As part of the National Democratic Alliance (NDA) government’s green energy push, India will award contracts for the supply of 15,000 MW this year. According to the plan, Solar Energy Corp. of India (SECI) will shortly call for bids from developers for buying 2,000 MW, a government official said, requesting anonymity.
The procurement will be done through a reverse bidding process, and it will provide a purchase guarantee, making such projects bankable and help solar power eventually cost the same as that purchased from the grid.
India’s plans to install 100,000MW of solar power capacity by 2022 and needs as much as $200 billion to meet this target. The government aims to provide green power at less than Rs.4.50 a unit.
“The states have already tendered for around 3000 MW. Also, NTPC has already tendered 2600 MW. We are confident that by 31 March 2016, a capacity of 15,000 MW will be awarded,” said the official quoted above.
Analysts see a lot of potential for solar power in India.
“ICRA sees strong demand outlook for solar energy sector in the long run, aided by favourable regulatory and policy support in place by Central and State Governments,” rating agency ICRA wrote in a 14 July report.
There has been growing interest from overseas investors in the Indian renewable energy space as well. SoftBank Corp., along with Bharti Enterprises Ltd and Taiwan’s Foxconn Technology, in June proposed to invest at least $20 billion in solar energy projects in India through a joint venture, SBG Cleantech Ltd. US-based First Solar Inc. and China’s Trina Solar are among companies that are planning to set up factories in India.
Queries mailed to the spokesperson of India’s new and renewable energy ministry and SECI managing director Ashvini Kumar remained unanswered.
While the present installation cost of a solar project is around Rs.6 crore per MW, economies of scale are expected to drive down the cost to Rs.4.5 crore per MW. The plan to reduce solar power tariffs comes in the backdrop of state electricity boards (SEBs) increasingly showing reluctance to buy power on account of their poor financial health. With a debt of Rs.3.04 trillion and losses of Rs.2.52 trillion, SEBs are on the brink of financial collapse.
“Given that state-owned distribution utilities are key obligated entities, solar energy projects remain exposed to counter-party credit risks, given that these utilities in many of the states (having high solar potential) continue to have stretched financial position. The fundamental improvement in their financial position remains crucial in the long run, as this would also enable them to honour the payments in a timely manner,” the ICRA report said.
State-owned NTPC Ltd has been calling for bids from solar project developers for buying 15,000 megawatts on behalf of the ministry of new and renewable energy. This is in addition to NTPC’s plans to set up 10,000 MW of solar power capacity on its own.
The Narendra Modi-led government has pushed renewable energy to the top of its energy security agenda, seeking to minimize India’s dependence on coal-fuelled electricity. Renewable energy accounts for only 35,777MW of India’s total power generation capacity of 272,503MW.