The government is set to invite tenders for developing grid-connected solar photovoltaic power projects with a capacity of 750 mw by May, signalling the launch of the second phase of the national solar mission. The mission will seek to increase the share of grid connected solar power to 3,000 mw and cumulative deployment of solar power in the whole country to 10,000 mw by 2017.

With the ministry of new and renewable energy receiving Rs 1,500 crore from the national clean energy fund, the mission, which had been lagging behind schedule due to paucity of funds, is being put back on track.

We have received clearance for allocation from the clean energy fund to finance projects selected in the upcoming bidding process, said Tarun Kapoor, joint secretary in the ministry of new and renewable energy.

The ministry will float tenders with a provision to provide viability gap funding for about 40% of the cost of the project. The bidder with the minimum requirement of viability gap funding will be selected.

The industry is divided over the new financing system, with some saying it will boost investment while others maintaining that a generation-linked incentive can help in the long-term growth of the sector.

“As an EPC (engineering, procurement and construction) company, our preference is for generation-based funding instead of capex-based as that ensures high quality assets. It is very important in solar industry as it involves 25 years of operations,” said Vivek Chaturvedi, chief marketing officer at Moser Baer Solar.

The newly-formed Solar Energy Corporation of India, the project administrator under the ministry, will steer the second phase of the national solar mission and also sign the power purchase agreements with project developers.

Inderpreet Wadhwa of Azure Power, which commissioned projects totalling 42 mw under the first phase, says that the system in the first phase was better. “Any incentive linked to generation yields higher generation. If payment is made upfront, then how will it incentivise power producers to generate power for the rest of 25 years?” Wadhwa asked.

A major setback for the solar mission has been the pulling out of the NTPC Vidyut Vyapar Nigam (NVVN), which executed the first phase of the solar mission and also signed power purchase agreements with power producers under which the solar power procured was bundled with conventional power and sold. According to a senior official, shortage of coal-based power forced NVVN to back out. There is not enough conventional power under the unallocated quota and the second phase will see minimal participation of NVVN.

“With clouds over the new viability gap funding scheme, too much of adventurous bidding won’t happen this time,” said S Venkatramani, general secretary of the Indian solar manufacturers association.

Project developers had bid at a price as low as Rs 7.42 per unit in the second batch of the first phase.