Solar Energy, and the Land a Solar Park Needs

In one line

The cheapest electricity India has ever contracted, and the land it needs is the resource question the tariff does not price.

The legal position in four sentences

Generation is delicensed. Section 7 of the Electricity Act lets any generating company establish, operate and maintain a generating station without a licence if it complies with the technical standards relating to connectivity with the grid under section 73(b). A solar plant needs no licence.

The policy hooks are sections 3 and 4. Section 3(1) requires the Central Government to prepare, in consultation with the State Governments and the Authority, the National Electricity Policy and tariff policy for development of the power system based on optimal utilisation of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy, to publish them, and to review or revise them; and section 3(4) requires the Authority to prepare a National Electricity Plan in accordance with that policy and notify it once in five years, after publishing a draft and inviting suggestions and objections from licensees, generating companies and the public, and after obtaining the Central Government's approval.

Section 4 requires a national policy permitting stand alone systems, including those based on renewable sources of energy and other non-conventional sources, for rural areas, and section 5 a policy for rural electrification and for bulk purchase and management of local distribution through Panchayat institutions, users associations, co-operative societies, non-governmental organisations or franchisees.

And the offtake is section 86(1)(e), the percentage of the licensee's total consumption to be purchased from renewable sources.

Section 5 deserves a sentence of its own in a solar answer, because a stand alone system managed by a panchayat, a users association or a co-operative is the one place in Indian electricity law where a common property institution appears. It is the module III idea applied to energy.

Why the tariff fell

Because the cost is capital and the capital got cheaper. For a solar plant almost the whole cost of a unit is the plant divided by its expected output over its life, discounted at the cost of finance. Three things therefore move the tariff: the price of modules, the cost of money, and the number of units the site produces.

The legal contribution was the procurement method. Section 63 allows the Appropriate Commission to adopt a tariff determined through a transparent process of bidding in accordance with guidelines issued by the Central Government, rather than determining it under section 62 on a cost-plus basis.

That distinction between section 62 and section 63 is the most examinable thing in this chapter. Under section 62 the Commission fixes the tariff on the project's costs and an allowed return; under section 63 the market fixes it and the Commission adopts what the bidding produced. A falling technology cost reaches the consumer quickly under section 63 and slowly under section 62.