India’s renewable energy policy framework favours CSP in long-run - Mar 26, 2011 - Jerri-Lynn Scofield - - Policy - Generation - Technical Articles - Index - Library - GENI - Global Energy Network Institute

India’s renewable energy policy framework favours CSP in long-run

Mar 26, 2011 - Jerri-Lynn Scofield -

Ahead of the game on renewable energy policy enactment, India is now pursuing ways to ensure countrywide support of the build-out of renewable energy, via RECs. Insiders say the domestic CSP sector is likely to thrive within the system over the longer-term.

India's REC scheme will spread the cost of renewable energy adoption in IndiaIndia sparked the development of its renewable energy sector back in 2003, with the introduction of an Electricity Act that included mechanisms such as renewable purchase obligations (RPO) and Feed-in Tariffs (FiTs).   

But despite many State Electricity Regulatory Commissions (SERCs) opting to enact RPOs, these obligations lacked overall uniformity, according to Vijay Lakhanpal, Chief Operating Officer, Forum for the Advancement of Solar Thermal (FAST).  This is because the Electricity Act allowed (SERCs) considerable discretion in setting their policies, he explains.

In November 2010, India’s Central Electricity Regulatory Commission (CERC) responded to state-by-state disparities in current capacities to generate renewable energy—and to meet their RPOs— by launching the Renewable Energy Certificate (REC) mechanism.  This mechanism allows states that have exceeded their RPOs to swap renewable energy with states that haven’t.

Although CERC has made a general suggestion that solar power generation should be promoted, each state is left alone to decide whether or not to mandate any particular percentage of solar power generation to meet its respective RPO.  States such as Tamil Nadu, for example, are exceeding their RPOs solely by the use of wind technology, according to Lakhanpal.

CSP advantageous under REC system

For states with solar-specific RPOs, there is no preferential treatment for any given solar technology.  RPOs are “technology agnostic between the various forms of solar,” explains Anish De, CEO of Mercados Energy.

The more important distinction driving a preference for PV or CSP arises from the size and resources of the developer. “Only big companies can go for CSP projects, whereas both big and small companies alike can develop PV,” notes Ramana Reddy, Project Manager-Energy, for KfW, New Delhi. This reality is “obviously due to the sheer minimum size requirements of CSP technology, and the modular nature of PV.” 

A PV plant can be 1 MW, 100 MW, or 500 MW, “with availability of land as the only consideration,” Reddy adds. Some companies, such as Lanco Solar, are hedging their bets, and pursuing both technologies.

De explains: “There is no distinction between the two technologies on an energy generated basis,” but he says the REC system might, in the longer run, translate into an advantage for CSP projects, since the larger relative size of these projects will lead to “greater opportunity to create more certificates.”

A loose FiT

As in Spain, Indian central and state government policies have promoted the renewable sector via FiTs. But unlike Spain, India’s government-mandated FiTs are no longer pivotal to CSP development. “I think developers are pretty ok with CERC levels of FIT,” says De, even though those are “a shade lower” than Spanish FiT.

The more important issue, he notes, is that contracts are no longer being awarded on the basis of the CERC FIT, due to competitive bidding driving project bids below the FiT price. “CERC rates are only a hypothetical tariff, with actual competitive tariffs in successful bids being an average of 30-35% lower than CERC- mandated tariffs,” confirmed Lakhanpal.

Whether such low tariffs are viable is questionable. De warns:  “The question is whether those tariffs are realistic or not, whether they’re sustainable or not.

Local content requirement no problem

Indian regulators have also set a high local content requirement: currently 30% for CSP and gradually increasing.   India has a large domestic engineering industry, strong in producing turbines (and other power block requirements such as generators, and control room elements), and piping, and fixtures, and so initially, local content requirements will be satisfied in these areas.  

In the longer run, however, Reddy suggests that China and India may become a source for more solar-specific components, such as mirrors, based on their relative labour costs advantage, not only for supplying domestic solar facilities, but also, producing for export.

Quality issues should not be a major issue for India. As Reddy points out: “Creating PV and CSP isn’t rocket science”. India has actually performed rather well on the rocket science front, as   one of the few technological powerhouses to launch its own rockets successfully into space.

Local partners key to success

In the long run, given the healthy competition in India’s CSP market, a high level of local content will be necessary in order for developers to remain competitive. “Satisfying the local content requirement is not going to be a challenge,” observes De.

So far, the seven developers awarded CSP contracts under Phase 1 of the Jawaharlal Nehru National Solar Mission (JNNSM) are domestic companies. Given the state of energy’s electricity grid, and the expanding power needs of its rapidly growing economy, renewable power generation is expected to beckon as an attractive opportunity for major international CSP developers, including Abengoa, Acciona Solar Power, Brightsource Energy, eSolar, and Solar Millenium.

These players will be drawn in by a large, growing, and highly competitive market, says De. “Combining local content will be very important for international players.  I cannot see a situation where those international players can be alone [in constructing Indian CSP projects].  They must have strong local partners, who are able to manage costs, as a necessary part of any competitive project.”

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Updated: 2003/07/28