At Rs2.62 per unit solar power turns cheaper than coal-based power

Solar power has turned cheaper than coal-based power with tariff hitting a record low of Rs2.62 a unit – a rate lower than grid parity - in bidding held for the Bhadla Solar Park in Rajasthan.

Companies bidding for 250MW capacity in the 750MW park took the lowest bid to Rs2.62 per unit, a price which is lower than NTPC's average coal-based power tariff of Rs3.20 per unit.

South African solar company Phelan Energy Group Limited, which bagged 50MW capacity and US Avaada Power Group, which bagged 100MW, quoted Rs2.62 per unit each while SoftBank Group clinched 100 MW at Rs2.63per unit in the bidding, which followed a "bucket-filling method". In case of bucket filling, the lowest bidder is given the first choice to select the plot in the solar park.

Altogether, 750MW solar power projects are on offer at the park. The remaining 500MW would be awarded today.

Experts pointed to the declining number projects on offer from state governments for the aggressive bids.

The tariff is fixed for 25 years with no escalation and, official said, the bidders have sought no viability gap funding from the government.

This tariff is lower than what was received for Kadapa Solar Park (250MW) in Andhra Pradesh where the lowest bid was Rs3.15 per unit. It also lower than Rewa solar park in MP with a 750MW capacity, which saw the lowest bid of Rs2.97 per unit, last month, but the levellised tariff (average fixed and variable tariff over the entire term of the power purchase agreement) works out to Rs3.3 per unit for 25 years.

Levellised tariff is inclusive of annual cost escalations in the cost of project, which is factored in the final tariff.

In January last year, solar power tariff had dropped to a new low, with Finnish energy firm Fortum Finnsurya Energy quoting Rs4.34 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 Rs4.63 per unit following aggressive bidding by US-based SunEdison, the world's biggest developer of renewable energy power plants.

Government officials pointed out that the latest tariff offer is lower than average coal based price in the country and the grid parity price for solar to match with coal.

"It is understood that this fall in solar tariffs is the result of combination of various 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.

Other factors contributing to the lower tariffs 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 US dollar," said Ashwini Kumar, managing director, SECI.

SECI is a wholly owned PSU of the ministry of new and renewable energy, which executes solar bidding.