At a record low of Rs 2.97 (4.4 cents) a kilowatt hour, the Rewa ultra mega solar power project has become not only one of the biggest solar parks in the world but also one of those with the lowest tariffs.
Mahindra Renewables, ACME Solar Holdings and Solengeri Power bagged the project’s three units at tariffs of Rs 2.979, Rs 2.97 and Rs 2.974 for the first year.
These tariffs are on a par with Rs 3.94 a unit that emerged in a tender floated by the Uttar Pradesh Power Corporation last year for coal-based power. The project has no government subsidy since it does not offer viability gap funding.
“The project design is good but nobody expected tariffs to drop so low,” Sunil Jain, chief executive officer, Hero Future Energies, told Business Standard. His company was among the 18 bidders that qualified for the reverse auction that began on Thursday and ran throughout the night to close after 33 hours on Friday evening.
At Rs 3.15-3.20 per unit, companies can make margins based on the fall in panel prices. The bids, however, “lost rationality”, added Jain. The contract allows for a 5 per cent year on year escalation, which works out to 75 paise in the 15th year. The levelised tariff will be around Rs 3.3 for 25 years. Jain said companies would not be able to make margins since panel costs might come down to 27 cents.
According to Manu Srivastava, chairman, Rewa Ultra Mega Solar (RUMS), and principal secretary in the state government, the project has its strengths. “There is payment security by way of a state government guarantee. The final consumers are also known, unlike in other contracts. Besides, in case something goes wrong, third party sales and compensation are available to the operators.”
He said viability should not be an issue since safeguards were already in place. In case a company does not sign a power purchase agreement (PPA), it will forfeit its bid security of Rs 25 crore for each unit. Besides, there will be a performance guarantee of Rs 75 crore, which will be forfeited in the event of the project not taking off. “Solar panel prices have come down and these are serious players,” he added. Bidders are required to have a net worth of Rs 300 crore for one unit, Rs 550 crore for two units and Rs 750 crore for three units.
Srivastava said open access contracts were already in place and Power Grid’s transmission line and sub-station at the site would be up by October. Ninety-seven per cent of the land was already available, he said. RUMS is a state-owned company with Solar Energy Corporation of India as a 50 per cent partner. “We do not have even one employee. State government employees are working with it part time.”
The World Bank-funded project will have three units of grid-mounted solar photovoltaic power plants of 250 mw each.
The selected bidders will sign two sets of PPAs with Delhi Metro Rail Corporation and Madhya Pradesh Power Management Corporation Ltd (MPPMCL). While DMRC is likely to buy 121 million units (kilowatt per hour) from each of the three units, MPPMCL will book 80 per cent of the generation capacity.
Located in Gurh Tehsil in Rewa, the project will supply solar power to meet almost the entire daytime requirement of Delhi Metro. This will also enable the project to supply the bulk of the power within the state during peak demand hours.
Twenty companies had put in bids for 10 times the required capacity of 750 mw. ReNew Power, SBG Cleantech and the Adani and Aditya Birla groups were among other bidders.
Power from the project is likely to be available from September 2017. The reverse auction for the project started with base prices for the three units at Rs 3.59, Rs 3.62 and Rs 3.64.
The lowest tariff for grid-connected solar power so far was Rs 4.34 per unit. Fortum India quoted the rate in January 2016 for the Badla solar park in Rajasthan. Competition among bidders can be gauged from the fact that a year later the highest tariff quoted for the Rewa project was only 5 paise more at Rs 4.39.
Shapoorji Pallonji Infrastructure and Torrent are out of the race since at Rs 4.39 and Rs 4.26 their quoted tariffs were the highest. According to the rules, bidders quoting the highest initial tariffs would not be allowed to bid.
In roof-top solar, Amplus Energy bid a record low of Rs 3 a unit in Uttarakhand, Himachal Pradesh and Puducherry in November 2016 to win a contract to install 14.5 MW of solar plants across 10 states. Rooftop generation is different from power generated in solar parks, which is not only connected to the grid but also much bigger in scale.