Solar Power Tariff Expected to Get Cheaper than Coal

Solar Power

The solar power tariff has seen a significant decline in tariffs from Rs. 10.95-12.76/kWh in 2010-11 to as low as Rs. 3.15 per kWh, which is expected to fall to Rs. 2.90 per unit.

India’s solar power prices may be set to fall below those of thermal (coal) energy. This is based on an expected cost of around Rs. 2.90 per unit for the solar power projects at Bhadla in Rajasthan that have received 51 bids. This price is less than the average rate of power generated by the coal-fuelled projects of India’s largest power generation utility, NTPC Ltd, at Rs3.20 per unit.

As reported in Livemint, the state-run Solar Energy Corporation of India (SECI), which is running the bid process for 750 megawatt (MW) of solar power capacity at two parks, has received bids totaling 8,750 MW. The bidders include some first-time participants in India, such as Saudi Arabia’s Alfanar.

The solar space has already seen a significant decline in tariffs from Rs10.95-12.76 per kilowatt-hour (kWh) in 2010-11. The previous low was Rs3.15 per kWh, bid by France’s Solairedirect in an auction last week to set up 250MW of capacity at Kadapa in Andhra Pradesh.

This low was preceded by Rs3.30 per unit quoted for a 750MW project at Rewa in Madhya Pradesh.

Ashvini Kumar, Managing Director of SECI credits the Rewa bid with being a tipping point. The structuring in terms of payment guarantee and off-take arrangement was the trigger for the sharp drop in prices and signaled the arrival of the low solar power tariff regime, he explained.

Kumar told the publication that prices have been falling and then came RUMS (Rewa Ultra Mega Solar park) and that kind of created history. There was aggressive bidding. A lot of credit was given to the structuring of the PPAs (power purchase agreements), bids and off-take arrangement, security by state and things like that. He further added that a sub-Rs3.00 per unit price is possible.

In Bhadla, while Saurya Urja Company of Rajasthan Ltd is developing a 500 MW park, Adani Renewable Energy Park Rajasthan Ltd is developing another of 250 MW capacity. Rajasthan Renewable Energy Corporation Ltd is a joint venture partner in both.

While a total of 24 bids totaling 5,500 MW were received for the 500 MW capacity on offer, the 250 MW park saw 27 bidders totaling 3,250 MW.

After the financial bids are opened within four weeks, a reverse auction process will be run to select the developers. The bidders include Aditya Birla Renewable, Hero Solar, SBG Cleantech One Ltd, ReNew Solar Power Pvt. Ltd, ACME Solar Holdings Pvt. Ltd, Green Infra and Azure Power.

Kumar also attributed the growing bidders’ interest to tripartite agreements (TPAs) between the Reserve Bank of India, the Union government and the state governments, which provided comfort to power producers against payment defaults by state electricity boards (SEBs).

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