With conventional energy becoming progressively costlier and solar power cheaper, India is gearing up to push for grid parity for solar power by 2017, five years ahead of its original target of 2022. In the Phase 1 of the Jawaharlal Nehru National Solar Mission (JNNSM), two rounds of reverse bidding led to the lowest bid of INR 7.42 (US$0.15)/ unit. The Ministry of New and Renewable Energy (MNRE) recently released a draft policy document for Phase 2 of JNNSM by the end of which it hopes to see tariffs declining to INR 6.0 (US$0.12)/unit.

Phase 2 aims to achieve 9000 MW additional installed capacity (cumulative capacity of 10000 MW by 2017) compared to 1000 MW in Phase 1. The major thrust area will continue to be large scale grid connected projects during Phase 2. For achieving the significantly higher capacity addition target, MNRE will adopt a combination of strategies like bundling scheme, generation based incentive (GBI) and viability gap funding (VGF). The bundling strategy was heavily banked upon and proved to be a successful one during Phase 1. It is a mechanism by which relatively expensive solar power is bundled with power from the unallocated quota of the Ministry of Power (MoP) generated at NTPC coal based stations. However, unlike in Phase 1, the bundling scheme will have a very limited scope during Phase 2, due to limited availability of conventional power from unallocated MoP quota. Similarly the GBI strategy aimed at deployment of grid connected rooftop and other small solar PV plants will also see limited application during Phase 2 with a target of only 60 MW of capacity coming on stream via this route. Further, only states which were not covered under this scheme in Phase 1 will be eligible for GBI.

VGF therefore, will be the most important implementation strategy adopted during Phase 2. Bids would be invited for VGF in Rs/MW terms from project developers and the bidder with minimum VGF requirement would be selected. For solar PV projects, the government intends to provision VGF for 750 MW in 2013-14 and 770 MW in 2014-15. Solar thermal projects worth 1080 MW will be funded through VGF in 2014-15. VGF will be provisioned through National Clean Energy Development Fund and international funds under the United Nations Framework Convention on Climate Change (UNFCCC).   The funds disbursement for selected projects will be on a deferred payment basis to ensure timely completion of the projects as per VGF guidelines. VGF will cover up to 40% of the upfront costs of projects.

Phase 2 will put greater onus on states and more emphasis on solar PV projects to achieve its targets. Out of the 9000 MW capacity installation target, 60% will be driven by state schemes and the remaining 40% by the Centre. The mix of solar PV and solar thermal projects will be in the ratio of 70:30. This is different from the 50:50 ratio adopted during Phase 1 of JNNSM. The shift in favour of solar PV is due to the significantly higher installation target for Phase 2, relatively shorter gestation period and higher degree of proven operational effectiveness of solar PV projects.