New Delhi: As part of the government’s plan to push solar electricity by paying for it in dollars, power trading company PTC India Ltd may call for bids from solar project developers on behalf of the ministry of new and renewable energy (MNRE).
The radical approach of dollar-denominated tariff expected to be followed by India’s largest power trader may be similar to that of state-owned NTPC Ltd, aimed at providing green power at less than ₹ 4.50 a unit.
With firms such as PTC making a purchase guarantee, these projects will become bankable and help solar power reach grid parity. The power sourced will be supplied to the states.
Inviting dollar-based tariff bids advocated by energy minister Piyush Goyal, along with sharing of hedging risks, is expected to reduce the solar power rate from around ₹ 6.7 per unit to around ₹ 4.37, with the firms freed from any foreign exchange risk.
Goyal has maintained that the government is exploring various financing models for the renewable energy sector.
In an interview to Mint last week, Goyal said, “We are looking at developers coming up and investing in India for power, for which we will pay in dollars. So, we are looking at dollar tariffs very actively which could be a game changer for the renewable energy industry."
Renewable energy accounts for only 31,692.14 megawatts (MW) of India’s power generation capacity of 267,637MW. India needs as much as $200 billion to meet its target to install 100 gigawatts (GW) of solar power and 60,000MW of wind power by 2022. But securing affordable, long-term and adequate funds has been a challenge for developers of clean-energy projects in India, where interest rates are high.
A PTC executive requesting anonymity confirmed the plans and said, “We are having discussions with MNRE. Micro issues are being discussed. It is a good idea. We are in positive talks."
While the present installation cost of a solar project is around ₹ 6 crore per MW, economies of scale are expected to drive down the cost to ₹ 4.5 crore per MW.
PTC is partly owned by the Indian government. According to the PTC website, the power trader was set up in 1999 as a government initiated public-private partnership.
This comes in the backdrop of PTC firming up its renewable energy plans. PTC India Financial Services Ltd (PFS) and International Finance Corporation (IFC) have collaborated to finance green energy projects.
The plan also comes amid PTC India’s declining share in India’s power trading market. Currently, less than a quarter of the traded volumes is sold through long-term power purchasing agreements (PPAs), which offer stable business and better margins. This exposes the firm to the vagaries of the merchant power market, including risks such as a rise in competition, price swings and demand suppression. To mitigate the risk, PTC India is planning to increase the share of long-term contracts in total volumes to 50% by end 2016-17.
“Volume decline is due to lower demand and transmission-related issues for short-term volumes (western region to northern region)," ICICI Securities Ltd wrote in a 16 April report.
“There has been an improvement in power demand and commercialization of projects where PTC has PPAs; this would drive strong volume growth going. More power supply under long-term PPAs would improve margins," the ICICI report added.
Mint reported on 15 May about state-owned NTPC’s plan to call for bids from solar project developers for buying 15,000 MW on behalf of MNRE.
The plan to reduce solar power tariffs comes in the backdrop of state electricity boards (SEBs) increasingly showing a reluctance to buy power on account of their poor financial health. With a debt of ₹ 3.04 trillion and losses of ₹ 2.52 trillion, SEBs are on the brink of financial collapse.