Ashutosh Agrawal 29th July 2010

A Brief on Solar Incentives for Grid-Connected Solar Plants

under National Solar Mission of India
Target:

• Target of 1000 MW before March 2013. Half from Solar PV and other half from Solar Thermal.

• Solar PV projects allocation in two phases:

Phase 1: 150MW to be allocated in FY 2010-11
Phase 2: Remaining of 500MW to be allocated in FY 2011-12

• Solar Thermal projects of 500MW (Total Planned Capacity) will be all allocated in FY 2010-11

Tariff Details:

• The generic tariff for Solar PV for the year 2010-11 shall also apply for 2011-12
The generic tariff for Solar thermal for the year 2010-11 shall also apply for 2011-12 and 2012-13

Provided that

(i) the Power Purchase Agreements in respect of the Solar PV projects and Solar thermal
projects are signed on or before 31st March, 2011; and
(ii) the entire capacity covered by the Power Purchase Agreements is commissioned on or
before
a. 31st March, 2012 for Solar PV projects
b. 31st March, 2013 for Solar thermal projects

• Tariff Control period is of 25 years

• For Solar Thermal Hybrid, at least 75% of electricity is to be generated from solar energy
component. The tariff is to be determined on case to case basis.

Levellised Total Tariff Net levellised Tariff (upon

Benefit of Accelerated
(FY2010-11) adjusting for Accelerated
Depreciation (if availed)
(INR/KWhr) Depreciation benefit)

Solar PV 17.91 (2.96) 14.95

Solar Thermal 15.31 (2.46) 12.85

• Debt to Equity ratio is assumed at 70:30. Cost of Debt is considered at 13.39% for 10 year loan.
Return on Equity for the first 10 years is 19% and for 11th year onward till useful is 24%.
• 90% of capital cost to be depreciated. Rate of depreciation considered is 7% for first 10 years and
1.33% from 11th to 25th year.
• CUF assumed for Solar PV is 19% and that for Solar Thermal is 23%
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Ashutosh Agrawal 29th July 2010

Approval Process

• NVVN (National Vidyut Vyapar Nigam) is the designated nodal agency for signing PPA.
• Qualification Criteria:

Project Capacity
Solar PV: 5 MW ± 5%
Solar Thermal: 5MW to 100MW

The Net Worth of the project company should be greater than INR 30Mil per MW of project
capacity upto 20MW. Beyond 20MW the limit is INR 20 Mil/MW. The best of last 4 years of
unconsolidated audited statements will be considered.

The Solar PV modules and Solar Thermal units to meet the technical requirements with
regard to type, certification and warranty as spelled out in regulation.

A letter from the STU (State Transmission Utility) confirming the technical feasibility of
connectivity of the plant to the Grid Substation at voltage level of 33KV or above to be
submitted along with RFS (Request For Selection). (STU will be responsible for connecting
the project to the substation).

For Solar Thermal, a letter from state authority approving the quantity of water required for
the project.

In Solar PV projects, the crystalline solar modules used must be manufactured in India. In
Solar Thermal, domestic equipments should be at least 30% of the project cost excluding
land.

• NVVN will invite project developers to submit RFS (Request for Selection). RFS to be submitted
within 30 days of receiving invitation. The project developer will have to submit non-refundable
processing fee of INR 100,000/- with RFS. In addition Earnest Money Deposit of INR 2Mil per
MW in form of Bank Guarantee has to be submitted.
• In case the size of submitted RFSs goes beyond 150MW, NVVN will ask for Tariff Discounting
Proposal Bid from each project developer. The Bid will contain the discount on Solar Tariff (in
INR/KWh) that project developer is ready to offer. The project developers will be selected in
decreasing order of discount offered. A Bid Bond amount also has to be submitted with RFP.

• NVVN will send Letter of Intent (LoI) to shortlisted project developers.

• PPA has to be executed within 30 days of receiving the LoI.

Performance Bank Guarantee (Calculated at the rate of INR 3Mil/MW and valid for 15
months) to be provided at signing of PPA.

Details of promoters in the project company and the shareholding pattern to be submitted.

• Financial closure to be achieved within 180 days of signing the PPA.

• Time for commissioning of Solar PV plant from date of signing the PPA is 12 months.
Time for commissioning of Solar Thermal plant from date of signing the PPA is 28 months.

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Ashutosh Agrawal 29th July 2010

Time Schedule

Sl. No. Event Date

1. Notice for Request for Selection Zero date

2. Submission of Applications with documents for

Zero date+30 days
Registration
3. Short-listing of Projects based on RfS received
Zero date+75 days
and decision on tariff discounting
4. Tariff discounting process and submission of
Zero date+90 days
proposals by short-listed developers
Within 30 days from submission
5.
Evaluation of Tariff discounting proposals of tariff discounting proposals
(zero date+120 days)
Within 15 days from evaluation of
6.
Issue of letter of intent tariff discounting proposals (zero
date +135 days)
Within 30 days from the date of
7.
PPA Signing issue of letter of intent (LOI date
+30 days)
8. 180 days from the date of signing
Financial Closure of the project
of PPA
12 months from the date of
signing of PPA for Solar PV
9. Commissioning of the Project
28 months from the date of
signing of PPA for Solar Thermal

__________________

Ashutosh Agrawal
Ashutosh@indiaconsultores.com
http://in.linkedin.com/in/itsmeashu
www.frontiers2explore.blogspot.com
(Feel free to contact me for more information)