India's solar advantage  

The Climate Spectator has a report from Bloomberg New Energy Finance on Indian solar power projects - India's solar advantage.

The first set of projects under India's ambitious National Solar Mission went under the hammer last week. Initial trends show that the capacity bid is at least three times more than the 620MW that is to be awarded, though the final numbers could show a much higher multiple.

There are, however, no alarm bells going off in the Indian finance ministry. The government has what can be referred to as a late-mover advantage, which has allowed it to avoid the excesses seen in some European countries.

There are a few things which stand out in the auction of India's first batch of solar projects, to be set up by 2013, and involving an investment of over $US2 billion.

For starters, the auction is primarily about large solar thermal. Bids for 470MW of capacity have been invited. This is higher than the total commissioned capacity of 437MW of solar thermal in Spain, the world leader, according to Bloomberg New Energy Finance data.

On the PV side, there are just 150MW of capacity on offer in India's first round through 30 projects of 5MW each to be set up by 2013. That is a small blip in the capacity being added globally. Bloomberg New Energy Finance has projected a PV capacity addition of 14GW-to-19GW in 2010. Up to 1.2GW of new installations are expected in the Czech Republic alone this year. Germany has installed over 3GW of PV in the first half of 2010.

Secondly, there is an element of market price discovery built into the process. The attractive feed-in tariffs will now cease to matter since the 400-odd applicants will have to offer the largest discounts to get selected, a formula that India has emulated from other countries which have married feed-in tariffs with reverse bidding.

Thirdly, the government has limited its own, and the consumer's, bill for solar power by ensuring initial support for pre-defined solar capacity instead of the anyone-past-the-post kind of a scheme which has led to runaway growth of solar power in parts of Europe.

Fourthly, India has mandated the use of domestically made PV modules in this phase and domestically made cells and modules in the next phase. For solar thermal projects, the rules mandate a 30 per cent local content. Both moves reflect the worrying trend of increasing protectionism in the clean energy sector.