Solar tariffs in Tamil Nadu: State discovers Rs 3.47 per unit rate in revenue auctions

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Tariffs for solar power in Tamil Nadu touched as low as Rs 3.47/unit in reverse-auctions held over the weekend. The biddings were done for 1,500 MW solar plants. The tariff is much lower than Rs 4.40/unit, which was the lowest bid in February’s solar tariff auction conducted by the state. Nevertheless, it is still much higher than Rs 2.44/unit, discovered in May at the reverse auctions for solar plants at Rajasthan’s Bhadla. “The auction was always expected to deliver rates below the regulated tariff (Rs 4.50/unit) due to decline in equipment costs, but it has not achieved the full potential,” said Kameswara Rao, partner at PwC. According to sources, 1,500 MW was distributed to 18 companies out of the 25 firms that participated in the bidding. State-owned NLC India Ltd, a traditional mining firm, was awarded 449 MW of solar plants. Bengaluru-based Raasi Green Earth Energy Ltd quoted the lowest bid of Rs 3.47/unit. Reputed solar companies which presented their bids include Rays Power Infra, Renew Power and Shapoorji Pallonji Infra. These companies were awarded 200 MW, 100 MW and 50 MW respectively.

Experts believe that the primary reason for higher bid is low solar radiation in Tamil Nadu compared to Rajasthan. Average sun intensity in Tamil Nadu is 5.5 Kwh/square metre/day, 20% lower than Rajasthan, leading to lower electricity generation. Additionally, unlike solar projects under the Solar Energy Corporation of India (SECI), land for the Tamil Nadu projects is to be acquired by the developers themselves. Bidders had to procure land and budget for payment delays of a few months. “A more robust bid document could have delivered much better rates,” Rao added.

Besides, payment delays and lack of offtake guarantee also played a role in restricting tariff quotes falling further. In a recent survey done by renewable energy research agency Bridge to India, Tamil Nadu was ranked the worst among ten Indian states as far as ease of doing business for solar projects was concerned.

However, the project offered a few incentives to make it attractive to developers. According to Varun Jairath, director, investments, at Rays Power Infra, “the project has benefits of compensatory offtake in the case of grid curtailment beyond a certain limit and payment has been guaranteed by Tangedco, via revolving Letter of Credit.” Low module cost, enhanced credibility of Tamil Nadu state utilities by the power ministry and development of transmission infrastructure in the state also played a role in bringing prices down, Jairath added.

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