In India, the Solar Mission is meeting the target for solar PV but not for solar thermal

In 2010, India's Jawaharlal Nehru National Solar Mission (JNNSM) set a target to develop 20,000 MW of solar energy by 2022.

This target was to be achieved in three phases: Phase 1 by early 2013; Phase 2 and 3 by 2017 and 2022 respectively. Phase 1 was further implemented in two batches: Batch 1 with capacity targets for solar PV and solar thermal; and Batch 2 with a capacity target for solar PV only.

However, as of June, 2013, it appears that JNNSM, though moderately successful in deploying solar PV, has failed in deploying solar thermal. This, along with other issues, such as the cost of debt, translates to real concerns over whether India is on track to meet its ambitious targets.

So, what is happening?

For solar PV, the performance of JNNSM with respect to deployment targets has been moderately successful in Phase 1. In Batch 1, seventy three percent  of the target capacity of 150 MW was online by the due date of October, 2011. In Batch 2, sixty seven percent  of the target capacity of 350 MW was online by the due date of February, 2013. However, these numbers change to eighty seven and eighty six percent, respectively, once the capacity online until June, 2013 is taken into account. Finally, using a metric that penalizes capacity that was delayed, these numbers change to eighty four and eighty three percent  respectively.

For solar thermal, based on the data available so far, the performance of JNNSM with respect to  deployment targets has been a failure in Phase 1. There was no capacity targeted for Batch 2. Of the targeted approximately 500 MW of capacity in Batch 1, with a target date of March, 2013, approximately none had come online by June, 2013. That is, the completion percentage is zero by all accounts.

Why is this happening?

The deployment success of solar PV can be mainly attributed to the following: low technology risk, low developer risk, and low off-take risk.

The technology risk of solar PV is low. Solar PV plants have a simple mechanical setup, with no moving parts and no cooling mechanism. Further, there is considerable experience with installing solar PV not only worldwide but also in India pre-JNNSM ? e.g., via the Gujarat policy that has deployed 850 MW so far.

The developer risk of JNNSM projects is low and is reducing over time. JNNSM reduced participation by non-serious players by incorporating a bid?bond that penalized delays in commissioning. Batch 1 received 343 applications amounting to 5,000 MW, whereas Batch 2 received only 152 applications amounting 1,900 MW. Although fewer projects bid under Batch 2, the average project size was much higher, indicating that only serious, well-qualified developers are staying in.

The off-take risk was low for JNNSM projects. All the projects under Phase 1 have a 25 year power purchase agreement signed with NVVN, the power trading arm of NTPC, which has a market capitalization of USD 35 Billion and net worth over USD 11.4 Billion. Thus, the power purchase agreement enjoys a strong credit rating and bankability, allowing these projects to secure funding in a quick manner.

On the other hand, there have been multiple challenges in getting solar thermal projects off ground, primarily related to technology, including construction, risk. Parabolic trough technology, the most dominant solar thermal technology, with an installed global capacity of barely 100 MW by 2012, has only 5.5 MW installed in India. Further, these large projects require a lot of land, with good direct normal irradiation and access to water as well as human resources, and all of these have contributed to delays.

Are there any policy lessons and/or recommendations?

In terms of what has worked, JNNSM has been successful in designing a price-discovery mechanism that, when combined with rapidly falling solar PV module prices, has brought down the delivered cost of electricity from solar PV by more than half in less than two years. JNNSM has also demonstrated that auctions can be successful, provided they are combined with bid-bonds. Finally, JNNSM has greatly benefited from the low off take risk provided by the NVVN power purchase agreement.

In terms of what has not worked has been embodied in the dismal performance of solar thermal plants. JNNSM can avoid these issues in future by taking the following steps. First, JNNSM should have promoted some pilot projects for solar thermal so as to reduce the technology risk. Second, JNNSM should have ensured that the plants have adequate information on solar resource as well as adequate access to resources. Finally, JNNSM should remove the technology specific domestic content requirements, and allow developers to choose the best available technologies.

Our paper, "How Effective Has India?s Solar Mission Been in Reaching Its Deployment Targets?" goes into more detail in evaluating the effectiveness of JNNSM, using rigorous analysis based on quantitative metrics, and offers suggestions for improving their design.