65% Of Aspiring Developers Choose To Exit PPA’s in GUVNL Projects In Gujarat

Mordor Intelligence Forecasts CAGR of 6.97% During 2023-2028 for Distributed Solar Power Generation

The Gujarat Urja Vikas Nigam Limited (GUVNL) has received 2605 applications from aspiring solar developers to exit their project commitments, after the utlity offered a one time exit option to developers from the signed PPA’s.

The development followed the decision by the state government to offer zero subsidy for these smaller projects, at a fixed tariff of Rs 2.83/kWh or unit.

The withdrawals by these developers amounts to 1546 MW, or 62% of the total capacity of 2501 MW that was distributed amongst almost 4005 small scale developers.

That effectively means that about 1400 applicants with a cumulative solar project capacity undertaking of 955 MW still find the Rs 2.83 /unit rate viable to proceed with their plans.

These Small Scale Distributed Solar Projects would have been somewhat like the component A of PM Kusum, but without the subsidies. We assume that might be one reason the state government decided to keep subsidies out of these, and use the PMKUSUM option more strongly in the future.

Announced as part of the ‘Policy for Development of Small Scale Distributed Solar Power Projects’ first in March 2019, the idea here was to focus on developing distributed solar energy, or plants that were off grid. PM KUSUM envisages grid connected plants of course.

Incidentally, even the purchasing power of Rs 2.83 set by Gujarat was considered on the lower side for projects of this nature, with other states generally staying above Rs 3 , going upto Rs 3.15/unit.

According to the policy, any eligible developer can set up a solar power plant with a capacity ranging from 0.5 MW to 4.0 MW and supply the solar power produced to the nearest GETCO substation.

After the state government decision on revoking subsidies, GUVNL had offered the option to withdraw, and the last date for the same was September 5. The story here also adds yet another chapter to the tortured growth of distributed solar in the country, which has generally struggled, thanks to official obsession with grid connected solar, and low costs, the latter a definite limitation for distributed solar plants. Considering the specific needs they serve and by bringing power to unserved areas, the move will be considered regressive, as on its own, this capacity expansion would have seen investments worth close to Rs 10,000 crores, and possible employment for 30,000 people.

The developments could also be a pointer for the limited life left for solar subsidies, now limited mostly to the residential rooftop sector, and in the form of Viability gap funding for projects under the CPSU scheme. A consequence of drop in solar power costs that has brought them below thermal costs for the first time since last year, the government no longer considers cost an issue, choosing to focus instead on subsidies for battery manufacturing and storage, considered vital to allow for higher renewable integration in the grid.