Solar power: Spot prices might be slashed

With relatively few takers for these units, CERC mulls move to lift sagging market in this segment

To help power distribution companies (discoms) meet their renewable power purchase targets, the Central Electricity Regulatory Commission (CERC) is examining whether to lower the price of renewable energy certificates (RECs) to as low as Rs 3.5 a unit (kilowatts per hour).

Currently, the price is regulated in the band of Rs 9.3-13/kwh for 2014-2015. The ceiling price of Rs 13 is proposed to be brought down to Rs 5.80/kwh. This would bring it closer to the average cost of solar power generation, currently Rs 7.72/kwh.

This way, CERC hopes to revive the spot solar power market, down with the high REC price. “The obligated entities are not comfortable buying solar RECs as solar photo-voltaic (PV) generation is available at a much cheaper rate than solar REC,” said a draft proposal of CERC dated September 30.

The regulator also feels the high REC price is giving windfall gains to projects registered under the REC mechanism. The Commission has, hence, proposed REC rates as the highest difference between the minimum requirement for viability of a solar power project and respective state APPC (average pooled cost of power purchase). RECs were launched in 2010 but at least 10 million are unsold, due to the high price. Of the unsold 1,01,23,060 RECs during September, 97,44,947 were non-solar and 378,113 were solar RECs.

CERC said unsold solar RECs are piling up for two main reasons. One, the Renewable Purchase Obligation (RPO), is not being enforced at the state level. Two, solar power is now available at a much cheaper rate.

RPO, launched in 2010, makes it obligatory for discoms, open-access consumers and captive power producers to meet part of their energy needs through the ‘green’ route. During 2013-14, leaving a few exceptions, no state met its RPO, for a fourth year in a row. The states or utilities that are unable to fulfil their RPO can buy RECs, each of which represents 1 Mw-hour of power produced from an RE source and are tradable at power exchanges.

The solar REC price is Rs 9-13 a unit. The cost of solar power has declined by 60 per cent in three years to Rs 6.5 a unit. The capital cost of solar PV has also decreased to Rs 6.91 crore per Mw in 2014-15 from Rs 17 crore per Mw in 2009-10. Solar PV power procured through competitive bidding recently by various states has yielded a PV rate of Rs. 6.5/kqh.

In the price band of Rs 3.5-5.8 a unit, the solar power price will also be closer to the average spot price of coal- generated power, currently at Rs 4.34 a unit.