India Revamps Solar Auction Rules; First Solar May Benefit

India revamped the rules for its second national auction of permits to build solar power plants, which could boost sales for equipment providers including First Solar Inc. and allow banks to lend more easily to the industry.

The government invited companies to register starting today for the auction that will award licenses to build as much as 350 megawatts of solar photovoltaic plants by 2013. New rules include changes that increase the size and amount of projects companies can win.

Indosolar Ltd., Moser Baer India Ltd. and Websol Energy Systems Ltd. rose in Mumbai trading after the new guidelines said projects using crystalline silicon technology would have to buy solar cells made domestically. The companies are India’s three largest traded makers of the cells used in solar panels.

“This is a big boon for these companies,” said Madhavan Nampoothiri, principal consultant with Chennai-based Energy Alternatives India.

First Solar, the world’s biggest maker of thin-film solar modules, and U.S. suppliers such as Abound Solar Inc. may still benefit because their technology is exempted from the local sourcing rules, Nampoothiri said. Indian project developers may import thin-film panels because they tend to be cheaper than crystalline, he said.

The government raised the maximum size of each project to 20 megawatts from 5 megawatts and said each bidder could win as much as 50 megawatts of the total capacity. That could attract more companies to participate, such as Tata Power Co., one of India’s largest private power producers, which sat out of December’s auction, citing reasons including small projects that wouldn’t be profitable enough.

Easier Financing

India is positioning itself to become one of the world’s fastest-growing solar markets with plans to build 20,000-megawatt of capacity, equivalent to about 18 nuclear power plants, by 2022. Winning permits through the government auction allows companies to build plants that will get incentives including an assured buyer of their electricity and favorable payments for their power.

The government extended the deadline for the winners to arrange financing for their projects to seven months from the six months offered in the first auction. Companies in that round struggled to obtain loans from banks that were wary about lending to a technology new to India.

Bharat Bhushan, Bloomberg New Energy Finance solar analyst in New Delhi, said project financing could get easier for the industry. “The lenders may find it easier and less risky to appraise a small number of bigger projects rather than a large number of smaller projects,” he said.

50 Percent Ownership

The new rules also require the controlling shareholder of each project to retain at least 50 percent ownership until a year after the plant starts generating power. That is up from 26 percent earlier after Renewable Ministry Secretary Deepak Gupta said the government wanted to discourage “fly-by-night” operators seeking to speculate by selling off licenses too quickly without building projects.

The new batch of permits will be for photovoltaic plants, which can use crystalline or thin-film panels to turn sunlight directly into power. Thin-film panels are made by depositing semiconducting material such as cadmium telluride onto metal or glass. Traditional panels are made by slicing crystalline silicon wafers into cells and assembling them into modules.

Bids are due by 5 p.m. local time on Sept. 23. The shortlisted candidates will be announced on Nov. 8.

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