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ShareHyderabad: The fledgling Indian solar industry is eagerly looking forward to the launch of the Jawaharlal Nehru National Solar Mission (NSM), which will suggest ways to increase the use of solar energy and to make it affordable.
Earlier slated for Saturday, it has been delayed to next week, said Farooq Abdullah, minister for new and renewable energy.
The National Semiconductor Policy (NSP) of 2007 had set the ball rolling -- albeit inadvertently -- to attract manufacturers to put in place a semiconductor ecosystem.
The NSM should spell out the demand-side policy boosters for the solar industry, which is estimated to be worth around Rs4,000 crore odd across the value chain.
Prime Minister Manmohan Singh has set a solar power generation target of 20 GW by 2020 for India and a draft NSM document doing the rounds sets out broad contours for achieving this.
The most important aspect the industry is focused on is the feed-in tariff (FIT), which the ministry of new and renewable energy is likely to fix as an incentive for solar power generators to step in to set up larger grid connected systems as also other incentives for off-grid applications.
While a January 2008 policy of the central government for attracting investments for demonstration projects totalling 50 mw -- which set Rs15 per unit (kilowatt hour, kwh) as generation-based tariff (GBT) for installations set up by March 31, 2009 -- has been around, not a single unit has come up yet. Likewise, the Gujarat government has a policy that pays Rs13 per unit has been found wanting.
Charles Yonts and Rajesh Panjwani, analysts with CLSA Asia-Pacific Markets, in a note on Friday said a feed-in-tariff of Rs15-20 per kilowatt hour looks very attractive on both absolute and relative basis and initial starters of solar power plans could earn internal rate of return (IRR) in excess of 15-20%, the highest among countries they looked at and compared with negative returns expected from solar investments in China. Quite naturally then, there should be a rush of developers in the sector.
Indications are that the policy could set the FIT at between Rs15 and Rs20 per kwh, apart from spelling out a financial support system for large grid-connected systems. It is also expected that the policy will heed to the suggestion of prolonging these and other incentives for 20 years or the life of the solar modules.
The industry is obviously happy at the prospect.
What will also help it is that solar module prices have dropped almost 30% since last year. Scale projects will enable producers to take advantage of lower costs and thereby have higher IRRs, observed Rajiv Jain, director government relations, ISA.
An important feature of the policy could be an incentive regime for setting solar projects early with a front-loaded FIT which reduces progressively over the years.
This could be available for generation capacity to the extent of 3000-5000 mw, said an industry source.
Another demand voiced by the industry at the recently concluded SolarCon 2009, a solar industry conference, is for at least a 20-year tenure for the power purchase agreements (PPAs) with state power utilities. While that is a state subject, Saturday's policy announcement is expected to suggest the same.
While the specifics of the NSM will still have to be spelled out in subsequent follow up announcements, according to ISA's Jain, what will be good for the industry is the mere thought of implementation of the policy itself.
