Solar mission: 1,500 MW worth projects to be allocated under bundling scheme

The Union Ministry of New and Renewable Energy (MNRE) has last week released the draft guidelines for the second batch of projects under  phase II of the Jawaharlal Nehru National Solar Mission (JNNSM).

Solar photovoltaic (PV) projects with a capacity of 1,500 mega-watt (MW) would be allocated in a phased manner, divided equally over 2014-15 and 2015-16. Projects for 500 MW out of the 1,500 MW have been set aside for domestic content requirement (DCR) category. DCR mandates sourcing of equipment from domestic market.
Goodbye to viability gap funding?

After experimenting with capital subsidy in the form of viability gap funding (VGF) for the projects in the Batch 1 projects allocated earlier this year, this batch is going back to the “bundling scheme” used in Phase I of JNNSM wherein solar power is bundled with coal-based power at the time of selling to distribution agencies. MNRE defines bundling mechanism as “bundle of relatively expensive solar power with power from the unallocated quota of the Government of India (Ministry of Power), generated at NTPC coal-based stations, which is relatively cheaper and sell it to the Distribution Utility at weighted average price.”

Bundling was credited with the reduction of tariff rates for solar power in Phase I of the mission. The World Bank in its report, Paving the Way for a Transformational Future: Lessons from Jawaharlal Nehru National Solar Mission Phase I, states that “bundling of solar power with cheaper conventional power reduces the tariff impact of solar power on the distribution utilities”.