Developers face penalty in the range of Rs. 2 crore for a month’s delay
With a looming deadline of January 9 next year, many of the 5 MW capacity solar photovoltaic (or PV) projects taken up under the Jawaharlal Nehru National Solar Mission seem set to miss the deadline unless they pick up their pace. Twenty-eight PV projects were to be set up under the mission in a year’s time from the date of signing the power purchase agreements.
K S Popli, director technical of India Renewable Energy Development Agency (IREDA) says that “10 to 12 projects seem to be on track”. Around four projects may meet the deadline with some extra efforts. He however added that “about 12 of the PV projects would most likely miss their deadline”.
What National Solar Mission – Batch 1 Guidelines (2010) delay clause states
In case of Solar PV, the project shall be commissioned within 12 months of the date of signing of power purchase agreement (PPA). In case of failure to achieve this milestone, NTPC Vidyut Vyapar Nigam (NVVN) shall encash the Performance Guarantee* in the following manner:
a. Delay upto one month - NVVN will encash 20 per cent of the total Performance Bank Guarantee.
b. Delay of more than one month and up to two months - NVVN will encash 40 per cent of the total Performance Bank Guarantee.
c. Delay of more than two month and up to three months - NVVN will encash the remaining Performance Bank Guarantee.
In case the commissioning of project is delayed beyond three months, the Project Developer shall pay to NVVN the Liquidated Damages at rate of Rs 1,00,000/MW per day of delay for the delay in such commissioning. The maximum time period allowed for commissioning of the Project with encashment of Performance Bank Guarantee and payment of Liquidated Damages shall be limited to 18 months from the date of signing of PPA.
In case, the Commissioning of the Project is delayed beyond 18 months from the date of signing of PPA, the PPA will be terminated and the Project shall be removed from the list of selected Projects
Source: National Solar Mission Guidelines 2010
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Site visits were carried out by the Down To Earth (DTE) team in mid-October to Rajasthan, less than three months to the deadline. The team found that the state owned Indian Oil Corporation (plant proposed in Rawra village of Jodhpur district) and less well-known companies Alex Spectrum (Gajener village, Bikaner district) and Greentech (Bap village, Jodhpur district) had not even begun construction of their 5 MW PV plants yet.
According to Anil Patni, in-charge of co-ordinating the private solar projects with Rajasthan Renewable Energy Corporation (RREC)—the state nodal ministry for renewable energy, “Alex Spectrum would begin construction after Diwali (late October)”, implying mere two months to meet the deadline.
This lead time is too short considering that OPG, a solar company setting up a similar 5 MW plant under the National Solar Mission migration scheme in Bap village in Jodhpur district, took six months to finish from start of construction. Inderpreet Wadhwa, CEO of Azure Power, one of the Indian pioneers in solar energy generation, says “it takes at least four to six months to construct a solar plant”.
When asked about delayed projects, B Bhargava, director with the Ministry of New and Renewable Energy (MNRE) says: “There is still time, they still have two months to go.” He has earlier stated that “There will be no extensions for any project.”
As per the National Solar Mission guidelines 2009, if projects do not finish on the scheduled time of 12 months after signing the power purchase agreement, the developers face penalties (called performance bank guarantee) in the range of Rs 2 crore for the first month of delay and up to around Rs. 12 crore for three months delay.
Ashwin Ghambir, Senior Researcher of Prayas Energy Group states that “Financing may be a big problem for the companies. From a policy stand-point it is important that the government encashes the bank guarantees so that the signal to the market is clear [that there is no special treatment].”
Migration projects
While most of the 5 MW PV migration projects finished just on time on October 15 2011, Moser Baer, Indian solar module manufacturer, has delayed their 5 MW solar photovoltaic project in Tiwari village, Jodhpur district where they are using their in-house thin-film amorphous silicon modules.
When DTE team visited the site on the date of deadline, the correspondent was told that about 11,000 out of 14,000 solar modules have been installed and that it would take another month or two to commission. Bhargava says “Moser Baer will be fined for the delay, but they have been given two months before their contract is cancelled.”
Two solar thermal projects, (Entegra's 10 MW Solar Trough plant in Bhadla village Jodhpur and Dalmia Cement's 10 MW Dish-Sterling engine in Bap village in Jodhpur) and one concentrated photovoltaic project (Entegra 1 MW CPV in Bhadla village) were also part of the migration batch.
At the proposed sites of these projects, nothing could be seen and when confronted with this fact, Patni of RREC admitted that these projects would not materialise, for reasons unstated.
The lender of the Dalmia Cement Dish-Sterling Engine plant—the US Export-Import Bank—remains upbeat. Spokesperson for the bank, Craig O'Connor, has an explanation. “Infinia Solar (the American technology provider for the plant) has recently moved its headquarters and it has set back production but the plant will go ahead”. These would have been the first solar-trough and dish-sterling plants on commercial scale in India.
Solar trough uses bent mirrors to focus the sun's energy on a pipe that heats up water for producing steam to run a turbine, whereas dish-sterling uses a parabolic dish to focus the sun's rays on the heat receiver of a sterling-engine suspended at the focal point of the dish.
Concentrated PV works by having lenses over the actual solar cells that focuses the light, thereby increasing efficiency. Entegra’s 1 MW CPV plant would have been first commercial project to attempt the novel technique in India, but now it faces uncertainty.
Srini Nagabhivara, Managing director at AES Solar says it is difficult for companies with tight deadlines. “The deadlines with penalties in turn have created uncertainty for the banks”. Developers also complain about permitting issues, problems with communities and flooding.
Meanwhile, the solar thermal plants under migration scheme still have until spring of 2013 to commission their projects.
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