Solar power bids at Rs2.97/unit for Bhadla plant

While this is higher than the record low tariff of Rs2.62/kWh discovered on Wednesday, experts say the downward slide of solar tariffs will have far reaching implications


New Delhi: Solar power tariff bids were at Rs2.97 per unit in the ongoing auction of a 500 megawatt (MW) solar park being developed by Infrastructure Leasing and Financial Services Ltd at Bhadla in Rajasthan.

This was the lowest bid at the time of going to press.

While this is higher than the record low tariff of Rs2.62 per kilowatt-hour (kWh) discovered on Wednesday, experts say the downward slide of solar tariffs will have far reaching implications for electricity from other sources in India.

The sub Rs3 per unit tariffs are lower 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. To be sure, solar is an intermittent electricity supply source. “The reverse auction is on. Out of 24 bids submitted, 11 were not shortlisted to participate in the auction,” said a person associated with the bid process, requesting anonymity.

The tender saw 24 bids totalling 5,500MW for the 500MW capacity on offer. State-run Solar Energy Corp. of India (SECI), which is running the bid process, shortlisted 13 of them and set the reserve price at Rs3.01 a unit before the reverse auction began on Thursday afternoon. The bidders include some first-time participants in India, such as Saudi Arabia’s Alfanar.

These low bids have been triggered by comfort factors such as offtake arrangement and better payment guarantee in the form of the tripartite agreements (TPAs). These TPAs between the Reserve Bank of India, the Union government and the state governments provide comfort to power producers against payment defaults by state electricity boards (SEBs).

The impact of low tariffs in India is already being felt.

“In a surprise move, the Uttar Pradesh Chief Minister, Yogi Adityanath, has cancelled the 15 year power procurement bids from eight independent power producers, to the tune of 3800MW, conducted by the previous government in 2016. The lower electricity rates in the spot markets have triggered this,” Angel Broking said in a statement. “While the PPA (power purchase agreement) with power producers was signed at a 15-year committed price of Rs4.15/unit, in the spot market price is at Rs3/unit,” the statement added.

Of India’s total installed power capacity of 326,848.53MW, electricity generated by coal and gas fuelled projects accounts for 217,492.26MW or 66.54% of the installed capacity. Renewables account for 57,260.23MW or a 17.51% share. Experts believe that the writing is on the wall for electricity generated from conventional fuel sources.

“It is understandable that these companies (running projects on conventional fuel sources) have taken loans for their projects while planning for 20-30 years ahead. But ultimately solar power is a game-changer and is a better technology. The companies dealing with oil, gas and coal will have to accept the change,” said Rakesh Kamal, a consultant with The Climate Reality Project, an independent organization working on climate change-related issues.