With the unallocated electricity quota under the phase 1 of JNNSM no longer available and the fact that NTPC/NVVN is no longer the procurer of solar electricity under the JNNSM, MNRE has established the Solar Energy Corporation of India (SECI) for handling the power procurement from the second batch of the JNNSM.
In this scenario however, SECI (MNRE)’s role would be limited to providing an upfront subsidy known as Viability Gap Funding (VGF) which is basically a part payment made by SECI to the project developer in order to make the project viable. In this scenario, the developer opting for the lowest amount of funding to bridge the gap would be chosen first and so on. This is a new form of reverse bidding wherein the developer would no longer quote the electricity tariff but the quantum of money required to make the project “viable”. In view of this, MNRE has released the draft guidelines for the first phase of second batch under JNNSM for setting up of 750 MW of solar capacity. Some of the information presented in the draft document is highlighted below.
This announcement should provide some insight on the VGF process for project developers. In all likelihood this VGF mechanism could prove to be beneficial to the developers since all the payments are front loaded, thus the lower tariff could have little impact on the viability of the project. In addition to this, developers would now have to tackle the bidding process which is no longer a tariff driven process but a capital subsidy driven process i.e. a developer who requires a lower subsidy would be given preference with a fixed tariff over 25 years.
The more interesting fact is that the DCR is not going to be enforced in full force. The strategy for tackling DCR is to split the capacity i.e. give a separate allocation to the projects using local components (a percentage of the total capacity of 750 MW). Furthermore DCR does not state it is applicable to c-Si only suggesting that technology selection be it TF or c-Si would be covered by DCR. Some reports suggest that the capacity allocation for projects favoring domestic components would be about 250 MW.
The draft document can be accessed here.
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