High cost of energy generated from non-conventional resources like solar and wind has always been contested. Solar and wind energy resources were always looked upon as secondary resources for power generation. But, that is changing the world over and India too is no different. The progress made by solar is commendable. Aided by continual decrease in the cost of PV Modules and Cells we are seeing wide spread adoption of solar energy the world over. Technologies like rooftop solar have given real power in the hands of the consumers.
In India the turning point was the launch of the National Solar Mission (NSM) and subsequent increase in the targeted generation capacity from solar to 100GW. With the Indian market majorly dependent on imported solar cell and modules, the decrease in cost of the same in international markets has benefited the solar industry. Despite many challenges the contractors in India have been coating lower prices in different National and State biddings. But, the acclaimed moment in the Indian solar market arrived in 2016 when Fortum Energy won 70MW of project in Rajasthan quoting the lowest bid of Rs.4.34/- per unit. The move by Fortum Energy was debated and the viability of project was questioned. Although, this was not one-off event, globally too the solar tariffs were witnessing gradual fall bringing them closer to power generation from conventional sources or grid parity.
In my Jan/ Feb 2017 editorial for Smart Energy Magazine I had written that the industry is approaching 2017 with anticipation and hope. And the very initial months of 2017 have proved that the expectations were not unfound. In the recently concluded 750 MW Rewa Solar Park auction in Madhya Pradesh the winning bid for first year tariff hit a new low at Rs.2.97/- per unit, having the provision to increase it by 5 paisa over 15 years, bringing the levelized tariff to Rs.3.30/- per unit over a period of 25 years.
It would be interesting to get into the distinctive features of this auction that really made possible for the players to quote the lowest bids. First of all, on auction were 750 MW situated at a single location inside a solar park- The Rewa Solar Park in MP. For 750MW the bids tendered were 10x at 7500 MW making the auctions extremely competitive. A huge capacity at single location eliminated the extra expenses for a developer, like temporary transmission and infrastructure cost, if the project was divided into different location. Secondly, at the Rewa Solar Park the allied infrastructure, like transmission substation, is ready making it more attractive for a developer. As inadequate evacuation infrastructure is a major problem faced by developers. Additionally, the icing on the top is that the projects inside the park come with payment guarantees, deemed generation benefits, longer construction time, and yearly tariff escalation for 15 years. All this factors contributed towards the fall in tariff cost to the level we are seeing.
The challenging part would be now that the auctions have rendered lowest cost, other projects or states coming up with bids will look at benchmarking this cost without taking into consideration the factors that have contributed towards the downward revision of the tariff. How does the industry brace up to this challenge would be interesting to see. At the same time, it is worth mentioning here that the lowest tariff, a record low for India, is still not the lowest tariff in the world. Hence, we still can hope for a downward revision of tariffs in future. Till then let’s cherish the Zenith passage of the Sun.