Solar farms flock to Gujarat for new tariff plan

The western Indian state of Gujarat has become the new solar hot spot thanks to a generous 25-year plan for fixed-rate tariffs.

Gujarat is viewed as an ideal place for solar power generation because of its abundant open space and high solar radiation. Earlier this month, the government established new policies to encourage the growth of the sector, including incentives through March 2014 for solar projects between 5 and 500 MW and exemptions from paying the electricity duty on solar power sent to the grid or used on-site (see Tata Power plans geothermal, solar for Gujarat).

The policy is seen as a way for Gujarat to become a leader in the solar space, and has already prompted dozens of companies to announce new projects there.

Several of the announcements have come in conjunction with this week's Vibrant Gujarat Global Investors Summit 2009, which has drawn commitments for more than Rs 1.02 lakh crore ($20.8 billion) in renewable energy projects.

Arun Mehta, director of Mumbai-based Refex Energy, attributed the new policy as the reason the company announced a Rs 1,000 crore, 50 MW solar power plant in Gujarat this week at the summit. Refex said it hopes to start design and construction of the plant this year. Refex Energy had worked with Germany's IBC Solar on other solar system integration projects in India.

Also at the summit, Astonfield Renewable Resources said it signed a memorandum of understanding with the state government for a 200 MW solar PV project in the state worth $800 million (see Astonfield to proceed with $4B India energy investment).

Last week, Mumbai-based Tata Power, part of the Tata Group, said it plans to build two, 5 MW power plants in Gujarat, one using solar and the other with geothermal.

Before Gujarat's policy was announced Jan. 8, the state was already getting interest from soolar developers. India's Suzlon Energy (BOM: 532667) said in November it planned to make its first investment in solar with power plants in Gujarat and Rajasthan (see Suzlon moves into solar power).

By 2012, Gujarat is expected to have a demand for 14,000 MW of electricity.The government has targeted 10 percent of the energy sold from renewable resources.

The state also established a policy to encourage wind projects this month proposing an increase in the power purchase rate to Rs 3.50 a unit from Rs 3.37 a unit.

India is estimated to have a 15 percent to 17 percent energy shortfall during peak demand (see India to remove cap on wind incentives).