Once in operation, the Rewa solar park will bring down solar-energy costs in India and be a direct source of power to the Delhi metro. © Shutterstock.com
The Delhi Metro Rail Corporation is on the fast track to deliver some of the globe’s biggest climate-friendly breakthroughs. In 2011, it was certified by the United Nations as the first metro rail and rail-based system to get carbon credits for reducing greenhouse gas emissions. It’s been called the only completely “green” metro system in the world for adhering to green building norms. And now, with IFC’s support, it’s positioned to become the first transportation system in India to take energy straight from a solar park—located in another state—to power its rail service.
When India’s new Rewa Ultra Mega Solar Park becomes operational in December of 2018, about 24 percent of energy from the park will be sold directly to Delhi Metro, meeting roughly 80 percent of its daytime energy requirements. This was made possible through a unique power scheduling arrangement developed by IFC when it designed the Rewa Ultra Mega Solar project.
The Rewa-to-rail connection was born when India’s Madhya Pradesh state government and Rewa Ultra Mega Solar Limited sought IFC’s help to develop an innovative solar power public-private partnership (PPP) that would attract major private developers and help the country meet its solar power targets. It’s been ambitious from its inception: with a capacity of 750 megawatts, the Rewa Ultra Mega Solar PPP will be one of the biggest single-site solar projects in the world.
But making it a reality required innovation. IFC’s financing strategies, tailored to this market’s specific needs, led to Rewa achieving the lowest-ever tariffs for a solar project in India (4.4 cents/kilowatt hour) without a government subsidy or viability gap funding. As a result, solar power was as cheap as coal for the first time in the country. Achieving grid-parity for solar power could be a tipping point for the renewable market in India as solar tariffs fall further in other states. In May of 2017, India decided against installing nearly 14 gigawatts of coal-fired power plants, largely because of the plummeting solar costs.
The project will generate $550 million in private investment. Once completed, it will help India avoid a million tons of greenhouse gas emissions per year and bring it closer to its goal of 100 GW of solar energy by 2022.
While the solar power market in India has been growing steadily for a number of years, the Rewa Ultra Mega Solar project will likely trigger a massive change in this market—opening it up to international investors waiting for policy changes that will reduce risks and build confidence in the market.
New Policies, Better Practices
About 300 million people in India do not have access to the electricity grid—and those who do endure frequent power cuts. Because of chronic power deficits, about 40 percent of the country depends on diesel for back-up power. For industries, this means high operational costs; for the country, it creates pollution and hurts economic growth.
The Rewa Ultra Mega Solar PPP, built on a foundation of government policies created with IFC support, will change the way many investors look at India’s renewable market. In addition to creating a new market for power off-takers through inter-state open access, as the Delhi Metro project demonstrates, Rewa Ultra Mega Solar’s groundbreaking structure includes financing innovations that have been adopted by the national government.
In August of 2017, just months after the project was signed, the Ministry of Power introduced guidelines on tariff-based competitive bidding and the process for procuring power from grid-connected solar power projects. These were based on ideas that IFC introduced when structuring the Rewa Ultra Mega Solar project.
The guidelines help assure that the Rewa project in Madhya Pradesh can be replicated as the Government of India develops related initiatives throughout the country. For example, IFC has been mandated by the state government of Odisha to develop a 1,000 MW solar park in the state, as well as to structure a second solar park in the state of Madhya Pradesh.
Pioneering Renewable Energy Investing
IFC has played a significant role in developing the renewable energy market in India since 2010, when the country’s solar industry was in early infancy. IFC’s involvement with Azure Power in 2010 made it one of the earliest investors and advisors to solar projects in India.
IFC has invested about $1.2 billion in climate-friendly projects through direct investments in India in the last five years, and this is expected to continue.
Read more about IFC’s work in solar energy at www.ifc.org/infrastructure.
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Published in November 2017.
