Big on Renewables

Andhra Pradesh emerges as a major investment destination

Andhra Pradesh made headlines in April when the tariff in the latest round of bidding conducted by NTPC for a 250 MW solar park project in the state touched Rs 3.15 per kWh. French company Solairedirect won the tender to develop the entire capacity at the Kadapa Ultra Mega Solar Park under the National Solar Mission (NSM).

With a rising focus on promoting non-conventional sources of energy, Andhra Pradesh is emerging as a new investment destination. The state has increased its renewable energy capacity significantly. During 2016-17, the state’s solar capacity rose by 325 per cent from 580 MW to 1,880 MW and wind power generation capacity increased by 254 per cent from 1,146 MW to 3,604 MW. The majority of the solar capacity came under the NSM (1,106 MW or 59 per cent). This helped the state reduce its power deficit to a negligible level of 0.1 per cent during 2016-17.

This attractive growth rate is mainly attributed to the investor-friendly environment offered by the state government under its separate policies for solar, wind, hybrid and waste-to-energy projects. Under these, the state offers single-window clearance to facilitate ease-of-doing business and boost investments in the renewable sector. The selection of Andhra Pradesh by the Ministry of Power (MoP) as one of the pilot states for the implementation of the Power for All scheme is also helping attract investment in the conventional power segment by strengthening the financial viability of its discoms. Under this, in 2015, the MoP and the Andhra Pradesh government signed an MoU, along with the state’s two power discoms, Eastern Power Distribution Company of Andhra Pradesh Limited (APEPDCL) and Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL), to relieve their financial stress. The financial turnaround of the state discoms is helping them gain the trust of investors. In addition, the state’s limited conventional power resources and industrial development are providing the required push to the renewable energy sector in the state.

Growth of solar energy generation

Andhra Pradesh is contributing significantly to the rising solar power capacity of the country. The state’s total installed solar capacity increased manyfold from 283 MW as of November 2015 to 1,880 MW as of March 2017. Of the total installed capacity, 1,198 MW solar projects were set up under the Jawaharlal Nehru National Solar Mission (JNNSM) and 682 MW under the state solar policy.

The state announced its new Andhra Pradesh Solar Policy, 2015 in February 2015, replacing the then prevailing Andhra Pradesh Solar Policy, 2012. The state government is targeting a solar capacity of 5 GW by 2020 through utility-scale solar projects, solar rooftop systems and solar parks. Although the new policy is not very different from the earlier one in terms of provisions and incentives, the government has assured an investment-friendly environment for solar power development, with a special emphasis on fast-tracking regulatory approvals. The government has stated that the nodal agency, the New and Renewable Energy Development Corporation of Andhra Pradesh (NREDCAP), has set up an online tracking system for solar power projects, thus allowing developers to check the status of their projects in terms of clearances, which will be granted within 30 days. Under the new policy, the government is also focused on promoting the manufacturing of solar power equipment in the state. To this end, priority is being given to solar equipment manufacturers while allocating government land in solar parks on a long-term basis. Manufacturers are also exempted from paying electricity duty for 10 years. Under the policy, in addition to large-scale projects, the state government is promoting rooftop solar projects under gross and net metering arrangements, and solar pump sets with a target to set up 50,000 sets by 2020. To promote generation of rooftop solar energy and its export to the grid, APEPDCL, in coordination with NREDCAP, is planning to increase the subsidy offered to rooftop solar projects to 50 per cent from the current 33 per cent being offered by the Ministry of New and Renewable Energy (MNRE). Recently, it invited bids for the design, supply, erection, testing, commissioning and operation of six grid-connected solar systems under the renewable energy service company (RESCO) model for a total capacity of 2,400 kWp in government hospitals and municipalities in Vizianagaram district, on a net metering basis for captive utilisation of power for a period of 25 years.

The solar-powered water pumping solution comes as a boon to meet the irrigation and drinking water needs of the rural population, especially in power-deficit regions. The state government has decided to give priority to the installation of solar pump sets by offering as much as 89 per cent subsidy, including 33 per cent subsidy offered by the MNRE. On April 10, 2017, Andhra Pradesh invited requests for proposals (RfPs) to design, supply, install and commission 3,000 solar photovoltaic water pumping systems on a turnkey basis. The bids are due on April 25, 2017 and are scheduled to be opened on May 5, 2017.

Solar parks

The state government’s focus on promoting non-conventional sources of energy has catapulted Andhra Pradesh as a forerunner in the development of solar parks across the country. To set up 20 GW of solar park capacity in the next five years, the government is offering Rs 40 billion central financial assistance under the MNRE Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects. For every MW solar project, developers will get a maximum Rs 2 million or 30 per cent of the total cost, whichever is lower.

Under this scheme, Andhra Pradesh Solar Power Corporation Private Limited (APSPCL), a joint venture (JV) between the Andhra Pradesh government and the central government, is developing four solar parks with a total capacity of 4 GW. However, the majority of them are facing delays. Only 250 MW of the total capacity has been commissioned so far by NTPC Limited in the 1,500 MW Ananthapuramu Ultra Mega Solar Park. NTPC is developing 1,000 MW of the Ananthapuramu park in two phases, Phase I (250 MW) has already been commissioned and Phase II (750 MW) is to be commissioned by 2018. Information on the remaining 500 MW capacity at the solar park is not available. NTPC is also developing the 1,000 MW Kurnool Ultra Mega Solar Park Project in the state, which has awarded the entire capacity to a Softbank-Bharti Group JV (350 MW), Azure Power Limited (100 MW), Adani Power (50 MW), and SunEdison (500 MW). The park is scheduled to be completed by 2018.

The 1,000 MW Kadapa Ultra Mega Solar Park is being developed jointly by the Solar Energy Corporation of India (SECI) and NTPC. The latter invited bids for 250 MW of capacity in the park in March 2016 in the open category under NSM Phase II, Batch II, Tranche I, and retendered it in October 2016. The tender has received a tremendous response with the lowest bid hitting Rs 3.15 per kWh.

In July 2016, SECI invited bids for 650 MW of capacity (500 MW in the open category and 150 MW under the domestic content requirement rules) under NSM Phase II, Batch IV. However, reportedly, SECI has put its 650 MW tender on hold.

As a part of the central government’s initiative to promote utility-scale energy storage projects, SECI, in 2016, invited bids for the remaining 100 MW capacity in the Kadapa Ultra Mega Solar Park with battery energy storage systems. This tender is also facing a delay due to the low cap on viability gap funding (VGF) and lack of clarity on storage system specifications. Since its announcement, the deadline date has been extended for the sixth time from September 8, 2016 to December 23, 2016. SECI has received 13 bids for the project and no further information is available.

The fourth one is the 500 MW Ananthapuramu II Ultra Mega Solar Park, which received in-principle approval in January 2016, and will be constructed at Talaricheruvu and Aluru villages of Tadipatri Mandal in Anantapur district.

Wind energy

During 2016-17, India added a record wind capacity of 5,400 MW, exceeding its 4,000 MW target. During 2016-17, the leading states in wind power capacity addition were Andhra Pradesh at 2,190 MW, followed by Gujarat at 1,275 MW and Karnataka at 882 MW. To maintain this growth momentum, the state government has identified 32 locations suitable for setting up wind projects. Of these, 25 locations are in Anantapur and the remaining seven are in the Kurnool, Nellore, Kadapa and Visakhapatnam districts. Anantapur has acquired the tag of a non-conventional energy hub, with promoters showing growing interest in investing in the district.

One of the key contributors to the considerable increase in wind power capacity addition in the state has been its high wind tariffs. However, during 2017-18, this capacity growth is likely to reduce owing to the state discoms’ reluctance to pay more than the tariff determined in the country’s first wind power auction. Before the auction, power regulators in Andhra Pradesh had set the tariff for 2016-17 at Rs 4.84 per kWh. But the state is not willing to sign power purchase agreements (PPAs) at a tariff higher than Rs 3.46 per kWh.

Solar-wind hybrids

Andhra Pradesh is among the few states in the country that are promoting solar-wind hybrid projects. It has released a draft policy for the same. The policy aims to encourage new technologies and methods involving combined wind and solar plant operations, which may also be coupled with other renewable energy sources and emerging technologies like energy storage systems. The state is targeting a total of 3,000 MW of hybrid wind and solar power capacity by 2019-20.


The current installed capacity of municipal solid waste-to-energy projects in Andhra Pradesh is only 6 MW, as against the estimated potential of 140-160 MW in the state. The state government has readied a plan to install 130 MW of MSW power projects as part of its Swachh Andhra Pradesh plan. These projects will be located at sites identified by the municipal administration and urban development department. The discoms will select project developers for the identified locations through competitive bidding.

In August 2016, the state government granted permission to 10 urban civic bodies to enter into agreements with private players to produce about 66 MW of power from garbage. Four major power generating firms in the private sector have come forward to set up the power plants. The respective local bodies will provide land and garbage to the companies. The government will buy back power generated by these plants at Rs 7.50 per unit for 25 years. After the expiry of the agreement, the firms will hand over the land as well as the plant in running condition to the civic bodies.

Two local bodies, Tadepalligudem and Machilipatnam, have signed MoUs with the Essel Group. As per the agreement signed by the Machilipatnam municipality, the plant will be set up in Rudravaram village on the outskirts of the town. The civic body will supply 196 metric tonnes of garbage every day for Essel’s 4 MW power project. Similarly, 5 MW power will be produced from the plant at the Tadepalligudem plant for which the local municipality will supply about 342 metric tonnes of garbage.

Solar and wind products manufacturing

The state government is also promoting domestic manufacturing of renewable energy equipment. Under its Solar Energy Policy, 2015, it is offering various incentives like electricity duty exemption and priority in land allotment to solar manufacturers. Along with these, the state government is helping manufacturers obtain various approvals and avail of other benefits. As a result, large players like Tata Power, Gamesa, the Essel Group and Suzlon are expanding their footprint in the state. Gamesa Wind Turbines Private Limited, Suzlon Energy Limited, Regen Powertech and ReNew Wind Power Private Limited have committed to investing Rs 19 billion to set up wind farms and turbine manufacturing units in the next five years in the state.

Essel Infra, an arm of the Essel Group, and China’s GCL Poly Energy Holdings have formed a consortium to invest $2 billion to create 5 GW of solar power module manufacturing capacity by 2020 in Andhra Pradesh. The companies are working on developing the site for the manufacturing plant, which will be constructed in various phases. Under Phase I, 1 GW of capacity of both cells and modules will be installed and in the later phases, the manufacturing capacity of polysilicon ingots and wafers will be added.

The way forward

The Andhra Pradesh government has a target of achieving 18,000 MW of renewable energy capacity addition by 2021-22, comprising 10,000 MW of solar power and 8,000 MW of wind power. Various attractive initiatives and policies of the central and state governments are likely to help the state achieve the set target. Recently, the MNRE received cabinet approval to increase the target of its scheme, Development of Solar Parks and Ultra Mega Solar Power Projects, from 20 GW to 40 GW. This provides an immense opportunity to the state to set up more solar projects.

In addition, Andhra Pradesh has set in motion several other initiatives in the renewable energy space under the Green Energy Corridors programme for power evacuation and procurement through PPAs with the state’s power distribution companies. The capacity to be developed will be awarded through competitive bidding, with preference being given to companies that announced investment plans under the REInvest initiative of the MNRE. Reportedly, the government will be investing close to Rs 200 billion in strengthening the transmission infrastructure. It has targeted the setting up of a 400 kVA substation in every district and industrial zone, and replacing the ageing lines with superior quality ones.


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