Solar power tariffs in India continue to fall at a drastic pace, touching a record low of Rs 2.62 per unit during the auction of 250 megawatt (mw) capacity at Adani Renewable Energy's Bhadla Solar Park in Rajasthan.

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"Another milestone towards PM Narendra Modi's vision of clean affordable power for: Bhadla Solar Park achieves tariff of Rs 2.62/unit," tweeted Minister for New and Renewable Energy, Power Piyush Goyal.

The reserve price for the auction was set at Rs 3.01 per unit.

Hours before the bid, Goyal had also tweeted, "In the past 3 years, the government had achieved a record low on the cost of clean energy; moving towards providing 24x7 affordable Power for All."

Phelan Energy Group of South Africa quoted Rs 2.62 per kWh to build 50 mw. Avaada Power too quoted the same tariff for developing the capacity of 100 mw whereas SBG Cleantech bid just a paise more at Rs 2.63 per unit for another 100 mw capacity. There were a total of 27 bids on Tuesday during the reverse auction conducted by Solar Energy Corporation of India (SECI).

The previous low was reached last month at Rs 3.15 per kWh for 250 mw for the Kadapa Solar Park in Andhra Pradesh. The winning bid was made by Solairedirect Energy India.

Prior to this, tariff had fallen in February at an auction by Madhya Pradesh's Rewa Solar Park at Rs 2.97 per kWh for 750 mw in the first year, followed by price escalation of 5 paise per year for 15 years. The levelised tariff stood at Rs 3.30 per unit.

These tariffs are record low considering the rates for solar during 2010-11, when it stood at Rs 10.95 to Rs 12.76 per kWh. Secondly, the latest solar tariffs are well below per unit price of thermal power, which is around 3.20 per unit by National Thermal Power Corporation.

"In just a month, there has been a significant 17% decline solar tariff, given that the winner of one 250 mw module at Bhadla Solar Park in Rajasthan quoted a new low of Rs 2.62 per unit, compared to Rs 3.15 per unit quoted for the Kadapa project in Andhra Pradesh in April. In contrast, there has been only a marginal drop in solar module prices. While a part of the difference can be explained by higher plant load factor (PLF) in Rajasthan, achieving reasonable returns at such low bid tariffs would be challenging," said Rahul Prithiani, director, Crisil Research.

He added, "Crisil Research's analysis shows that the equity internal rate of return at a tariff of Rs 2.62 per unit would be 9-10% assuming a PLF of 21%, the capital cost of Rs 3.3-3.5 crore per mw, and an interest rate at 9.5%. We believe there were two reasons for the bidding aggression: deceleration in project award activity over the past few quarters, and intensifying competition. The quest is to build a significant solar portfolio, especially on the back of large funds raised over the past one year."

The industry is also viewing solar projects as a low-risk, low-returns business.

According to a recent India Ratings & Research report, during FY17, the renewable energy sector reported a record capacity addition of over 11 gigawatt (gw), which is an increase of around 60% over the previous year. As per Ministry of New & Renewable Energy (MNRE) data, the record capacity addition was due to the wind and solar power segments at 5.4 gw and 5.5 gw, respectively.

SUN SHINES

  • Phelan Energy Group of South Africa quoted Rs 2.62 per kWh to build 50 mw  
  • Avaada Power too quoted the same tariff  
  • SBG Cleantech bid just a paise more at Rs 2.63 per unit