Why The Rewa Plant Is Critical To India's Solar Energy Ambitions

On 15 February, 2015, Prime Minister Narendra Modi made an interesting observation in his inaugural speech for the first RE-Invest global summit in New Delhi. He remarked that Indian energy sector has been thinking in terms of Mega Watts (MW), but for the first time, India had started talking about Giga Watts (GW).

It was inconceivable that India aimed at 100 GW of installed solar power capacity by 2022, given that the entire country had under 3 GW of existing installations when the Modi government took over. Yet, the ambitious target set clearly signalled the government’s intent to make solar energy an integral part of Indian energy security strategy.

The target was of course lampooned as too ambitious and impractical. Despite the economic headwinds since then, India has managed to hit about 35 GW in installed capacity till now. One major gap is rooftop solar, which has not progressed much.

So while adding 65 GW of solar capacity in two and half years looks tough, opening up of the rooftop solar market nationwide can help push the envelope.

But even this current progress from 3 GW to 35 GW was not easy. One of the projects which gave impetus to this journey was the Rewa Ultra Mega Solar Ltd (RUMSL) solar plant, inaugurated by PM Modi on 10 July.

When the reverse auction for the tariffs from the Rewa plant were conducted in 2017, Rs. 2.97 per unit was the discovered number. This was a crucial signal – solar tariff had fallen below the Rs. 3 per unit mark and became competitive with the usual grid prices. This auction also demonstrated the importance of ensuring grid connectivity for solar projects and providing the visibility of power evacuation to the developers.

A joint venture between the state government-run Madhya Pradesh Urja Vikas Nigam Ltd (MPUVNL) and central public sector firm Solar Energy Corporation of India (SECI), the Rewa project is a great example of federal cooperation and multi-agency coordination driving productivity and efficiency gains.

Rewa project was also the first solar project to sell power across state borders. It highlighted the importance of signing long-term Power Purchase Agreements (PPAs) in the solar sector, just like those signed for thermal power plants, to make the projects competitive. The Delhi Metro Rail Corporation (DMRC) and the MP Power Management Company Limited (MPPMCL), the holding company for all the power state distribution firms, are major buyers from the Rewa plant.

60 per cent of the DMRC power need will be fulfilled via this PPA. This PPA will have a term of 25 years with a levelized tariff of Rs. 3.30 per unit. Approximately 345 million units of power will be supplied to DMRC per annum by the Rewa plant. This Open Access (OA) purchase of solar power was first of its kind agreement in the country. Power Grid Corporation of India Limited (PGCIL) was roped in to design the 220/400 kV interstate transmission line, which facilitates evacuation of power from the site.

RUMSL selected Mahindra Renewables Private Limited, ACME Jaipur Solar Power Private Limited and Arinsun Clean Energy Private Limited to develop the 750 MW generation capacity.

Each vendor developed 250 MW generating units. International Finance Corp (IFC) provided debt funding to all three vendors. RUMSL also became the first Indian project to receive funding from the Clean Technology Fund, in which the World Bank is a trustee, to develop the power evacuation infrastructure.

The MP government is now trying to replicate the project implementation success in three other locations in the state.

Another 1500 MW of solar energy projects are being developed by RUMSL, though they have been delayed due to the political situation in the State and later the constraints imposed by the Covid-19 pandemic. The three projects will come up at Agar (550 MW generation capacity), Neemuch (450 MW) and Shajapur (500 MW).

These capacities for solar projects would have sounded like a dream just a decade ago. But globally, the prices of solar cell modules have crashed, there are several avenues for capital expenditure funding and resultantly the supply and demand have moved to reduce the unit pricing.

The massive solar parks which have come in over the last few years in India are a testimony to India’s ambitions and the changing business dynamics.

Bhadla (Rajasthan, 2250 MW), Pavagada (Karnataka, 2050 MW), Orvakal (Andhra Pradesh, 1000 MW) and Kamuthi (Tamil Nadu, 648 MW) are already in different stages of operation. There is also a healthy competition between States to conceptualise and commission new projects, which bodes well for the growth of the sector in the country.

Apart from the untapped potential of rooftop solar, another area which the government can use to drive long term solar adoption is agriculture. The central government has been looking to dedicate about 8 GW of installed solar capacity to agricultural feeders. This has been talked about for a while, but concrete movement has not happened, partly because States have to be onboard.

Realistically speaking, 25-30 GW of solar power addition may very well be possible until the end of 2022. India may take a couple of years more to then hit 100 GW ambition. The adoption will be faster once the storage technologies become more prevalent and affordable.

Irrespective of the timeline, India hitting 100 GW installed base on solar power will be a humongous achievement.