The solar industry will be funded with direct grants covering as much as 40 percent of the upfront cost of building projects. That model has previously been used to build roads, ports, railways and fossil-fuel plants in India, says the Bloomberg report.
Since India began its National Solar Mission in 2010 the many players have managed to cut average costs of photovoltaic power 51 percent. The program has sought to drive down the cost of solar power to the level of other forms of grid-supplied electricity by 2017. But private lenders have been slow to fund solar because of a lack of confidence in the technology, according to the draft.
Higher interest rates and the short-term lending available for renewable projects in India add as much as 32 percent to the cost of clean power compared with similar projects in the U.S. and Europe, according to a report released today by the Climate Policy Initiative and the Indian School of Business. Developers submitting bids that need the least funding will win solar auctions, according to proposed rules. Grants would be paid in stages as projects reach milestones to prevent developers from bidding too low and ignoring plant performance.
That approach seeks to avoid the large, drawn-out subsidies taken on by European governments that pay fixed premium tariffs to clean-energy plants for as long as 20 years. Germany, Italy and the U.K. have rolled backed support as the cost of their subsidies ballooned as installations boomed.
The draft raises the possibility of doing away with a rule that requires projects to buy crystalline cells and panels from local manufacturers. Those companies have filed a complaint alleging foreign competitors are dumping equipment below cost in India.
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