Six years ago, in December 2011, when France-based SolaireDirect put in a Rs 7.49 per kWh bid in the first auctions under the National Solar Mission, it made headlines and the company was roundly criticised for being reckless.
But the solar revolution it triggered marches on today, with renewed momentum, if the recent bids for the Rewa solar park tender are any indication. The lowest winning bid quoted by any developer touched Rs 2.97 per unit for the first year of plant operations. With a 5 per cent annual escalation for 15 years, the levellised tariff for a 250 MW unit in the park works out to Rs 3.30 per kWh.
This low tariff has been the result of a number of factors – some pertaining to the very concept of a solar park, wherein the project risk and the number of clearances required can be minimised; others stemming from favourable global PV market conditions.
The size and location of the projects, payment guarantee terms, deemed generation benefit, longer construction timeline, and yearly tariff escalation for 15 years are the factors that the Madhya Pradesh government ensured are pitch perfect to attract the best developers and help them minimise the risk factors.
The timing of the bid was also perfect. It was conducted just after the Union Budget 2017-18 made solar-tempered glass, used in solar equipment, duty free while also reducing the countervailing duty on raw materials used in solar equipment from 12.5 per cent to 6 per cent. To top it, globally, solar module prices have fallen in the past year.
The Rewa tender – its design and concept – could serve as an example for upcoming projects across the country. The concept of tariff escalation and the introduction of the open access element are two key takeaways that need to be promoted.
A larger impact of the Rewa results will be felt on the overall power sector as such low tariffs will make new coal- and gas-based power projects less attractive, not just for consumers but for offtakers as well.