Means of promotion

Clarification on the Incentives

Generation Based Incentive (GBI)

Announced in January 2008, it was the first step to promote grid connected solar power plants¹. GBI is payable to the distribution utility for power purchased from solar power projects between 1 - 3 MW capacity connected to the distribution network below 33 KV voltage level. The GBI was made equal to the difference between the tariff determined by the Central Electricity Regulatory Commission (CERC) and the Base Rate, in the first fiscal year of commissioning to be escalated by 3% every year for 25 years².

Renewable Purchase Obligations (RPO)

The NAPCC [National Action Plan on Climate Change, introduced in June 2008] asserted that renewable energy should account for 5% of a state’s energy mix in FY2009-2010, and should increase by 1% every year for the next 10 years. This required declared RPO to be fulfilled by “Obligated Entities” [viz. Distribution Licensees, Captive Consumers and Open Access Consumer who are mandated to fulfill Renewable Purchase Obligation].

The National Tariff Policy was amended in January 2011 to prescribe solar-specific RPO be increased from a minimum of 0.25 per cent in 2012 to 3 per cent by 2022³.

However this process had several issues. For example, while some states (like Rajasthan and Tamil Nadu) have higher potential for generating solar energy, others (like Delhi) do not have significant potential⁴.

Renewable Energy Certificate

(REC)

To address the mismatch between availability of RE resources in state and the requirement of the obligated entities to meet the RPO, REC was introduced by the CERC. This scheme allows the states to meet their RPOs either through internal generation or through purchase of RECs. One Renewable Energy Certificate is treated as equivalent to 1 MWh of electricity injected into the grid from renewable energy sources. Floor price and forbearance (ceiling) price for solar REC is fixed by CERC⁵.

Feed-in-Tariff (FiT)

JNNSM was officially announced in January 2010. The first phase of this program targeted 1000 MW, by paying a tariff fixed by the CERC of India. In spirit this has been a feed in tariff to be paid for purchase of power generated from RE sources. The tariff for solar PV projects was fixed at INR 17.90 (USD 0.397)/kWh which has been revised and at present is INR 7.72 for FY2014-2015. In comparison, average tariff for residential and industrial user in state of Madhya Pradesh is INR 5.27 & 6.75/kWh respectively⁶.

Accelerated Depreciation (AD)

In solar projects, AD is widely used as an incentive to lessen the burden of tax. In India, investors in solar project can set off their tax liability on the taxable income to the tune of 80% in the first year, and subsequently 20% in the second year. CERC also decides on FiT after taking into account the AD. In their latest order, CERC determined a tariff of INR. 7.72 (USD 0.11)/kWh for solar PV without AD benefit [as mentioned in the previous row] and INR 6.95 (USD 0.10) / kWh with AD benefit for the year 2014-15⁷.