Unfazed by US objections, Centre to go ahead with buy-local rule for solar

M Ramesh Chennai | Updated on March 11, 2015 Published on March 11, 2015


3,000 MW of solar photo voltaic capacity up for grabs in Batch II of Phase II

Undeterred by the ongoing battle at the WTO over the mandatory buy-local rule for solar power projects, the Ministry of New and Renewable Energy has decided to go ahead with similar provisions for the award of the next set of solar power projects.

Coming up next is Phase-II, Batch-II of the Jawaharlal Nehru National Solar Mission, where 3,000 MW of solar photo voltaic capacity will be up for grabs through a bidding process. The chunk will be divided into lots and allocated to various States, and projects of at least 10 MW in size will be awarded to those bidders who offer to sell the power cheapest to the State-owned power trading company, NTPC Vidyut Vyapar Nigam (NVVN).

The guidelines for Phase II Batch II, released by the Ministry on Tuesday, said the Ministry will prescribe the “domestic content requirement” (DCR) for each State. As in the case of the previous round of bidding, (Phase II Batch I, where 750 MW of capacity was distributed to winners), bidders may bid for ‘DCR’ or ‘open’.

India’s DCR rule has particularly irked the US, leading it to complain to the WTO. The case is underway, but the Centre is unfazed. India’s defence stands on two legs — that the quantum of projects required to buy local cells and modules is very small, and that in any case it is only a State-owned company that is buying the power, and the WTO allows buy-local rules when applied to government procurement.

The guidelines said that for plants using crystalline silicon, the cells and the modules (modules are made with cells) should be produced in India. For ‘thin film’, the entire module must be made in India, though import of the substrate is permitted.

Narender Surana, Managing Director of module manufacturer Surana Solar, felt the guidelines should have been further refined. A part of projects to be awarded under the ‘DCR route’ should be permitted to use modules made in India using imported cells, he said.

CUF cap

A noteworthy feature of the guidelines is the Capacity Utilisation Factor (CUF) cap. The Ministry will prescribe a CUF ceiling, which practically means a cap on the number of kWhr of electricity generated. Generation beyond the limit will be paid only ₹3 a kWhr, though the plant owner can sell surplus power to third parties.

Experts such as Raveesh Budania of Headway Solar, a Delhi-based solar consultancy, have welcomed the move, noting that such a ‘cap’ will discourage the practice of developers building plants that actually have higher capacity than awarded, so that they generate more and earn more. After all, it is impossible for the Ministry to monitor the capacity of every plant. Hence it is saying, if you over-generate, we will pay you only ₹3.

It is good for the developers too because they may add to the capacity at any time and sell the surplus power directly to consumers, noted Budania.

The guidelines also fix a limit on the tariff — it shall not exceed that prescribed by the Central Electricity Regulatory Commission. The winners will have 210 days from the date of signing the power purchase agreement to construct the project.

Published on March 11, 2015
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