Like in most countries across the world, solar in India is also supported through policy and regulatory measures. Every year, only a limited capacity of projects is allotted by the central and state governments through a bidding process. Due to the limited allocation, the bidding is highly competitive and leads to extremely low(and sometimes unviable) prices quoted. On the regulatory side, the lack of enforcement of RPO is a major challenge that a project developer has to face.
In addition to the policy and regulatory challenges, there are challenges related to number of permits required, timely receipt of permits, among others.
Broadly, 3 types of infrastructure related challenges are faced by a developer.
- Solar Resource Assessment: At the beginning of the JNNSM and Gujarat policy implementation, most developers struggled due to the lack of proper ground measured irradiation data. Even though satellite measure data was available, the accuracy of the results was not clear. However, with the installation of more than 500 MW in both Gujarat and Rajasthan, many of the developers now have good irradiation details for at least a year in these states.
- Land: Identification of suitable land and taking possession(lease or outright purchase) of the land from the owners can be a challenge. Even after the land is acquired, there is always the possibility of disturbance from the local leaders.
- Grid Infrastructure: Since many of the solar plants are located in remote areas far away from an existing grid, setting up connection to the grid can be a challenge. In addition, the non-availability of the grid and the quality or the stability of the grid can also pose major challenges.
3. Financing Challenges
The high interest rates coupled with the limited experience of banks with solar projects make it extremely difficult for a developer to secure project financing. The low tariffs that are realised after a reverse bidding also lead to difficulty in financial closure since the profitability of the projects may be below the expectations of the financing institution. In case of some states, the power off-taker might be in financial distress, which makes it even more challenging to secure financing for solar projects.
4. Implementation challenges
Most of the implementation challenges are caused by the remoteness of solar plants. It can be quite challenging to mobilise and manage manpower and other resources in the remote locations. Some of the other challenges could be related to managing the local community issues(social and political, among others). Unexpected weather conditions like excess monsoons or sand storms in places like Rajasthan can hamper the speed of the project.
While the above mentioned challenges are real and can be part of every project, most of the developers are now aware of them and have devised clear strategies to overcome and even prevent some of them from affecting their projects. While the developers will not have direct control over the policy/regulatory challenges and the financing challenges, the other two challenges – infrastructure and implementation – are mostly managed well by the developers and this is an indication of how far the Indian solar sector has evolved. Once grid-parity is achieved the other two challenges will also be quickly overcome.
Prepared for Intersolar India by Madhavan Nampoothiri, RESolve Energy Consultants