Is India ready to be solar powered?
Tipesh Tank — તિપેશ ટાંક
— General Manager (Tenders) at Magellanic Cloud (BSE — MCLOUD) — IIT Madras — GOLF —
Dec 22, 2015, Source: Moneycontrol.com
Gunning for the sun: Is India ready to be solar powered?
Solar energy companies or renewable energy companies have been quoting record low rates in government auctions to win solar projects in India. But that also raises the question if one could see a repeat of problems in the road and power sectors where companies bagged orders by quoting cheap rates which subsequently turned out to be unviable for them.
This trend of aggressive bidding for solar projects started after India raised its solar power capacity target to 100 gigawatts by 2022, raising the same by five-fold. The NDA government has planned 20 solar parks across India with a total capacity of 20,000 MW.
According to a Clean Technica report , solar power bids have fallen by over 50 percent in India in the past five years. The first auction in December 2010 under the central government policy of National Solar Mission saw developers bidding between Rs 10.95/kWh and Rs 12.76/kWh, the report states. This has come down to an average quoted price of around Rs 4.63 per unit now.
Companies such as SunEdison and SB Energy — the joint venture firm of SoftBank, Bharti Enterprises and Foxconn — recently quoted Rs 4.63 per unit to win solar parks in Andhra Pradesh in two separate reverse e-auctions. In a reverse auction, the role of buyer and seller is switched and a business bid is won by quoting prices downwards. India is one of the few markets globally to go with a reverse auction-derived price.
These bid rates of lower than Rs 5 per unit are raising questions on the long-term viability of these projects.
A Mint report quoting Sumant Sinha, founder and chief executive at renewable energy firm ReNew Power Ventures Pvt. Ltd says the current bids are far too aggressive and the competitive bidding route, while reducing tariffs in the short term, is quickly leading to consternation that India despite, higher volume, is becoming an unattractive market from a returns point of view.
The Mint report further says that these were the first two projects (in Andhra Pradesh) to be bid under the government-provided solar parks, which means developers get ready-to-use infrastructure, such as land and transmission facilities, leading to low project risk and lower costs. This in turn might have resulted in the aggressive bidding. For foreign firms looking to make it big in India, this is an attractive bet compared to state-level auctions, which would require them to acquire land and build infrastructure support, the report further explains.
In an earlier interview with CNBC-TV18 , Sumant Sinha had spoken about rooftop power and competitive pricing. He believes the proper pricing of solar power is still in excess of Rs 5 per unit. "Ground mounted solar is probably about Rs 5.60-5.70 per unit and rooftop solar is probably Rs 6.25-6.50 per unit level — is where proper pricing with proper returns, with long-term sustainable business models really would be at, at this point in time," according to him.
After the completion of the bidding process for the solar park in Andhra Pradesh — issued by the Ministry of New and Renewable Energy (MNRE) — Tarun Kapoor, joint secretary (solar), MNRE, had told Business Standard that not one but several companies had bid around Rs 4.6-5 a unit, thus reflecting the new stable tariff.
With the current price of coal-based power averaging around Rs 3 per unit, solar is close to achieving grid parity, which means that solar power today is almost around the same price as coal-based power. Despite this, there continue to be many questions on the sustainability of such low rates — whether the companies will ultimately compromise on quality in a bid to get returns, or as the Mint report says flip the assets to another buyer in future.
However, globally, too, solar power costs have fallen by 200 times from USD 100 per watt in 1975 to 50 cents per watt this year. Analysts estimate costs may fall another 50 percent by 2020. But is India ready to be solar powered is the real question here.