Gujarat’s decision to offer zero subsidy for smaller solar projects sees an exodus

Gujarat Urja Vikas Nigam Limited (GUVNL) has received 2,605 applications from aspiring solar developers to exit their project commitments, after the utility offered a one-time exit option to developers from the signed power purchase agreements (PPA).

This development follows the decision by the state government to offer zero subsidies for these smaller projects, at a fixed tariff of Rs 2.83/kWh or unit.

The total applications for opting out represent solar power projects with an aggregate generation capacity of 1,546.45 megawatt (MW) or 62 per cent of the total capacity of 2501 MW that was distributed amongst almost 4005 small-scale developers.

That leaves 1,400 applicants with a cumulative capacity of 955MW who have not applied for the exit option. They will continue to set up solar projects in Gujarat under the state’s policy for the development of small-scale distributed solar projects (SSDSP-2019).

In early August, GUVNL had announced a one-time exit option for small-scale distributed power developers to walk out of PPA they had signed with the state-run company. The agreements were for solar projects to be established under the SSDSP policy.

GUVNL had extended the last date for the submission of a written request and prescribed undertaking to September 5, 2021. With this, about 65 percent of the total number of applicants have decided to exit PPAs.

The exit option was provided to the developers after many of them complained of project viability following the state government clarification that the projects under the SSDSP policy will not be eligible for any subsidy.

The four discoms affiliated to GUVNL had signed PPAs at a tariff of Rs 2.83 per unit for 4,005 small-scale solar power projects with a cumulative power generation capacity of 2,501MW under this policy. Initially, the projects were estimated to bring an investment of over Rs 10,000 crore in green energy and allied sectors. According to market analysts, this development can also be seen as a pointer for the limited life span left for solar subsidies, now limited mostly to the residential rooftop sector, and in the form of viability gap funding for projects under the central public sector undertaking scheme.

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