
NTPC is developing 1,000MW of the 1,500MW total. The first phase of 250MW was
commissioned by NTPC in 2015 with a power purchase agreement (PPA0 with the
Andhra Pradesh state-owned electricity distribution company at Rs5.96/kWh
(US$91/MWh).15 In May 2018 NTPC completed a tender for the remaining 750MW
at Rs2.71-2.72/kWh, just 45% of the tariff just three years earlier.16 Commissioning
can be expected within 24 months as per 18 to 24 months of commissioning due
date.
Ananthapuramu–II, totalling 500MW, will be built near four villages of the same
district.
Kadapa Solar Park, Andhra Pradesh (1,000MW)
The 5,928 acre, 1,000MW Kadapa facility is being developed by the Andhra Pradesh
Solar Power Corporation (a joint venture of the government of Andhra Pradesh and
the government of India).
The Solar Energy Corporation of India (SECI) awarded 750MW, the bulk of the
facility’s capacity, in April 2017 at what was then a competitive price of
Rs3.15/kWh, with zero indexation for 25 years, as is standard for Indian renewable
tenders.17 But with the continuing, sharp price deflation that characterised 2017,
whereby solar tariffs dropped to a record low of Rs2.44/kWh, the distribution
companies involved declined to honour the proposed contracts.
While clearly an issue for the solar sector,
this price deflation has been a much
graver threat for the country’s already
financially troubled thermal power
generators with tariffs often ranging from
Rs3-5/kWh, raising serious concerns
about massive stranded asset risks in that
sector.
The remaining 250MW was won by ENGIE
of France’s SolaireDirect under a bundling
strategy (tying at-the-time more
15 PSPCL. NP Kunta Ultra Mega Solar Park.
16 ET Energy World. Strong response, drop in tariffs at NTPC solar auction. 10 May 2018.