Delayed Solar Plants in India May be Let Off the Hook

India plans to defer fines for solar-thermal power developers that failed to complete $1 billion of plants in time as it seeks to spur investment in the industry.

Reliance Power Ltd. (RPWR), Godawari Power and Ispat Ltd. and Lanco Infratech Ltd. (LANCI) are among companies that failed to finish seven projects totaling 470 MW by May because of a lack of water and equipment and financing problems, said Ministry of New and Renewable Energy Joint Secretary Tarun Kapoor.

Under contracts awarded in December 2010, the plants would pay about 2.3 billion rupees ($42.5 million) in late penalties.

“There’s obviously a problem since all are delayed,” Kapoor said in New Delhi. “This is the first time solar-thermal projects are being built in India and we want them to succeed.” A ministry panel is recommending a 10-month extension, he said.

Solar-thermal technology, which focuses sunlight on liquids to produce steam and is valued for its ability to store energy, has struggled to compete with cheap photovoltaic equipment that converts light directly into electricity. Areva SA (AREVA) scrapped an A$1 billion ($1 billion) complex in Australia in November after failing to raise funds. Photovoltaic panel prices have slumped.

A 50 MW Godawari project is the nearest to completion of the seven, and a 100-megawatt site owned by billionaire Anil Ambani’s Reliance Power is about six months behind, Kapoor said.

The Godawari development is undergoing final testing and should be finished as early as this week, said Siddharth Agrawal, the company’s project head. A major constraint was the lack of local parts, forcing Godawari to pay as much as 25 percent more to get foreign equipment on time, he said.

Delays in laying a water pipeline by Rajasthan state held up the Reliance operation, according to a March letter from the local government to Renewable Energy Minister Farooq Abdullah.

Lanco Infratech is building a 100 MW plant and is the contractor for KVK Energy & Infrastructure Pvt.’s 100 MW project. Both suffered a shortage of heat-transfer fluid from U.S. suppliers and lower-than-expected solar radiation levels, Lanco Solar Chief Executive Officer V. Saibaba said by e-mail.

India, which has built 1,686 MW of photovoltaic capacity, expects to award a further 500 MW of solar-thermal capacity by 2017, Kapoor said, adding that the plans may be affected by the outcome of the plants under construction. The current projects, from 20 to 100 MW, use turbines from suppliers such as Siemens AG, General Electric Co. and Areva.

“It depends on how the technology behaves,” Kapoor said.

The cost of solar photovoltaic panels, which need batteries to store the energy they generate, have plunged 61 percent in the past two years, according to data compiled by Bloomberg.