Solar @ Rs. 2/kWh: Solar tariffs fall to a historic low
In the recent bid of SECI 1070 MW, Saudi firm Aljoemaih energy and Warter Company and Green Infra Wind energy Ltd have been the winners with the historic low tariff of Rs. 2/kWh followed by NTPC bagging 600 MW capacity @ Rs. 2.01/kWh. These projects are to be implemented in the state of Rajasthan which has highest solar radiation in the country and the bidders can install in the solar parks in Rajasthan which are being developed by MNRE solar park scheme with the state of Rajasthan. The SECI PPA is for 25 years. SECI PPA has the provision of compaensation in case of curtailment of the power due to grid un availability. This tariff is about 15% lower as compared to the previousely discovered tariff of SECI bid 2.36/ kWh. This makes Indian solar tariffs as lowest solar tariff in the world.
Excepting the NTPC, the other two bidders are international developers and have access to cheaper capital. Solar tariffs are dependent on multiple factors, which include the cost of financing, credibility of off taker, grid stability and solar radiation as major factors. SOme other factors include the land availability and ease of development. If we l;ook at the recent module price trends the Indian market is having PV module availability @ Rs. 15 Wp for such as large capacity, if we consider the BoS cost including the installation as Rs. 10/Wp. and land transmission and other overheads @ Rs. 2/Wp, the overall project cost accounts to the tune of abouit Rs. 2.7 Cr/MW. We tried to do the reverse engineering to assess whether the tariff quoted by these firms are viable or not? . We evaluated the LCOE for this bid considering the project cost as 2.7 Cr/MW, CUF 20%, interest rate as 8%, and other generic assumption in our financial model. The results show that the bidders have considered their return on equity expectation at 12% to achieve the LCOE of Rs. 2/kWh.
| Levellised COG | ||
| Per Unit Cost of Generation | Unit | Levellised |
| O&M expn | Rs/kWh | 0.32 |
| Depreciation | Rs/kWh | 0.76 |
| Int. on term loan | Rs/kWh | 0.33 |
| Int. on working capital | Rs/kWh | 0.01 |
| RoE | Rs/kWh | 0.60 |
| Total COG | Rs/kWh | 2.02 |
It is interesting to note that the module price may further fall in due course of time as these projects are to be implemented in 2 years span and modules shall be procured in 2022 by the developers. The PV moduletechnology has significantly matured and the modules of size of 500W+ are available which reudces the BoS cost significantly. The adoption of 1500V DC system inverter technologies and use of higher AC DC ration to the level of 50% are some of the factors which the developers may have considered in this bid.
