Setback for solar power projects: Private developers have made this big statement

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Solar power developers seem to be having a rethink on the aggressive approach to bag contracts as this had whittled down tariffs to unprofitably low levels. With potential bidders objecting to the tariff ceiling prescribed by it for the two pilot solar-powered agri-feeders in Yavatmal and Ahmednagar districts, the Maharashtra government may ask state-run generating company Mahagenco to pick up majority stakes in these and a clutch of large-scale projects in the pipeline, sources said.

Also, several small projects may be clubbed before the tenders are invited so that the bidders find economies of scale.

The move may considerably reduce the private developers’ business risk by cutting down project costs.

Maharashtra has lined up a massive solar capacity addition programme, keeping the demand for electricity from the states’ farmers in mind. A total of 700 feeders and capacity of 1400 MW are planned.

The two pilot projects of 2 MW each, conceived about a year ago, have got delayed as investors cited their unviability due to low tariffs. The state government had, in the bid documents, proposed to keep tariffs below Rs 3 per KwH, while private developers reckon that tariff below Rs 3.5 per KwH is non-viable.

Arvind Singh, principal secretary (energy) in the Maharashtra government, told FE: “Large players raised the issue of projects being non-viable as they didn’t see economies of scale. However, if the pilot projects are successful, we plan to group some of these feeders to 20-40 MW capacities which would provide the kind of returns big players look for.”

If the government’s plan fructifies, it could help resolve the farmers’ grouse about not getting power during daytime. It will also help reduce inefficiency and bring down the tariffs for industrial and commercial consumers, analysts said.

Prashant Khankhoje, director, Global Energy — advisers to private players for these projects — said the government is in the process of revising the terms and conditions of the bidding document where state generation company Mahagenco may take up to 51% stake in the projects, while the remainder would be taken by private

players. This would reduce the project cost by half and bring down the tariffs, making it attractive for investors.

“As per the revised bidding conditions Mahagenco can collect the tariffs from the state-run distribution entity Mahadiscom instead of farmers as was proposed earlier which would allow them to run the project without any collection-related issues,” Khankhoje said.

Agriculture consumes around 30% of total power supplied in Maharashtra. However, the supply to domestic and agriculture segment happens through the same feeder which puts a lot of pressure on the system. Subsidised electricity is available to farmers at night for agricultural activities such as running pump sets.

It is expected that separate solar feeders will bring some load off the grid. The government plans to provide electricity to farmers for 12 hours a day and aims to distribute 5 lakh solar-powered pump sets in the next five years.

As per industry standards, a 1-MW solar project costs around Rs 5 crore.

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