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India Offers to Foot Bill for 30% of Solar Construction Costs

India proposed to fund almost a third of solar-plant construction costs as it outlined rules for a second phase of project auctions today.

The country, seeking bids next month to build 750 megawatts of capacity, is offering grants of as much as 25 million rupees ($46,000) a megawatt or 30 percent of project costs, according to the draft guidelines published on the website of the Ministry of New and Renewable Energy.

The proposals mark the first time the solar industry has attracted such extensive direct grants in India. The government, which has previously used the funding model to build roads, railways and coal-fired power plants, is seeking to boost renewable-energy output to curb chronic blackouts that shave an estimated 1.2 percentage points off annual economic growth.

The country is proposing a minimum solar-plant size of 10 megawatts in the second auction, with a fixed power-purchase price of 5.45 rupees a kilowatt-hour for 25 years, according to the guidelines.

The draft rules, which are open for consultation until April 30, don’t specify the capacity of solar cells and modules to be purchased as part of local content requirements. India has rejected claims by U.S. suppliers that it has violated World Trade Organization rules on equipment imports.

The South Asian country, the world’s second most-populous nation, will probably auction more solar megawatts than planned this fiscal year in a bid to cut power shortages, Tarun Kapoor, joint secretary at the New and Renewable Energy Ministry, said March 14. India has targeted more than the 1,650 megawatts for the year through March 2014. It plans an eightfold expansion of solar capacity by 2017.

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