The lacklustre year 2013 is drawing to a close with some good news for the coming year. The Uttar Pradesh Power Corporation Limited(UPPCL) signed PPAs with 6 developers for setting up a total of 110 MW of solar power projects under the state’s Solar Power Policy 2013 which targets 500 MW solar capacity by 2017. In March 2013, the state floated RfP for allocation of 200 MW of Solar projects(details here), and in August 2013, it was announced by the government that 7 developers were selected to develop 130 MW.
One of the noteworthy aspects of the policy is that the Power Purchase Agreement(PPA) duration is 10 years which is the lowest among all the prevalent state policies(and JNNSM) in the country. The shorter PPA duration is favoured by quite a few developers for various reasons. During a panel discussion at Intersolar India 2013 held last month, Mr. Inderpreet Wadhwa, CEO of Azure, came out strongly in favour of PPAs of 10-15 years duration. He had the following reasons for his stance.
- 25 years is a long time, and involves lot of uncertainties for both the developer and off-taker.
- Solar developers need assured steady cash-flows only till the loan repayment period(debt service duration) which is usually around 10 years. Once the debt part is taken care of, the developer will have more flexibility in changing the tariffs.
- After 10 years or so, the off-taker might have various other options to procure power from, and need not rely on governmental budgetary support to purchase solar power.
- Similarly for the developer, there might be options after 10 years to sell power at higher rates if the APPC keeps increasing year-on-year.
(Azure is one of the 7 selected developers in UP).
Another interesting aspect of the UP projects is that the winning tariffs are among the highest in the country, and fall in the range of Rs.8.01-Rs. 9.33/kWh. Considering the fact that almost all these projects are expected to come in the Bundelkhand region which has the highest irradiation in the state(and also fairly close to Rajasthan), the tariffs are quite attractive. The land prices are also lower in UP compared to Punjab, which also has fairly high tariffs(Rs. 7.2/kWh – Rs.8.74/kWh).
- Essel Infra Project – 50 MW
- Moser Baer – 20 MW
- Sree Developers – 20 MW
- Azure Surya Private Limited – 10 MW
- Refex Energy – 10 MW
- Jakson Power – 10 MW
- DK Infracon – 10 MW
According to the RfP, the projects have to be commissioned within 13 months from the date of signing the PPA(by end of January 2015). However, since most of the developers are well experienced in this sector, we expect a majority of the projects to be commissioned ahead of time during early part of Quarter 4(October to December) of 2014, barring major unexpected incidents.
It is also reported that the bids for the remaining 370 MW will be invited soon.
It may also be recalled that the UP government had announced that it was planning to sign an MoU with the National Hydroelectric Power Corporation(NHPL) for setting up 100 MW of solar project in Uttar Pradesh.
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problem still will be thr of land acquisition n infra shortage in Bundelkhand hence developing solar parks with common pooling substation, associated transmission infra and land to developers on long term lease is faster way of executing solar projects in the states to remove duplication common resources.