Solar tariffs in India are set to hit a new low with the tender for 500 MW of capacity offered under the national solar mission (NSM) in Andhra Pradesh receiving huge investor interest last week. In response to tenders for setting up 10 projects of 50 MW each, bids totalling around 5,500 MW were received.
This has set the stage for aggressive tariffs to be quoted by the developers, with Rs.5 per kWh tariff becoming the new norm. The National Democratic Alliance (NDA) government has pushed renewable energy to the top of its energy security agenda and is looking to provide green power at less than Rs.4.50 per unit.
Consider, the price of power generated by the state-owned NTPC Ltd, India’s largest power generation utility. In the last financial year, the average rate of electricity sold by NTPC’s coal-fuelled projects was Rs.3.25 per unit, while the tariff of power from its other projects ranged between Rs.2 and Rs.4.50 a unit. NTPC has already articulated its intent to supply electricity from 10,000 MW of solar power capacity that it is setting up on its own at Rs.3.20 per unit by bundling it with unallocated power to bring tariffs down. In addition, it plans to sell electricity at around Rs.5 per unit for 15,000 MW that it is buying on behalf of the ministry of new and renewable energy (MNRE) and earn 7 paise per unit in return.
India will award contracts for the supply of 15,000 MW this year. A number of utilities and private equity (PE) firms are trying to get a slice of India’s growing green energy pie. These include NYSE-listed Brookfield Asset Management, Switzerland-based PE firm Partners Group AG, infrastructure investment manager I Squared Capital, Dubai’s PE firm Abraaj Group and Doha-based Nebras Power QSC. A subsidiary of Singapore-based Sembcorp Industries Ltd acquired a 60% stake in IDFC Alternatives-backed renewable energy firm Green Infra Ltd for S$227 million in February.
However, concerns remain about the payment for this solar power by the state electricity boards (SEBs), which are weighed down by Rs.3 trillion in accumulated losses.