Is Rs5 per kWh the new normal for Indian solar power tariffs?

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The GoI has given top priority for renewable energy on energy security agenda and is trying to bring down per unit green power at less than Rs.4.50. The recent bids result in Madhya Pradesh, Telangana & Punjab have found tariff price in the range of Rs. 5-6 per kW, while lowest quote Rs. 5.09 per unit was in Punjab bid. There are possibilities that the current batch of NSM projects may see tariffs below Rs.5 per kWh.

The progress is important while considering electricity produced by coal, 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.

Many Analysts say that the solar power tariffs have been reduced due to the decline in the cost of capital and equipment. According to Kotak Institutional Equities Research the decline in capital cost of equipment (modules, inverters, BoP) plant costs have come down by 15-20 % over past 1.5-2 years, and 40-50% over the past 3-4 years and “return (equity internal rate of returns or IRRs) have come down in the range of 13-15% for international utilities, 18-20% for PE backed IPPs (independent power producers) and 20% plus for Indian corporates.

However, they also mentions that major concerns still 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.

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