Solar power tariff hits new low in Rajasthan: 4.34 per unit

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solar gridIt’s not  just oil that is on a slide. While globally crude has slid some 70% in the last year and a half, solar power tariffs too have sunk to a new low in India at Rs 4.34 per unit — a third of the going rate a few years ago — for a project in Rajasthan.
The lowest solar tariff in the country was quoted by Fortum India for one of the six packets of 70MW each bid out by state-run generation utility NTPC for Rajasthan’s Bhadla solar park near Jodhpur. Rays Power Infra and Solar Direct won two packets each, while the quote from Indiabulls for the sixth project stood a tad higher at Rs 4.36 per unit.

The previous low stood at Rs 4.63 per unit offered by SunEdison and SB Energy for two projects of 500MW and 350MW respectively in Andhra Pradesh.

Fortum’s quote is lower than the price of power from several thermal power plants built by private firms and slightly higher than tariffs offered by yet others. But is is still nearly double that of NTPC’s tariff for thermal plants.

Understandably, an elated power, coal and new and renewable energy minister Piyush Goyal tweeted to congratulate chief minister Vasundhara Raje. The CM tweeted back to credit the PM’s vision and Goyal’s support for the feat.

At a ballpark figure of Rs 6 crore per MW cost, the entire 420MW project could take up an investment of Rs 2,520 crore.

The ever-declining solar power tariffs have also drawn cautionary notes from some industry players who have raised concerns over long-term sustainability. Industry tracker Mercom Capital Group recently said concerns were rising since project costs, including those of solar modules that take up half the investments, did not match the rate of decline in tariffs.

 “In our channel checks, we are not seeing a significant enough drop in component prices to justify a 20-30% drop in bids. If anything, prices are solidifying as the year-end rush is creating a shortage putting upward pressure on prices. Looking at Chinese module spot price trends in 2015, the price drop is about 8% in the first six months after which it has held steady,” a recent Mercom Capital report said.

Sunil Bansal, secretary of Rajasthan Solar Association, said project cost would come down as economy of scale improved.

 He, however, cautioned that if oil and coal prices remained at the current historic lows, then the cost of thermal power would not go up as significantly as expected by the industry. That may dampen the prospect of solar energy in the short term.
 Bansal said the PM has created an exciting environment and the power developers are trusting his commitment to the sector. Rajasthan government selected NTPC for sourcing solar energy to meet its renewable purchase commitment and would sign power purchase agreement. The projects are expected to be completed in 13 months from award. The state government is providing land.
 But BK Doshi, Rajasthan Renewable Energy Corporation MD, described the latest drop in tariffs as an indication that the Centre’s and Rajasthan government’s plans to set up 100GW (giga watt) and 25GW respectively are achievable.

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