Next wave of growth in the renewable sector to be fueled by UMREPPs

In December 2014, MNRE rolled out its scheme for “Development of Solar Parks and Ultra-Mega Solar Power Projects” with an objective to facilitate the solar project developers to set up projects in a plug and play model. The scheme proposed to set up at least 25 solar parks and ultra mega solar power projects across various locations. India houses multiple ultra-mega solar parks with a capacity of more than 1 GW, and two of them (Bhadla, Rajasthan and Pavagada, Karnataka) are the largest commissioned in the world to date. These huge sites have been instrumental in driving economies of scale and attract foreign capital.

There has been a renewed interest in setting up Ultra Mega Renewable Energy Power Parks (UMREPPs) with SECI, NTPC and other state governments making announcements to come up with huge capacity. The process is advancing to achieve the 450 GW renewable energy target set for 2030 by the government to move to a greener economy. A list of recently announced ultra mega solar parks is given below.

Table 1: List of UMREPPs planned

Source: JMK Research

As part of the bigger plan, MNRE has also recently improved and modified its guidelines for the development of solar parks and ultra solar mega parks. The ministry has now included a new model called Ultra-Mega Renewable Energy Power Parks (UMREPPs). Under this model, the following implementation arrangements are issued:

  • Any Central Public Sector Undertaking/State PSU/State government organization or their subsidiaries can be solar power park developers. A Joint venture between the two is also possible.
  • The land allotted under this mode by the State Government to the developer is subject to the condition that the development must be completed within 2 years (extension of 1 year under extreme conditions), failing to which the land would be taken back in consultation with ministry.
  • The UMREPPs are not to be considered profit-making activities and a maximum of 16% return on equity may be allowed.
  • The state government or any agency designated for the work will be paid a facilitation charge of INR 0.05/kWh of power generated from the projects for the entire period of the power purchase agreement (PPA).
  • The developer will also be entitled to Central Financial Assistance of Rs.20 Lakh/MW or 30% of the cost of development of UMREP whichever is lower for the development of internal infrastructure. If the developer has a trading license, they will be entitled to claim a margin of Rs. 0.07/kWh, however not in case of EPC projects.
  • CPSUs are free to set up RE projects in EPC mode under CPSU schemes in any of the UMREPPs

These utility-scale projects will go a long way in revealing the success story of renewables in India. Ultra Mega Solar Parks have been the government’s ambitious plan and much-needed policy intervention and effective regulatory landscape have been provided to the developers. The recent policy amendment is a step in the right direction. The government should focus on short term impediments right now to reap the longer-term benefits from Ultra mega solar parks.