Solar power tariff falls below average price of coal-based power

The price of solar power touched an all-time low in the bidding held for Bhadla Solar park in Rajasthan with the lowest bid coming in at Rs 2.62 per unit on Wednesday morning, which is less than the average price of coal-based power in the country. The solar power companies are competing for setting up a total capacity of 250 MW in the ongoing round.

The price for solar power has turned out to be even lower than public sector utility giant NTPC's average coal-based power tariff of Rs 3.20 per unit. The companies that were awarded the contracts are South African solar companyPhelan Energy Group Ltd won 50 MW, US Avaada Power Group which bagged 100 MW at same rate.

Cleantech, the energy arm of SoftBank Group, also clinched 100 MW at Rs 2.63 per unit as the bidding followed bucket filling method to award quantities in the 750MW phase IV auction of Bhadla solar park. This tariff is fixed for 25 years with no escalation and the bidders have sought no viability gap funding from the Government, said officials.

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After the bidding round, Power Minster Piyush Goyal tweeted : ``Another milestone towards Prime Minister Narendra Modi's vision of clean affordable power for all: Bhadla Solar Park achieves tariff of Rs 2.62 per unit.'' This tariff is lower than the Rs 3.15 per unit bid received for Kadapa Solar (250MW) in Andhra Pradesh.

It is also lower than Rewa solar park-750 MW (MP) which saw the lowest bid of 2.97 per unit, last month, but the levellised tariff comes out to be Rs 3.30 per unit for 25 years.

Levellised tariff is inclusive of annual cost escalations in the cost of project which is factored into the final tariff. A senior government official pointed out that this tariff is lower than average coal-based price in the country and it will be possible to match the grid parity price for solar with coal.

"It is understood that this fall in solar tariffs is the result of a combination of factors, most important being the decision of the Government of India to cover solar power by Solar Energy Corporation of India (SECI) under the ambit of Tripartite Agreement for payment security against defaults by State distribution companies.'' SECI managing director Ashwini Kumar said. SECI is a wholly government-owned public sector undertaking of the ministry of new & renewable energy which executes solar bidding.

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``Other factors contributing are about 7-8 per cent higher yield in Rajasthan due to better solar radiation conditions, drop in module prices in International market, and strengthening of Indian rupee against the US dollar," Kumar added. Solar tariffs have been heading sharply downwards over the last year or so. In January 2016, solar power tariff had dropped to Rs 4.34 a unit which was the lowest till that point, with Finnish energy firm Fortum Finnsurya Energy quoting Rs 4.34 a unit to bag the mandate to set up a 70-MW solar plant under NTPC's Bhadla Solar Park tender.

In November 2015, the tariff had touched Rs 4.63 per unit following aggressive bidding by US-based SunEdison, the world's biggest developer of renewable energy power plants which was also a record low at that point.