India Solar – The Story Continues

The Indian federal government announced its national solar mission several months ago. And since that time there has been a frenzy in Indian solar on multiple fronts, some of which I’ve written about in past posts:

– several small projects authorized by state level governments were grandfathered into the national plan, and holders of those PPA (power purchase agreements), have been speaking with a variety of prospective investors in an attempt to eke out the best terms for investment; some of the project sponsors in this category have little experience in solar and have no desire to move ahead on their own.

– Other larger projects (5MW +) that have also been grandfathered have changed ownership, with the acquiring groups being mid-size or large family sponsored conglomerates that have significantly more expertise than the sellers (a reason for the sellers to sell); the new owners have also been speaking with all manner of domestic and international players to bring in the requisite expertise for commissioning these solar projects, because while these mid and large size firms have quite a lot of expertise in managing large scale projects, few have solar expertise.


Note:  This is a cross-post from NRI Matters, where I blog on Indian investment issues. is an initiative of the Government of India and Confederation of India Industry for reaching out to foreign investors.


The activity level has increased significantly during the past 30 days, but we can expect it to increase further. One reason is that many of the projects that have been grandfathered into the national solar mission have December 2011 commissioning deadlines, so this leaves a very short time frame for design, engineering and construction. Some sellers or promoters seeking partners appear to be pushing the time limit right up against the boundary where they risk breaching commissioning deadlines.

On another note, it appears that the design of the national solar mission is already having an impact on state-level solar programs. Specifically, the national solar mission instituted a reverse auction process for setting the solar feed-in tariff. While solar project sponsors might have preferred a relatively high and pre-set tariff, the reverse auction method is better for the government, as it will be a less expensive subsidy. Not surprisingly, state officials are looking at copying the national solar mission’s reverse auction process; in fact the state of Rajasthan recently issued a draft of its new solar policy that includes a reverse auction process. I expect other states to follow.

So at what level are the various feed-in-tariffs settling? Many players involved in the solar game in India expect tariffs to settle at the INR 12-13 range. A few months ago this might have seemed shockingly low, as this level is 20%-30% below tariffs available under existing PPA’s. But, solar project projections at these tariff levels suggest that the available profits are reasonable for project sponsors and reasonable for the government. Of course – those are just projections…..we’ll know in about 18 months how it all works in practice.

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