Solar tariff wars heat up in India

Fuelled by the NDA government’s ambition around clean energy, solar power tariffs have touched a record low and are on course to decline further


India plans to generate 175GW of renewable energy by 2022, of which 100GW is to come from solar power projects. Photo: Pradeep Gaur/Mint
India plans to generate 175GW of renewable energy by 2022, of which 100GW is to come from solar power projects. Photo: Pradeep Gaur/Mint

New Delhi: At a time when addition of coal-fuelled power generation capacity has come to a standstill globally, India is seeing a race to the bottom in solar power prices.

The latest was the record low tariff of Rs3.15 per kilowatt hour (kWh), quoted by France’s Solairedirect SA on 12 April to win the rights to set up 250 megawatt (MW) of solar plants at Kadapa in Andhra Pradesh and sell power to state-run NTPC Ltd. The tariff is expected to fall below Rs3 a unit during auctions for the Bhadla solar parks in Rajasthan.

The previous low was Rs3.30 per unit for a 750MW project at Rewa in Madhya Pradesh. These bids translate to below 5 cents per kWh and rank India at the sixth position globally in terms of the lowest tariff bid awarded. The world’s lowest solar tariff is in Chile (2.91 cents), followed by Dubai (2.99 cents) and Mexico (3.30 cents). The US (3.40 cents) and Saudi Arabia (4.80 cents) rank at the fourth and fifth places, respectively.

All the global majors are already in India’s solar space, be it Japan’s SoftBank, France’s Engie, Italy’s Enel, Canadian Solar or Singapore’s Sembcorp. Others in waiting include Norway’s Statoil ASA, France’s Total SA and Royal Dutch Shell Plc, who are aggressively looking at ramping up their solar power project portfolio, with India as the focus area for investments.

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India’s growing green economy has been fuelled by the government’s ambition around clean energy. India plans to generate 175 gigawatts (GW) of renewable energy by 2022. Of this, 100GW is to come from solar power projects. This vision was first articulated by then chief minister of Gujarat, Narendra Modi, at Neemuch in Madhya Pradesh in February 2014. In his speech, the Bharatiya Janata Party’s (BJP’s) prime ministerial candidate said India should harness solar energy to bring about an “energy revolution” in the country.

“If we don’t protect the environment, then development will be in danger. Environment-friendly development desires non-renewable form of energy generation,” Modi had said.

After BJP assumed power, Piyush Goyal, minister of state with independent charge of mines, power, coal and new and renewable energy was tasked with the job of translating Prime Minister Modi’s vision into reality.

This brought the ministry of new and renewable energy (MNRE), housed in New Delhi’s CGO Complex, a Soviet era styled government building into the thick of things. The experience was also new for the bureaucrats manning the least visible of the infrastructure ministries.

The power from sun has become a competitive energy source vis-à-vis the coal-fuelled conventional source of electricity due to the lower cost of raising finances, and the falling price of solar modules. This assumes importance given solar radiation of 5 to 7 (kWh) per sq. m for 300-330 days in a year received by India.

Last month, India declared its “association” status with International Energy Agency (IEA), the world’s premier energy monitor based in Paris.

Goyal has repeatedly said that clean energy is an article of faith for the Modi government and is not driven by India’s commitments to the United Nations Framework Convention on Climate Change adopted by 195 countries in Paris in December 2015.

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Aiding Goyal were Upendra Tripathy, formerly secretary of the renewable energy ministry and an Indian Administrative Service (IAS) officer from the Karnataka cadre, and Tarun Kapoor, who was responsible for the solar programme as a joint secretary in the ministry and earned the moniker of India’s solar bureaucrat.

“When we started, people didn’t believe that solar was for real. They thought it was imaginary given that the tariffs were at Rs18 per unit. They thought it was a story which was being hyped. However, a lot of people including companies and financial institutions got interested. We called for open bidding and whatever was happening internationally, be it in terms of technology or falling solar PV (photovoltaic) prices got reflected here. With no cartels being formed, it helped India,” said Kapoor, now an additional chief secretary in the Himachal Pradesh government.

“It was an ambitious task but things came together,” added Tripathi, who now heads International Solar Alliance (ISA), the first treaty-based international government organisation headquartered in India.

The baton has now been taken by states like Madhya Pradesh, with the Union government coming up with draft guidelines for tariff-based competitive bidding for sourcing electricity from grid-connected solar projects on 28 February after the success of the Rewa bid.

“MNRE has taken note of our initiative. We have given our inputs,” said Manu Srivastava, managing director, MP Urja Vikas Nigam Ltd and the Reva project’s proponent, while extolling the virtues of payment guarantee, availability of land, and transmission modalities.

Also, India’s initiatives on solar energy and electric vehicles are closely linked. With storage being the next frontier for India’s clean energy push, the batteries in electric vehicles (EVs) offer a potential solution. This spells good news for India’s finances as any shift to electric vehicles will help reduce pollution and fuel imports. India’s energy import bill is expected to double from around $150 billion to $300 billion by 2030.

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