How Bundling Scheme is Going to Impact Solar Companies in India

The Bundling Scheme is a plan to sell renewable energy (RE) and thermal power in a bundle so that end users can get uninterrupted supply of power. Bundling solar power was first introduced by the government in the first phase of Jawaharlal Nehru National Solar Mission (JNNSM), in the year 2010.

What is bundled solar energy?

Bundled solar energy means combining solar power with the power from the government’s unallocated quota, generated at National Thermal Power Corporation (NTPC) coal-based stations, which was comparatively cheaper. Solar power would be purchased by NTPC Vidyut Vyapar Nigam Limited from developers, which would then be combined with cheaper coal-based power. The price of this was set by the Central Electricity Regulatory Commission (CERC) and then sold at the reduced price to distribution companies. Reduction in the price of solar directly results in cheaper power, reducing the impact on them. At the same time this will also benefit the developers, since they would receive higher tariffs.

How does it work?

In the first phase, the cost of bundled solar power was successfully lessened to INR 5/kWh. The ratio of coal to solar power was kept at 4:1. A total capacity of 718 MW was commissioned under Phase 1. However, bundling faced a hurdle due to India’s coal production being extremely slow and unallocated coal not being available in abundance. Selecting solar power projects under various central schemes was proposed in the second phase. This is where the Viability Gap Funding Scheme was introduced, which is being implemented through the Solar Energy Corporation of India (SECI). This scheme specifically aimed to solve interruption in power supply and low capacity utilisation of solar power plants and make them appealing for state-owned power DISCOMS.

In this scheme, at least 51% of the annual energy supplied has to be Renewable Energy. The balance would then be drawn from thermal power sources.The generator, which will have the option of selecting the type of RE and mix and decide upon the usage of Energy Storage System (ESS). The tariffs for RE will be quoted by bidders as a composite single tariff for bundled energy. The scheme is the need of the hour for state-owned DISCOMS because they are drowning in debt. They are delaying payments to renewable energy companies. MNRE has said that the scheme will enable them to purchase power at competitive rates to meet their deficits. 

What is the grid-tied solar system?

The impact of the bundling scheme cannot be viewed alone but in conjunction with other schemes. The bundling scheme was introduced to facilitate grid-connected solar power generation. A grid-tied solar electrical system is a network of power lines connecting users of electrical energy and producers of electrical energy. The home solar panel system is linked to the local power utility company’s electrical grid. Grid-connected projects could be ground-mounted PV or rooftop PV.

India aims to increase solar usage up to 100 GW by 2022. It is essential to take important steps to achieve this. There is a huge need to convert solar and bundle into usable electricity through panels. The infrastructure requirements for solar parks and the transmission of this power into the national grid must be met.

Manufacturing of solar panel systems is also extremely poor in India. In 2018, the government made a significant policy to impose the Safeguard Duty of 25% on Solar Imports for two years, after which it would be phased down. This was meant to encourage Indian companies of solar energy involved in manufacturing. But it was not as effective as hoped. Imports did drop due to slower capacity building in India, but not because of a rise in domestic sales. Indigenously made solar panels and cells constitute just 15% of Indian solar projects. A manufacturing solar company in Delhi, or elsewhere faces stiff competition from Chinese and Malaysian manufacturers despite the safeguard duty. Therefore, even though bundling has attempted to push the usage of solar while diminishing the need for expensive thermal, the Indian solar companies still have to bear the brunt of expensive machinery. 

Solar partnering by DISCOMS is a part of solar push by the government. Rooftop owners are licensed, and developers are chosen through a competitive bidding process that is done by DISCOMS. For usage of their rooftop, solar panel system owners are given a monthly rent or credit on their electricity bill. A three-way agreement between DISCOMS, rooftop owners and solar developers are made for a period of 20-25 years. The developers would own and operate the solar panel system while roof owners will to host the solar panels. The DISCOM agrees to buy the power at a fixed rate. All owners have to do is to calculate the estimate of the power generated using a solar rooftop calculator.

The solar partnering model is good for consumers who want roofless solar or have to subscribe for a monthly fee. They get part of their electricity at the predetermined solar tariff. The government has also announced a capital subsidy on rooftop solar installations. This means that the solar system for home price would be considerably reduced. This is already applicable for many solar home systems in Haryana. 

Conclusion

A policy where users can feed the electricity back into the grid will make solar penetrate at the grassroots levels. It would also be a positive move for the solar companies listed in India. Greater accessibility of solar would mean an increase in demand. Bundling would solve the issues of irregularity, since solar is not always reliable, and yet solar companies will be making a profit from this hybrid scheme since the push for solar has only just begun and will continue to grow.