India’s solar power tariffs hit a new record low of ₹2 per unit

The previously lowest recorded solar tariff in the country was of ₹2.36 per unit.

Saudi Arabia’ Aljomaih Energy and Water Company and Singapore headquartered Sembcorp’s India arm’ Green Infra Wind Energy Ltd. placed the winning bids of Rs2 per kilowatt-hour (kWh) to win the contracts to build 200 MW and 400 MW of solar projects respectively. State run NTPC Ltd placed the second lowest winning bid of Rs2.01 per unit to secure the balance 470 MW capacity.

“A record low bid price of ₹2 per unit was discovered during this auction," said the government official cited above requesting anonymity.

Spokespersons for Aljomaih Energy and Water Company couldn’t be immediately contacted. Spokespersons for Sembcorp Industries and NTPC didn’t comment on the development.

Interestingly, it is the foreign players who have taken the lead in placing the aggressive bids recently during this auctions conducted by India. During the last round, the lowest bid was placed by Spain’ Solarpack Corporación Tecnológica, S.A. The previously recorded low solar bid was of ₹2.44 per unit in May 2017.

The bids comes in the backdrop of fund-starved state electricity distribution companies (discoms) unwilling to sign contracts with intermediary procurers such as SECI for these previously-awarded projects at a comparatively higher tariff. Due to the recent low-price bids, the discoms are tariff-shopping and are reluctant to ink power supply agreements (PSAs) for these projects.

Also, debt financing for green energy projects drying up with large Indian banks declining to fund projects that have committed to sell power at less than ₹3 per unit. The banks have been wary of lending to developers as they suspect the viability of projects that have agreed to sell power at rock-bottom tariffs.

This bids also assumes importance given that the rapid pace of clean energy capacity addition by India. Clean energy projects now account for more than a fifth of India’s installed power generation capacity. India has 34.6 GW of solar power, with an aim to have 100 GW of solar capacity by 2022. The country is seeking additional clean energy investment of around $80 billion till 2022, growing more than threefold to $250 billion during 2023-30.

Also, these record low bids comes at a time when the US President designate Joe Biden has promised a ‘Clean Energy Revolution’. Biden’s campaign promise includes ensuring that the US “reaches net-zero emissions no later than 2050", recommitting to the Paris Agreement on the first day of his administration, and “a federal investment of $1.7 trillion over the next ten years."

The bids also showcase the NTPC's pivot towards green energy. The state-run conventional power generation firm is rewriting its playbook, given that India’s energy landscape is rapidly evolving. NTPC on its part has decided not setting up new greenfield coal-fueled power projects and plans to make a total capital expenditure of Rs1 trillion between 2019 and 2024 to become a 130 GW power producer by 2032. It has around 4GW of renewable capacity, mostly solar, and plans to add at least 5GW solar capacity in two years. It will acquire at least 1GW of operational solar projects as part of its strategy to have a 32GW clean energy portfolio by 2032.

India has been trying to rejig its energy mix in favour of green energy sources and has become one of the top renewable energy producers globally, with a plan to achieve 175GW by 2022 and 500GW by 2030 as part of its climate commitments.