At a time when the Narendra Modi-led government is eyeing 100 gigawatt solar power target by 2022, utilities such as Hindustan Powerprojects Pvt. Ltd are averse to bid as they find the tariffs “too aggressive”.
The solar power tariffs have been declining in India from the high of Rs17.91 per unit in 2011. In January 2016, Fortum Finnsurya Energy Pvt. Ltd, a Finland-headquartered utility, quoted a record low of Rs4.34 kilowatt per hour (kWh) to get the mandate to develop a 70MW solar plant under NTPC Ltd’s Bhadla Solar Park tender in Rajasthan. Also, in November 2015, the US-based renewable energy firm SunEdison Inc. emerged as the lowest bidder by quoting a low tariff of Rs4.63 kWh at an auction called by NTPC.
Ratul Puri, chairman, Hindustan Powerprojects, confirmed the company’s move to abstain from a recent solar bid at a press conference on Thursday in New Delhi.
It currently costs between Rs4- 5 crore per MW to set up a solar power project. The winning bid for NTPC’s projects was Rs4.78-4.80 kWh and Rs4.63 kWh in Karnataka and Andhra Pradesh, respectively.
Puri added that “tariffs right now are too aggressive”.
Hindustan Powerprojects plans to commission 7,000MW by 2020 from thermal, solar and hydro power projects.
Puri also said that his company will observe how the companies in the solar sector perform before taking a plunge.
The National Democratic Alliance government’s 100 gigawatt solar generation target by 2022 is five times the previous goal and will require an investment of around Rs6 trillion. The ambitious plan is part of efforts to provide electricity to almost 280 million people who don’t have access to electricity. State-run NTPC has been tasked to meet a quarter of this solar power generation target.
A senior NTPC executive, requesting anonymity, said that the tariff bids for solar power are currently ranging between Rs4 and Rs5 per unit depending upon the location. India receives one of the highest solar radiation of up to 7 kWh per sq. m for most part of the year.
“We are getting around 20 to 30 bids for every tender. There is a lot of interest and competition. It also depends upon the cost of capital at which a developer secures finance,” the executive added.
According to the government, around Rs71,201 crore has already been sanctioned to finance green projects.
India may shelve its plan to introduce dollar-denominated tariff for grid-connected solar power given the low tariff for electricity generated from the sun and a weakening rupee against the dollar.
Analysts believe that the solar power tariffs will remain subdued.
“Solar tariffs discovered in competitive bidding have fallen drastically in recent bids and the aggressive bidding could continue, given huge competition,” India Ratings and Research Pvt. Ltd. wrote in a report released in March 2016.
India has pledged to reduce emissions at the United Nations Climate Change Conference in Paris with solar power generation at the heart of its strategy.