Industry perceptions on feed in tariff (FiT) based solar power policies – A case of Gujarat, India

Renewable and Sustainable Energy Reviews 57 (2016) 988–998

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Renewable and Sustainable Energy Reviews journal homepage: www.elsevier.com/locate/rser

Industry perceptions on feed in tariff (FiT) based solar power policies – A case of Gujarat, India Komali Yenneti a,b,n a b

School of Geography, Earth and Environmental Sciences, University of Birmingham, B15 2TT Birmingham, United Kingdom Nanjing Institute of Geography and Limnology, Chinese Academy of Sciences, Nanjing 210008, China

art ic l e i nf o

a b s t r a c t

Article history: Received 7 January 2015 Received in revised form 21 October 2015 Accepted 17 December 2015

India has an active participation in global solar energy contribution through the Jawaharlal Nehru National Solar Mission (JNNSM) and its many states are also walking hand in hand with the national government through individual state solar policies. The state of Gujarat, through the ‘Gujarat Solar Power Policy 2009 (GSPP 2009)’, has been leading the country in solar power generation. The feed-in-tariff based GSPP 2009 is a unique experiment of the state to develop individual solar projects as well as public-private partnership based large-scale ‘solar parks’. Of the about 2700 MW (in September 2014) installed solar energy capacity in India, Gujarat occupies a share of more than 900 MW. This paper, through semi-structured in-depth interviews conducted with project developers involved in implementation of the Charanka solar park, Gujarat, investigates the industry perspectives on the GSPP 2009. With an installed capacity of 216 MW (in April 2012), the Charanka Solar Park is the Asia's largest solar park. Findings from this study indicate that the attractive fixed feed-in-tariff and strong implementation mechanisms are the key strengths of the policy. On the other hand, the key challenges are lack of trust of financial institutions on solar energy projects, and tradability and bankability of the solar power purchase agreements. & 2016 Elsevier Ltd. All rights reserved.

Keywords: Feed-in-tariff Gujarat Jawaharlal Nehru National Solar Mission Solar policy India

Contents 1. 2. 3.

4.

5.

n

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989 The ‘Jawaharlal Nehru National Solar Mission 2010’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989 Methods and analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990 3.1. Data collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 990 3.2. Data analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991 Gujarat Solar Power Policy 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991 4.1. The context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 991 4.2. The institutional framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992 4.2.1. Energy and Petrochemicals Department (EPD), Gujarat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992 4.2.2. Gujarat UrjaVikas Nigam Limited (GUVNL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992 4.2.3. Gujarat Energy Development Agency (GEDA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993 4.2.4. Gujarat Power Corporation Limited (GPCL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993 4.2.5. Gujarat Energy Transmission Company (GETCO) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993 4.2.6. Financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993 4.2.7. Project implementing institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 993 Drivers of GSPP 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994 5.1. Geographic and climatic suitability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994 5.2. Environment and development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994

Corresponding author at: Nanjing Institute of Geography and Limnology, Chinese Academy of Sciences, Nanjing 210008, China. E-mail address: [email protected]

http://dx.doi.org/10.1016/j.rser.2015.12.173 1364-0321/& 2016 Elsevier Ltd. All rights reserved.

K. Yenneti / Renewable and Sustainable Energy Reviews 57 (2016) 988–998

6.

Strengths and opportunities of GSPP 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1. Fixed and attractive feed-in-tariff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2. Better implementation mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Weaknesses and challenges of GSPP 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Conclusions and policy implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Acknowledgement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

989

994 994 995 996 997 997 997

1. Introduction

2. The ‘Jawaharlal Nehru National Solar Mission 2010’

With a total area of 196,024 km2, Gujarat is one of the most advanced and rapidly developing states in India. Since its formation in 1960, the economy of the state has largely been dominated by a variety of industries. The state is currently growing at 2 to 2.5 percent higher than the national Gross Domestic Product (GDP) and has about 20% higher per capita income than the country's average [15]. It hosts some of the most prominent industries in the country, including the world's largest ship breaking yard at Alang, the world's largest oil refinery at Jamnagar, the world's cheapest car manufacturing industry at Sanand, and the world famous diamond industry and trade hub in Surat. The state also ranks first in nationwide gas-based thermal electricity generation. The other major industries include ports, chemicals, drugs and pharmaceuticals, automanufacturing (e.g. General Motors, Ford etc.), cotton production, textile manufacturing and trade, animal husbandry and dairy production, tourism, etc. These are limited number of examples of Gujarat's wide ranging industrial activities. The staggering growth in industrialisation, development and urbanisation of the state, especially over the past three decades, has led to an increase in energy consumption. To address the ever-growing demand for energy and contribute to addressing the global environmental change, the state of Gujarat has taken lead in the country in utilising the large potential of alternate energy sources. In fact, it is first in the country to release its own wind and solar power policies. While the wind power policy was released in 2007, the Solar Power Policy was released in 2009. Indeed, the ‘Jawaharlal National Solar Mission’ (JNNSM), a national level policy for accelerating solar energy in India, was released a year after the ‘Gujarat Solar Power Policy 2009’ (GSPP 2009) [22]. The main objective of this research is to critically analyse the GSPP 2009 from the perspectives of project developers involved in implementation of the Charanka solar park, Gujarat. With an installed capacity of 216 MW (by April 2012), the Charanka Solar Park became Asia's largest solar park, overcoming China's 200 MW Goldmud Solar Park. Apart from unpacking the underlying context of solar power development in Gujarat, this paper also identifies the critical challenges that are ahead and to be addressed for achieving large scale solar energy development in the state. After this introduction, the paper is structured as follows: first, it begins with the background of solar energy policy landscape in India. Second, the research methods adopted in this paper are discussed. Next, the context of the GSPP 2009 is presented, by reviewing the evolution of solar related policies and regulations in Gujarat and the institutional framework of the GSPP 2009. Following this, the paper discusses insights from interviews with project developers. In this section the paper addresses the drivers of GSPP 2009 development and the underlying opportunities and challenges. Finally, the paper ends with some concluding remarks and policy implications for Gujarat and further afield.

The average intensity of solar radiation received over India is 200 MW/km2 (megawatt per kilometre square), with 250–325 sunny days in a year [22]. With a national solar radiation generation potential of 5,000 trillion kW h/year, solar energy has been the greatest unexploited renewable energy source for India [22]. Most parts of the country receive a daily solar energy incidence of 4 to 7 kW h/m2 per day and sunshine of about 6–8 h a day, averaging to about 2300 to 3200 h per year [16,19]. Accordingly, since the economic liberalisation in 1990s, the Ministry of New and Renewable Energy (MNRE) in India has been initiating and implementing an array of solar energy policy mechanisms and programmes, often combined with a range of economic incentives for project developers [20]. However, until 2009, the total installed capacity in the country was less than 100 MW. In 2010, India's JNNSM was initiated under the ‘National Action Plan on Climate Change’ (NAPCC). The JNNSM is a major initiative and a milestone of the Government of India to address climate change and energy security challenges, and bring ‘great energy transition’ in India. It is also a unique and ambitious transformational programme that aims to establish India as a game-changer in solar energy by creating enabling policy and economic conditions [14]. The aspiration is to ensure large-scale deployment of solar generated power through both grid-connected and decentralised off-grid services. Apart from providing clean energy and addressing India's energy issues, it is also expected that through implementation of the JNNSM, India could mitigate about 42 million tonnes of CO2 emissions and consequently increase India's bargaining power in international negotiations [18]. The JNNSM has ambitious plans to generate 20 GW of gridconnected solar photo-voltaic (PV) energy, 2 GW of off-grid solar PV energy, and install 20 million sq. m of solar thermal collectors by 2022 (Table 1) [14,20]. Its 20 GW grid-connected solar PV target is planned to be implemented in 3 phases: Phase-I (1000 MW): 2010–12, Phase-II (7000 MW): 2013–17, and Phase-III (20,000 MW): 2018–2022 [22]. This phased approach is adopted to modify policy guidelines based on learning and experiences gained from the previous phases. With the help of strong policy and tariff mechanisms in the JNNSM, the nascent solar industry achieved the Phase-I target of 1000 MW by the end of July 2012. In fact, the cumulative achievement of grid-connected solar energy grew from about 150 MW in 2010 [13] to more than 2700 MW in September 2014 [12]. As shown in Fig. 1, the annual installed capacity of solar PV power increased 20 times in the last five years. If the target of Phase-II of the JNNSM is achieved, the installed solar PV capacity of solar PV will reach more than 5000 MW in 2017.

20,000

4000–10,000

1000–2000

4000 3500 3000 2500 2000 1500 1000 500 0 1990

1995

2000

2005

2010

Accumulated installed capacity (MW)

2011

2012

2013

2014

Annual installed capacity (MW)

Fig. 1. Annual and accumulated solar PV capacity in India (Source: compiled by the author).

Table 2 List of project developers' respondents (source: compiled by the author from fieldwork). Name of company

Project technology

Company Company Company Company

1 2 3 4

PV TPV PV PV

Company 5 Company 6 Company 7 Company Company Company Company Company Company Company Company

8 9 10 11 12 13 14 15

Project area (in sq. m)

Interview type

15 25 1 10

358,737.3 600,000 20,300 206,645.0

TPV PV PV

25 5 5

518,375.0 99,522.4 102,626.8

TPV TPV PV þTPV PV PV PV PV PV

20 15 10 15 25 6 25 5

603,078.4 300,823.45 264,966.7 442,214.84 750,026.8 394,244.5 509,506.8 100,000

Direct Direct Direct Not conducted Direct Direct Not conducted Direct Direct Direct Direct Direct Telephonic Direct Not conducted Not conducted Direct Telephonic

Company 16

PV

Company 17 Company 18 Total

TPV PV

Capacity (MW)

2 5 5 214

40,500.0 149,550.0 152,918.2

3. Methods and analysis

2000

1000

200

3.1. Data collection

Target for Phase-I (2010– 7 13) Target for Phase-II (2013– 15 17) Target for Phase-III 20 (2017–22)

Off grid solar applications (MW) Solar collectors (million m2) Period

Table 1 Jawaharlal Nehru National Solar Mission targets (Source: [22]).

Promoting solar thermal and off-grid systems to serve population without access to commercial energy and modest capacity addition in grid-based systems. Capacity to be ramped up to create conditions for scaled up and competitive solar energy in the country. Create favourable conditions for solar manufacturing capability, particularly for solar thermal for indigenous production and market leadership.

K. Yenneti / Renewable and Sustainable Energy Reviews 57 (2016) 988–998

Utility grid power, including roof Focus of the period top (MW)

990

While a range of research instruments is available for conducting case study research, due to the need for intensive conversation and data gathering, in depth interviews were mainly used for the research reported in this paper. Out of the 18 project developers involved in the Charanka solar park, 15 interviews were conducted between October 2011 and January 2012 (Table 2). Both face–face and telephonic interview methods were used in interviews. The face-to-face interviews took place at different places such as construction site offices, head offices, government offices, and hotels, while the telephone interviews were conducted where an interviewee was either out of city or too busy to meet in person. All of the interviews were conducted in English. The questionnaires were developed based on the literature review and personal experience. The questionnaire had three major sections. The first section consisted of questions relating to the profile of respondents such as information about the developer, his/her role in the company, the project development details

K. Yenneti / Renewable and Sustainable Energy Reviews 57 (2016) 988–998

of the company etc. The second part of the questionnaire was designed to understand the developers' perspective on the GSPP 2009, the reason for the company to choose Gujarat for setting up a project, and the people involved in development of the project. The third section was majorly designed to comprehend the benefits and challenges of the policy. The questions covered the awareness of solar energy technologies, prospective for solar energy development in Gujarat, and perspectives towards tariff, support from the government, procurement methods, funding, etc. For accurate rendition, with prior permission of the interviewees, most of the interviews were audio recorded. All measures were taken to ensure the anonymity of interviewees in presentation of the data. Before the commencement of field work, the research obtained University of Birmingham's (UoB) Ethics committee approval. 3.2. Data analysis

Iterative process

The collected interview data was translated, transcribed, and analysed using thematic analysis method and with the help of NViVo software. The data analysis methodology used in this research can be condensed into five major phases (Fig. 2). However, the stages are not completely linear, as they form a continuum with inductive and iterative procedures. First, the collected data was organised into smaller and accessible units for easy reference. The organised data was transcribed. Each of the transcribed document was labelled with interview date, category, and respondent number. This provided a foundation for initial analysis and getting to know the data. Second, the organised and transcribed data was broken into smaller data-bits, and placed into similar categories to make meaning out of it. Each document of the transcribed interviews was imported to NViVo and stored as ‘sources’. Using NViVo through inductive and iterative process of reading and re-reading the sources, ‘text’ which linked or connected to the research themes were coded and

Data Organisation (Transcription and organising data)

Preparing data for analysis Getting to know the data

Data categorisation (Reading, reflecting, annotating/memoing, coding)

Condensing to make meaning to raw texts

Focus interpretation (Splitting, splicing, identifying patterns, themes)

Reducing data into subthemes

Deepen interpretation (Linking and connecting, corroborating)

Categorising substantive & iterative nodes into emerging themes

Synthesis and generalisations (validating and concluding)

Comparing substantive findings with established literature & relating to research questions

Fig. 2. Inductive and iterative thematic analysis used (source: author).

991

categorized for further complex thematic analysis. Next, after an initial focussed interpretation and establishing preliminary themes, more deepened interpretation was carried out for understanding the relationships between emerging themes. Finally, based on the emerging themes during the analysis, the relevant arguments from the interviews were selected. Through a non-linear and iterative process of writing, the quotations were validated and synthesised with empirical arguments. In all through the process of analysis it was ensured that the four criteria of thematic analysis were addressed: i) the themes must reflect and respond to the research objectives; ii) the themes must evolve from a saturation of the information; iii) themes should represent separate and distinct categories of findings; and iv) the themes should be as specific and explanatory as possible. Using thematic analysis with the help of NViVo software helped to categorise every bit of new information with respect to a particular theme of this research. More specifically, using this qualitative analysis software was useful in terms of large storage, retrieval capacity and exploring new relationships as data analysis unfolded.

4. Gujarat Solar Power Policy 2009 4.1. The context With over 300 days of sunshine, solar radiation of 5.6– 6.0 kW h/m2 per day, and availability of huge tracts of waste and barren land, Gujarat has a huge potential for generating solar energy [5]. Realising this huge potential, the Government of Gujarat released the GSPP in 2009. In fact, Gujarat is a pioneer in Solar Power Policy development in India. Due to decentralisation, both the ‘Centre’ and ‘States’ in India have equal legislative powers in making and implementation of ‘electricity’ related policies. If not satisfied or do not want to comply with a national policy on ‘electricity’, a state could formulate its own policy. Accordingly, Gujarat's solar policy, released a year before the JNNSM, is independent of the national solar policy. While the JNNSM is based on competitive bidding process, GSPP 2009 is based on fixed feed-intariffs (FiTs) (Table 3). Though various guidelines were issued for solar energy development in Gujarat (Table 4), the GSPP 2009 – with an overarching aim of promoting solar energy through investment from private developers – is a key milestone. Apart from individual solar power projects, the GSPP 2009 is also an experiment by the state government to develop a series of public-private partnership based large-scale ‘solar parks’ in the state. The first of the solar parks was developed in Charanka, a remote village in Gujarat. The project was not only awarded by the Confederation of Indian Industry (CII) for being the most innovative and environment-friendly project in India, but was also recognised globally. With an installed capacity of 216 MW and an investment cost of about US$280 million, the project became Asia's largest solar park after overcoming China's 200 MW ‘Goldmud solar park’. From the release of the Solar Power Policy to the mid of 2014, the state had commissioned about 900 MW of solar energy projects, including Charanka solar park [3,21] (Fig. 3).

Table 3 FiT details of GSPP 2009 (source: [4]). Sr. no

Particulars

Tariff for photovoltaic projects

Tariff for thermal projects

1

Projects commissioned before 31.12.2010

2

Other projects commissioned before 31.03.2014

Rs. 13.00 (US$0.21) (for the first 12 years) Rs. 3.00 (US$0.05) (from 13th to 25th year) Rs. 12.00 (US$0.20) (for the first 12 years) Rs. 3.00 (US$0.05) (from 13th to 25th year)

Rs. 10.00 (US$0.16) (for the first 12 years) Rs. 3.00 (US$0.05) (from 13th to 25th year) Rs. 9.00 (US$0.15) (for the first 12 years) Rs. 3.00 (US$0.05) (from 13th to 25th year)

992

K. Yenneti / Renewable and Sustainable Energy Reviews 57 (2016) 988–998

Table 4 Timeline of solar power regulations in Gujarat (source: compiled by the author). Policy document

Year

Description

GERC guidelines (notification no 15) Discussion paper on tariff and grid connected demonstration solar power plants Solar Power Policy (SPP) GERC guidelines (for the period 2009–12) Tariff and grid demonstration solar power plants notification (order 1) Tariff and grid demonstration solar power plants notification (order 2) Tariff for procurement of power from solar energy projects (order 2) Tariff for procurement of power from solar energy projects (order 8) Notification no. 3 of 2010 titled “Procurement of Energy from Renewable Sources” Discussion paper for proposed tariff order Regulation 1 “Multi Year Tariff Regulation, 2011” Tariff for procurement of power from solar energy projects (order 1)

2005 RPO specifications for procurement of power from renewable (for the period 2005–09) 2008 Solar tariff determination for the period after 2005–09. 2009 Policy to promote grid-connected solar energy generation (operative period until 2009–2014) 2009 Proposed a higher RPO percentage of the total energy generated to open access users/consumers 2009 Tariff for the period 2009–12 (after the expiry of 2005–09) 2009 Specifies tariff for the grid interactive solar power plants which are eligible to avail Generation Based Incentives (GBI) from Ministry of New and Renewable Energy (MNRE) 2010 Decided approach of generic tariff determination 2010 Tariff specific for solar thermal projects (including roof-top projects) and other small projects ( o 5 MW) 2010 The policy specifies RPO which is to be in line with the national targets under National Action Plan on Climate Change (NAPCC) 2011 Proposal of specific tariff for solar energy projects (for the period 2012–15) 2011 Supports the Solar Power Policy in the methods of promoting solar energy. 2012 Not Available

Installed capacity in MW West Bengal Uttar Pradesh Uttarakhand Tamil Nadu Rajasthan Punjab Maharashtra Madhya Pradesh Karnataka Jharkhand Haryana Gujarat Delhi Chattisgarh Andhra Pradesh Arunachal Pradesh Andaman & Nicobar Islands others

0

200

400

600

800

1000

1200

Fig. 3. State-wise installed capacity in India (as on January, 2014) (source: compiled by the author).

section, the different institutions and their roles analysed from the fieldwork are explained (Fig. 4). 4.2.1. Energy and Petrochemicals Department (EPD), Gujarat The GSPP 2009 was released under the governance of the EPD, a state government department responsible for making policies related to all aspects of conventional energy transmission, distribution, energy conservation and the use of non-renewable sources. Apart from the GSPP 2009, the EPD also released the ‘wind power policy’ in 2007 through which the state has already established a strong profile of generating 2884 MW of wind energy (second only to Tamil Nadu with installed capacity of 7134 MW). Various other acts, rules and resolutions pertaining to both solar and wind power in the state are also regularly released by the EPD.

Fig. 4. Solar park development – institutional framework (source: author's own analysis).

4.2. The institutional framework A large number of institutions are involved in the GSPP 2009. Before critically analysing the policy, it is important to understand the institutional framework under which the policy is operated. In this

4.2.2. Gujarat UrjaVikas Nigam Limited (GUVNL) GUVNL is responsible for tariff determination. The GUVNL was formed as a part of the power reform structuring process under the Electricity Act (EA) 2003 and the Gujarat Electricity Industry (Reorganisation and Regulation) Act 2003. Under this reform process, the erstwhile Gujarat Electricity Board (GEB) was reorganised into seven companies1 including GUVNL. As GUVNL is 1 The seven companies are Gujarat UrjaVikas Nigam Ltd. (GUVNL) – holding company; Gujarat State Electricity Corp. Ltd. (GSECL) – Generation; Gujarat Energy Transmission Corp. Ltd. (GETCO) – Transmission; Uttar Gujarat Vij Nigam Ltd. (UGVNL) – Distribution; Dakshin Gujarat Vij Company Ltd. (DGVCL) – Distribution;

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responsible for purchase and sale of electricity, it is responsible for tariff determination and also Power Purchase Agreement (PPA)2 for solar projects. The PPA plays a major role in solar energy development; without a PPA the government will not buy the power and the general public cannot afford at high tariff rates. Apart from tariff determination and making PPAs, GUNVL is also responsible for testing imported technologies. To support the domestic market, and to establish India as a global hub for solar manufacturing, the policy on Domestic Content Requirement (DCR) was proposed as a part of the JNNSM. According to the DCR, all solar power project developers using crystalline silicon PV technology, irrespective of project location, are mandated to use modules manufactured in India. However, due to lack of large and quality manufacturers and lower international price compared to crystalline based modules, most of the projects still largely rely on imported thin-film PV technology. Furthermore, of the total inhouse production of about 3000 MW of crystalline silicon PV, much of it caters to the export market. The JNNSM targets 4000– 5000 MW capacity of annual domestic module manufacturing capability by 2022 [2]. However, this is far less than the JNNSM's grid-connected solar energy target of 20 GW by 2022. Considering these factors, many of the project developers resort to cheap solar markets such as China, Europe and other countries. With the increase in imports of cheap solar panels, the governments are increasingly becoming cautious about the quality of the technology. GUVNL as an agency is responsible for testing these imported thin-film panels and other technology related to solar projects. 4.2.3. Gujarat Energy Development Agency (GEDA) GEDA, as a state nodal agency for the Ministry of New and Renewable Energy (MNRE), is responsible for renewable energy development across the state. GEDA is also responsible for allocating power capacities and getting all clearances from the MNRE in relation to tax and custom duty exemption on imported technologies and materials. All these aspects of inspection, communication, legal aspects in the policy procedures, processes and procedures to be followed by the project developers are specified and set by GEDA. Apart from providing technical and financial eligibility criteria for setting up a solar project in the state, GEDA is also responsible for promoting socially oriented solar schemes for urban, tribal and remote underdeveloped regions. 4.2.4. Gujarat Power Corporation Limited (GPCL) GPCL, a fully government owned company, is responsible for implementation, land acquisition and provision of common infrastructure (water, sanitation and roads) for solar parks developed in the state. EPD has designated GPCL for the development of solar parks. While GPCL is responsible for providing common infrastructure for the solar park, the infrastructure required inside the solar projects has to be developed by the project developers themselves. Further, the land allotment to the project developers is carried out based on the ‘plot allotment policy’ developed by GPCL [10]. GPCL is also responsible for carrying out financial assessment studies, environmental clearance aspects, studies on topography, hydraulics, hydrology, geo-technical survey, environment and Resettlement & Rehabilitation (R & R) studies. It (footnote continued) Madhya Gujarat Vij Company Ltd. (MGVCL) – Distribution; and Paschim Gujarat Vij Company Ltd. (PGVCL) – Distribution. The rest of the six companies are subsidiary companies to GUVNL. 2 PPA is a contract between two parties, one who generates electricity for the purpose of sale (the seller) and one who is looking to purchase electricity (the buyer). The PPA defines all of the commercial terms for the sale of electricity between the two parties, including when the project will begin commercial operation, schedule for delivery of electricity, penalties for under delivery, payment terms, and termination.

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appoints individual consultants such as the National Environmental Engineering Research Institute (NEERI) to work on required studies, master plans, designs and drawings, tendering processes and evaluation, R & R studies for environmental clearances, and project management consultancy (PMC) for other any works related to the solar park. 4.2.5. Gujarat Energy Transmission Company (GETCO) GETCO and other distribution companies are responsible for providing grid infrastructure and power transmission networks for solar energy projects. In case of ‘solar parks’, along with providing transmission infrastructure, GETCO is also responsible for buying power from developers according to a PPA. 4.2.6. Financial institutions Various financial institutions including the national commercial banks, non-banking financial institutions, private infrastructure financial institutions, and international multilateral funding agencies, such as the World Bank, International Finance Corporation (IFC), and the Asian Development Bank (ADB) are involved in funding solar projects developed under the GSPP 2009. For example, ADB financially supported the Charanka solar park with an initial investment of US$100 million in the form of loan, and the Gujarat government invested US$37million. The financial institutions which provide financial capital (such as credit, loans, guarantees, and risk insurance) to commission solar plants are important for project implementation. Along with debt funding from different national and international financial institutions in the form of equity funding (70:30 i.e., 70% loan from the bank and 30% liquidity of the company), project developers' equity contribution and self-funding are also major parts of financial investments. The funding from the banks is based on the clients' and engineering, procurement and construction (EPC) contractor's turnover (last 5 years' balance sheets). 4.2.7. Project implementing institutions For the overarching strategies to translate into particular policies at an individual project level there is a need for integrated involvement of institutions at project implementation level. There are two different kinds of institutions involved in the implementation of solar power projects in Gujarat: i) project developers, ii) engineering, procurement, and construction (EPC) contractors. At the first level, the project developers, who are responsible for bidding, and commissioning projects to supply solar-generated electricity to the grid, play a major role in developing solar projects. The project developers, on signing a PPA with GEDA, are responsible for power procurement. This category is particularly of interest to this paper because this research is based on the perceptions of this group. The project developers sub-assign the task of development of a project to the EPC contractors. The EPC contractors, who have expertise in designing, building and understanding local challenges, are responsible for project construction. Looking at the institutional framework it could be noted that different institutions are responsible for different activities in the development of GSPP 2009. Various intermediary government and government companies are assigned with different roles in the development of Gujarat solar policy. While the developers investing in projects under the concept of ‘solar park’ need to approach only GPCL for any clearances, issuing of certificates, infrastructure allocation etc., the projects developed outside the ‘solar park’ concept have to undergo through the different institutions mentioned above.

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Table 5 District-wise solar potential in Gujarat (source: compiled by the author). District

Total area (sq. km)

Solar potential (MW)

Ahmedabad Amreli Anand Banaskantha Bharuch Bhavnagar Dahod Gandhinagar Jamnagar Junagadh Kheda Kutch Mehsana Narmada Navsari Panchmahal Patan Porbandar Rajkot Sabarkantha Surat Surendranagar The Dangs Vadodara Valsad

8087 7397 2951 10400 5253 8628 3733 2163 14125 8846 3959 45652 4393 2755 2196 5083 5668 2295 11203 7390 7761 10489 1764 7555 2939

491 1925 80 2044 99 2342 430 35 13172 1810 114 10342 537 25 49 676 445 1694 22941 2303 821 6055 0 262 232 68924

5. Drivers of GSPP 2009 5.1. Geographic and climatic suitability One of the major discussions that emerged from the interviews on the reasons for Gujarat to promote solar energy through GSPP 2009 despite of it being a power surplus state was the state's climatic suitability and land availability. As emphasised by several respondents, the state of Gujarat, with high solar radiation and large tracts of available land, is an ideal place for developing solar energy. Developing solar energy can not only generate clean and sustainable energy, but also foster solar energy related industrial development in the state. The Detailed Project Report (DPR) of the solar energy development in Gujarat also recognises the potential of solar energy in Gujarat, i.e., availability of large land areas feasible for solar development in the state coupled with high solar insolation of 5.8–6.0 kW h per sq. m per day [9]. Along with land, a solar plant's operating capacity is highly sensitive to global horizontal irradiance (GHI). The project costs and returns after accounting for the impact of solar radiation levels will have a considerable impact on payback periods. Hence, considering the high solar radiation levels, the payback period for a solar PV project is considerably low when compared to low insolation areas (such as states in the North of India). There is also a lot of potential for solar energy in different districts of Gujarat (Table 5). Vast tracts of land in areas with high solar radiation such as Banaskantha (in North Gujarat), Kutch and Saurashtra regions are also identified for tapping solar energy. During a discussion with a government official, it was mentioned that the government identified a total of 14.40 million acres of uniquely positioned waste land in areas of high solar radiation. Accordingly, the state government is planning to set up mega-size and ultra-mega-size solar energy projects in North Gujarat, Kutch and Saurashtra. As well as it is understandable that while capturing the whole potential is very difficult, large scale projects like Charanka solar park can be initiated in various other districts and regions.

5.2. Environment and development Considering the environmental issues around fossil fuels and quick depletion of coal, renewable energy – especially solar – provides a promising future for several interviewees. According to the estimations of [9], a solar project has life cycle GHG emissions in the range of only 25–32 g/kW h, which could further decrease to 15 g/kW h in future (similar findings in [1]. This is much lower than the emissions from a conventional fossil fuel based power plant, which varies from 400 to 1000 g/kW h [9]. For example, according to [8], the 216 MW Charanka solar park, implemented under the GSPP 2009, itself accounts for 342,400 t of Carbon Emission Reductions (CERs). This considerable amount of GHG emission reduction in a solar vis-à-vis a coal-fired power plant was highlighted as the other major driver for solar energy development in the state. Along with the climate change issue, the fuel crisis leading to huge power scarcity in the country is another considerable issue driving the state to lean towards solar energy. It was emphasised that solar energy provides a platform for Gujarat to generate extra revenue through the sale of power to industries and other energy deficit neighbouring States of India. While the energy requirement of Gujarat in 2010–11 was around 10,000 MW/h, it was generating more than 13,000 MW/h [7]. As it is a power surplus State, the excess power produced is being exported to the neighbouring power deficit States such as Tamil Nadu and Rajasthan at high prices. The Gujarat Urja Vikas Nigam Limited (GUVNL), a state government owned corporation is responsible for inter-state transmission and distribution. It was identified that Gujarat, by generating this excess power, may also sell it to industries at a much higher tariff compared to the tariff that is paid to the developers. The state of Gujarat is a highly industrialised state with a growth in the industrial sector at 12.5%, and contributing 16% of the total industrial production in the country in 2009 [6]. The government, through the ‘Vibrant Gujarat’ summit conducted once every two years, invites business developers from across the globe to invest in setting up industries in Gujarat. These initiatives and interviews emphasise that economic development through encouraging development of new and nonconventional energy sources was one of the other main drivers of the GSPP 2009 and the development of solar projects under the policy.

6. Strengths and opportunities of GSPP 2009 6.1. Fixed and attractive feed-in-tariff The JNNSM of India provides a policy and regulatory environment for implementation of the Renewable Energy Purchase Obligation (RPO) mandate for power distribution companies. According to the RPO, states are required to generate or procure 0.25% of net energy produced from solar energy by 2013 and increase it to 3% by 2022 [17]. To achieve this RPO either through generation or procurement, about 20 states in the country came up with ‘state solar procurement’ policies. Apart from the RPO, states are also free to carry out independently any further solar energy related activities through the state specific solar policies. Though the JNNSM is a major driving force for promoting solar energy in India, several interviewees strongly considered that the JNNSM's competitive reverse bidding process – where the project developers bid a competitive tariff for the power generated – made it disadvantaged compared to Gujarat solar policy, where a feed-in-tariff for a specific period is pre-fixed by the state government. The tariff rate of Rs. 13 (US$0.26) for the first 12 yrs and Rs. 3 (US$0.06) from 13th to 25th yr for solar PV projects

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995

NSM Gujarat policy Gujarat Phase-I

Gujarat Phase-II

6000 Rs 17.91 for PV under NSM Rs15.40 for CSP under NSM

5126

5000

MW

4000

3000

Tariff falls below Gujarat solar policy Rs13.30 for PV under solar policy Gujarat Rs10.54 for CSP under solar policy Gujarat Rs 12.16 for PV under NSM Rs 9.50 for CSP under NSM

2000

1000

716

565 650

396.5

537

620

0 PPA signed under NSM

Gujarat PPA signed

Bidding under NSM

Gujarat solar policy allotments

2010

NSM bidding process

2009

Draft NSM policy

Gujarat Phase I released

Jan Feb Mar Apr May Jun Jul Jun Jul Aug Sep Oct nov Dec Jan

Fig. 5. Gujarat Phase I and II vs. NSM (Phase I and Batch I) event Timelines (source: author from analysis of policies) [21]. (For interpretation of the references to colour in this figure legend, the reader is referred to the web version of this article.)

compared to the conventional power rate of Rs. 3 (US$0.06) at any given period of time, was seen as a major benefit by the project developers. The tariff had been the most important criterion and role player in the decision-making of the developers to choose a specific policy (national or state policy). As the GSPP 2009 is an independent state policy with a pre-fixed tariff mechanism and released before the initiation of the JNNSM, project developers are free to choose either of the policies. Eventually, the high tariff of Gujarat compared to the JNNSM made the business developers lean towards Gujarat solar policy. The Gujarat solar policy was announced a year before the JNNSM came into force. Unlike the JNNSM which has strict timelines for bidding process, as no timelines or guarantees were required from developers to sign PPAs initially many developers took interest. After the JNNSM policy was formalized in 2010, developers moved away from Gujarat toward the JNNSM. This is because many developers assumed that JNNSM as a central government backed policy would be more profitable and viable than the state-government led solar policy. The enormous interest from developers in the JNNSM led to competitive bidding for the projects and this situation led to a decrease in power generation tariffs. The steep fall in the JNNSM tariff below the levellised tariff3 of Gujarat resulted in developers' sudden interest in GSPP 2009. However, after the release of the JNNSM in 2010 (the dotted redline) there was a sudden rush to the NSM bidding process (Fig. 5). The total amount of capacity that was bid under the JNNSM in July 2010 was as high as 5126 MW. However, within months due to a steep fall in the JNNSM tariff, the bid capacity was reduced to as little as 650 MW (in September 2010). Of the total 5776 MW 3 Levelised Tariff refers to the average fixed and variable tariff over the entire term of the PPA or Power Purchase Agreement adjusted for inflation. In the case of Gujarat, it is the fixed tariff floated by the government to the developers unlike the NSM. Hence Levelised Tariff ¼ (Arithmetical Average of Tariff over the life of the plant/PPA)/Discount Factor. The Discount Factor could be linked to an appropriate inflation index such as the Wholesale or Retail Price Index.

capacity bid under the JNNSM in 2010, only about 620 MW capacity projects reached the stage of signing PPAs (in January 2011). This shows that due to fluctuation in tariff prices, unlike the fixed tariff of Gujarat, the initial rush to the JNNSM declined later. The project developers preferred Gujarat's fixed tariff. It was also stressed that a significantly higher feed-in tariff in the first 12 years in Gujarat matches investors' timelines, as they would look to recover the cost of debt during this period. Furthermore, unlike the JNNSM's Phase-I (2010–13) project execution timelines, the GSPP 2009 has longer timelines for the execution and commissioning of projects (upto 2014) (Fig. 5) [21]. At the same time, it has a stringent penalty mechanism for delays that forces developers to speed up the implementation process. Delayed projects would face a downward revision in tariffs. 6.2. Better implementation mechanisms Despite being from different states, most of the interviewees expressed the opinion that Gujarat's solar policy is a well drafted policy with an attractive tariff. They also felt that the state's transparency, target-achieving strategies, and investor-friendly policy mechanisms puts the GSPP 2009 in a better position for project attractiveness than other states in the country. This is also directly reflected in the implementation of projects across the state. Before the release of the GSPP 2009, no serious progress on solar energy was made either in the country or the in the state. But since the release of the GSPP in 2009 to the end of March 2014, the state contributed to about 900 MW of installed capacity out of the total 2600 MW capacity in the country. While between 2012 and 2013 states like Rajasthan and Madhya Pradesh, with policies released after 2010 from the learning experience of Gujarat, quickly increased their pace, as Gujarat initiated the policy first and the other states tried to adopt it, business developers were keen on Gujarat policy. Despite businesses originating from other states such as Andhra Pradesh and Karnataka, the interviewees also had a strong sense of confidence in Gujarat solar policy. This is

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Table 6 Extended perspectives and suggestions of developers on the challenges and opportunities of GSPP 2009 (source: compiled by the author). Parameter

Solar Policy 2009 guidelines

Financial criterion

Net Worth of Rs. 2Cr/MW (US$333,333/MW)

Technical criterion

Domestic content

Land/Water/Evacuation arrangement for a project

PPA with GUVNL

Perspectives of developers

Suggestions by developers

If the developer could achieve financial closure for their project the net worth criterion should be relaxed The developers who were given allotment of Entity must have experience of developing any The developers opined that this was really necessary for the success of the projects should have mandatory experience in Projects in the last 10 years whose aggregate implementing solar power projects worldwide capital costs must not be less than the amount policy or should have partners with implementing equivalent to Rs. 3.00Cr./MW (US$ 500,000/ experience. This was indicated in the policy. MW) of capacity The developers have appreciated this Best technology can be induced to get maximum Developers can have appropriate technology freedom given in the policy output out of the project whether it is imported or indigenously manufactured The developers have to make arrangement for The developers stated that there were Single window clearance is provided for all approvals. The government should allocate land time delays during land acquisition at least for the land, water, and grid arrangeafter considering the type of technology to be and they also had issues with in ment required for a project (if the project is implemented. The government should also obtaining water outside of the solar park mechanism) strengthen the grid infrastructure and provide guarantees for the availability of the grid The developers opined that if GUVNL fails to pay Developer to give Bank guarantee @ Rs. 50 lakh/ Bankability was the main issue the tariff amount, there should be another MW (US$83333/MW) at the time of signing of mechanism, such as creation of a special fund to PPA (power purchase agreement) with GUVNL pay the developers on time for the electricity delivered by the developer. The developers felt this was not necessary

because the payment of such high tariffs for power distribution utilities in other states, which are currently under financial stress, will not be easy. Issues of strong tariff, transparency, financial stability of the state electricity utilities and government agencies seem to be playing a major role in project developers' interest in Gujarat. While tariff, sound financial structures, and strong implementation mechanism were the major driving forces for individual solar power projects, tariff coupled with the state's ‘single window processing’4 system was highlighted as an opportunity for the projects that are developed under the concept of ‘solar park’. For example, a business developer from the state of Andhra Pradesh, argued that the single window processing enabled various project developers from different parts of the country to develop huge interest in the Charanka solar park. While the developer initially thought of setting up an individual 5 MW solar power plant at a different place in Gujarat, he shifted to the ‘Charanka solar park’ as there he did not need to build any infrastructure or even get involved in the complex land acquisition process. All approvals, clearances, and supporting infrastructure and land were cleared by the government. This government led initiative encompassing single window processing, and hassle-free provision of infrastructure made the development process easy for the developers.

7. Weaknesses and challenges of GSPP 2009 While the single window processing system was an opportunity for the projects implemented in the solar park, it was a challenge for the projects implemented outside the solar park. To overcome, this challenge, some of the developers suggested that the single window system, or an equivalent mechanism and facilitation, should be provided for all kinds of projects instead of concentrating only on solar parks. Along with single window system, various other clear challenges were also identified by the interviewees. As solar energy is a relatively new technology in the country, the slippage possibility in revenue generation is a key challenge. The interviewees stressed 4 A single government agency as a contact point throughout the development of a project for all approvals, development of facilities and clearances.

that financial institutions are reluctant to fund solar energy projects for several reasons and hence support for achieving financial closure from policy and the government would be an added advantage. Developers from their experience expressed that banks are too conservative about solar energy projects. Though banks want a guarantee on the consistent output of the projects, some of the interviewees explained that it is not possible due to the uncertainty of solar power generation (sun is in no one's hands!). On the other hand with technologies being imported from countries like China, banks consider it too risky to finance these projects. Apart from non-availability of funding sources, the other challenges that project developers' interviewees mentioned were the nontradability and bankability of the ‘Power Purchase Agreement PPA’ document. Several interviewees felt that the PPA was not bankable. As said by one of the interviewees, the GSPP 2009 has a specific clause, in that the energy produced in the solar park should be sold only to the GETCO and not to any buyer the developer wishes to sell. This makes the PPA a non-tradable document. According to the banking system in India, a product or project is considered bankable only if lenders are willing to finance it. For the lenders to finance, the project has to be tradable. Generally with any wind farm or solar project, the owner should be able to sell the power to anyone – may be a local grid, or to a local village, or to an industry – which makes the PPA tradable. But as Gujarat's PPA was nontradable, the interviewees lamented that bankers were reluctant to fund solar park projects. People who had strong balance sheets were able to generate finance but those balance sheets that were not strong could not generate finance. On the other hand, if the PPA is not bankable, it affects the credibility of the developers. The performance of the electricity utilities, such as GETCO and GUVNL, closely relate to bankability of the project. The main concern was that the utility company (GUVNL) does not possess the requisite bankable guarantee parameters to bring profit. Failure of performance of any of these utilities at any point will result in debt and penalties; hence, most of the developers felt that the performance of utilities should be closely tied to the PPA. If GUVNL fails to pay the tariff amount, there should be another mechanism, such as creation of a special fund to pay the developers on time for the electricity delivered by the developer.

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However, this notion was rejected by a senior official in another project development company, who stated that the issue of bankability is for those developers who delay the project. As the banks are concerned about getting their returns back, poor execution and delays can result in a loss of credibility of the developers. He stated that knowledge about risk mitigation in implementation of projects and understanding the banking process in India can help to increase bankability of projects. A recent report titled ‘India's solar market at a cross roads’ in line with the findings here emphasise that with borrowing costs of 13–14% and no technical requirement for bidding, banks consider it too risky to finance solar energy projects [11]. To create credibility and security of the solar projects from the perspective of bankers, the PPA has to be made strong between the developer and the power distribution utility. Most developers unanimously concluded that over the next 20 years, as the focus shifts from fossil fuels to the development of cleaner sources of energy, solar technology needs to be supported with proper policy and financial mechanisms for better implementation. The following table summarises the additional views and suggestion of developers to address the challenges of the policy (Table 6).

8. Conclusions and policy implications The findings of this paper relates broadly to three aspects. First, the paper discussed how the state of Gujarat, with the aim of reducing pressure on the environment, initiated the promotion of solar energy. After its success with wind energy sector, and with its vast geographical and climatic benefits, the state started focusing on promoting solar energy. The announcement of its solar policy in 2009, which was designed to give a push to solar development through a raft of incentives to developers and by utilising government land for establishment of solar parks, proved to be a major step towards grid connected solar power generation in the country. The main drivers of the policy were identified as addressing climate change and energy security, high solar radiation, availability of land tracts of waste land, and generating extra revenues through developing a new industry. Second, the paper highlighted that there were a series of opportunities for GSPP 2009 when compared to either the Jawaharlal Nehru National Solar Mission (JNNSM) or other state policies in the country. The wide variety of incentives, the attractive fixed feed-in-tariff, and strong financial structures of utilities and implementation mechanisms made GSPP 2009 investor friendly policy. These varied strengths of the Gujarat's policy for harnessing solar energy and making it grid interactive attracted several project developers from across the country to set up large-scale solar projects in the state. Finally, the paper documented some bottlenecks and challenges of GSPP 2009 as identified by the developers. These issues include single window system for projects developed only under the ‘solar park’ mechanism, lack of trust of financial institutions on solar energy projects, and tradability and bankability of the Power Purchase Agreements (PPAs). In addition, the paper provided some extended perspectives and suggestions of the developers for improving the policy. Looking at the overall arguments, it could be observed that the project developers had a positive outlook on the policy. This is evident from the fact that the interviewees were looking forward to the extension of the policy after its lapse in 2014. Given the huge interest of the developers, the state government also released a new policy with new tariff and implementation mechanisms recently in 2015. In one of my personal discussions with government interviewees, it was stated that for the

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development of the new policy, large parcels of land were identified by the government across different parts of Gujarat. Along with project development, research and development activities were also proposed in the new solar policy. However, much of the information in terms of projects proposed and land allocated is currently unavailable. Through the perspectives of the industry stakeholders, this research provides a precise understanding on the opportunities and challenges of government-led policy interventions. Lessons learned from this experience will be useful for policymakers both in Gujarat, other states of India as well as other nations of the world interested in addressing the challenges in implementing such clean energy policies, and eventually supporting the state-led institutions targets of green energy and emission reduction.

Acknowledgement This research was supported by a scholarship from the University of Birmingham UK, College of Life and Environmental Sciences. I thank the anonymous reviewers for their constructive comments. I would also like to acknowledge the National Natural Science Foundation of China (Grant no: 41130750) and Nanjing Institute of Geography and Limnology, Chinese Academy of Sciences (NIGLAS) in supporting the writing of this paper.

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