A big breakthrough but gaps persist in the wider picture
India’s largest renewable energy company, ReNew Power won India’s first e-Reverse Auction of 400 MW renewable energy project conducted by Solar Energy Corporation of India Ltd. (SECI) and will be the first company to deliver round the clock electricity supply. The other winning bidders included Solarpack, Avikiran Surya (ENEL Green Power), Amp Energy Green, Eden Renewables, ib vogt Singapore, & Ayana Renewable, from seven different countries.
ReNew Power quoted a first-year tariff/bid of Rs. 2.90/ kWh (US $0.038/kWh) for 1.2 GW of projects but was only able to win 400 MW under the bucket filling method.
A maximum timeframe of 24 months from the effective date of PPA (Power Purchase Agreement) will be provided to the developer. On an annual basis, the first-year tariff of Rs. 2.90/kWh will have a 3% escalation rate, up to the 15th year of the overall PPA having a 25-year term. As a result, the effective tariff for the said project amounts to Rs. 3.59/kWh.
Where a normal renewable energy project in India operates with the capacity utilization rate of 30-40%, ReNew Power has to ensure that it operates annually with a capacity utilization rate of around 80%, under the terms of the agreement.
Although, this maybe a breakthrough but still a lot needs to be done in terms of tariff reduction in India. Currently, the solar tariffs in the Gulf region are lowest due to a variety of reasons- lower expected return on equity (ROI), minimum cost of land for solar projects, no corporate taxes on equipment’s and power sales, higher capacity utilization factor (CUFs) due to higher solar resources availability, lower depreciation, and higher debt to equity ratio. But, owing to the way in which economics function across different countries, it is difficult to come up with ways to replicate these factors in the Indian market.
As compared to the tariffs in the Gulf region, solar tariffs in India are almost double the value. Currently, solar tariffs in India vary in the range between Rs. (2.5-2.9)/kWh. However, with the advancement in technology, solar tariffs will see annual declines of up to 5-10% in the coming decades.