Solar tariffs break 3-rupee barrier in India

16 February 2016, Week 06 Issue, 545

Solar tariffs in India have broken the 3 rupees (US$0.045) per kWh for the first time, as developers quote below the price of electricity supplied by state-owned NTPC, the country’s biggest coal generator. 

The rates were offered last week by the winning three renewable developers bidding to develop the world’s largest solar power plant of 750 MW in Rewa, Madhya Pradesh. Mahindra Renewables, Acme Solar Holdings and Sweden’s Solenergi Power bid 2.979 rupees (US$0.045) per kWh, 2.97 rupees (US$0.044) and 2.974 (US$0.044) respectively, winning contracts to build plants of 250 MW each. 

India’s minister for power, coal, new and renewable energy Piyush Goyal, remarked in a tweet that the first-year solar tariff bid of 2.97 per kWh was a record low for the country. 

“This is going to be the first time [that a] tariff of electricity based out of solar power plants is going to be at sub-3-rupee level,” said Manoj Upadhyay, chairman, ACME Group. 

Such low tariffs indicate bidders have benefited from major advantages in the cost of finance and the crashing price of modules, the bulk of which are imported from China.

The last record tariff for a utility-scale solar project in India – achieved via the country’s reverse bidding system – was 4.34 rupees (US$0.065) per kWh in Rajasthan. 

Under the Rewa contracts, there will be a 5-paise (0.001 rupee) per annum escalation in tariff over 15 years, the levelised tariff equal to about 3.3 rupees (US$0.049) per kWh. The projects, to be completed in 18 months, will supply 80% of their power to the state and rest to Delhi Metro Rail.

Manu Srivastava, managing director of Madhya Pradesh Urja Vikas Nigam – the firm which formed a JV with state-owned Solar Energy Corp of India to set up the Rewa ultra-mega project – said that the low rates have been achieved without viability gap funding (VGF) or subsidies, making solar a competitive energy resource to take on conventional power. 

“The cost of panels has come down. If we do [a] back of the envelope calculation, the last lowest solar tariff was 4.34 rupees per unit. You can say 70% of that price per se was [for the] solar panel. That makes it almost 3 rupees. Now, that has gone down by 26%,” said Srivastava, adding that efforts have also been made to keep the cost of capital low.

“We are the only solar power project in the country which has taken a World Bank loan as it was crucial for us to keep our cost low,” the official said.

Edited by

Andrew Dykes


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