‘Green Ahead’ Industry Speak – PowerWatch India

Madhavan Nampoothiri was a member of the interviewee panel for the following article.
Industry Speak – April 2012
What is your assessment of the progess of JNNSM?
“Despite teething troubles, I feel the JNNSM is progressing well. The MNRE did a good job in completing the bidding process of both the batches of the Phase 1 within the planned time schedule. The bidding can be viewed as fairly transparent, if the allegations against Lanco are unfounded. 28 out of the 30 projects from the fi rst batch allocation had signed PPAs and half of them had commissioned their projects before the deadline. Some of the projects, even though completed, could not start power generation due to lack of adequate evacuation infrastructure. 14 projects missed the commissioning deadline and were promptly penalised by the NVVN by encashing their bank guarantees.  MNRE deserves credit for not extending the commissioning deadline and also
for letting the NVVN penalise the projects that missed the deadline.”
Pre-JNNSM, the major barrier in solar power was its high cost. Within the two years of its launch, the cost of solar has come down drastically from 17-18 per unit to 7.50 per unit, as suggested by the bids of second batch bidding. According to you, what has led this drop? Many sector players in the field think such bidding is unsustainable. What’s your opinion?
“There are various factors that have led to the drop. First is the falling cost of PV module prices that bidders may have factored in into their calculations. Second is strategic bidding. Many of the bidders, in their attempt to gain a first mover advantage in the sector, willingly lower down their threshold IRRs for strategic reasons. Lastly is fi nancing. Some of the large developers opted for imported less expensive thin fi lm modules that came with low cost financing support. This enabled these developers to reduce their capital cost. While there are genuine concerns about the viability of these projects, in my opinion, the low prices of solar are here to stay and developers.”
It is ironical to see that majority of the projects under the JNNSM scheme are being bagged by new and small players, quoting a low tariff rate. Are we on the right track with the JNNSM? Will these projects be able to meet the timelines and commitments?
“While some new companies did win in the fi rst batch of Phase 1, most of the companies that won in the second batch are well established companies like Azure, Mahindra Solar, Welspun, Green Infra and Solairedirect, among others. By changing the selection criteria for the bidding of the second batch, the MNRE was able to ensure that serious players were awarded the projects. While it is too early to comment if the projects will meet deadlines, in my opinion, a  majority of the projects (in the second batch) will be completed on time and will meet their commitments.”
What’s your opinion about mandating domestic content requirement under JNNSM? Is it helping the domestic industry or is it proving to be counterproductive?
“Data suggests that this well intentioned policy has not had the desired impact in terms of helping the domestic PV manufacturing industry. The reason for this is that the domestic content requirement is mandated only for crystalline silicon technology whereas it is not applicable for thin fi lm technology. Currently, imported thin fi lm modules account for about 60-70% of all PV installations in the country (including projects under the Gujarat State Policy). Thin film modules are cheaper than crystalline Silicon and their theoretical output in the high temperature climate of India made it an attractive option for project developers to opt for it. It is to be noted that there is no long term performance data to validate the theoretical higher yield of thin fi lm technology. Even though the price difference between crystalline Silicon and Thin fi lms have considerably narrowed, less expensive fi nancing options available for imported thin films makes them quite attractive. The bottom line is that the domestic content requirement needs to be either backed by strong financing support from Indian lending institutions or government incentives for the products of domestic PV manufacturers to make the mandate effective.”
According to you, what are the problems being faced with the implementation of the Mission?
“The foremost challenge is to secure funding for solar projects. The low bid prices have lowered the returns from PV projects and have reduced the appetite for lending from fi nancial institutions. Then, there are project delays due to land acquisition issues, Lack of adequate trained manpower and land clearances, besides power evacuation infrastructure hurdles that need to be looked into.”
For the complete article, PowerWatch INDIA April 2012