Ministry of New & Renewable Energy is planning to launch Phase 2, Batch I of the National Solar Mission (NSM) which aims development of around 750 MW of Solar PV Projects.
Under the NSM Phase 2, Batch I, the Government is considering to provide Viability Gap Funding (VGF) maximum upto 30% of the Project Cost or INR 2.5 Crs/ MW whichever is lower.
Some of the major aspects of this program as per the draft guidelines issued MNRE are as below:
Capacity: total 750 MW
PPA Process: The allocation process, signing of Power Purchase Agreements (PPAs) and handing out of VGF will all be handled by the Solar Energy Corporation of India (SECI).
Tariff:
- Projects not availing Accelerated Depreciation: Rs. 5.45 /kWh
- Projects not availing Accelerated Depreciation: Rs. 4.95 /kWh
Viability Gap Funding
- Over and above the tariff, Viability Gap Funding (VGF) will be provided with an upper limit of 30% of the project cost or INR 25m/MW.
- The exact quantum of VGF will be determined by a reverse bidding mechanism.
- Developers would not be able to take advantages of REC Mechanism.
- Viability Gap Funding (VGF) will be provided with an upper limit of 30% of the project cost for a maximum capacity of 100 MW.
- The VGF amount will be handed over in three installments:
- 1st Installment (25% of total VGF): After the delivery of at least 50% of the equipment
- 2nd Installment(50% of total VGF): Commissioning of the project
- 3rd Installment (25% of total VGF): After one year of commissioning.
- SECI can claim assets equal to the VGF amount if the plant remains inactive or if any assets are sold.
- If the plant fails to generate any power continuously for one year during the course of the PPA period or the project is dismantled or its assets sold, SECI will have the right to claim assets equal to the value of VGF granted.
Key Concerns
- Low tariff and uncertainty over VGF due to reverse bidding process will adversely affect the profitability of the Projects.
- A firm mechanism to ensure that there is a match between states willing to buy power at the pre-determined prices and developers’ preference of location for the projects
- No clarity on how the SECI will ensure the off-take of the power to states across the country that might be willing to buy the power.
As said by the MNRE, the bidding documents are all ready and waiting for the Cabinet approval for the disbursement of grant.
According to sources, the program is supposed to be launched in the next 10 days.
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