Odisha to join solar tariff war with Rewa, Kadapa

Odisha is ready to take on Madhya Pradesh, Andhra Pradesh in terms of solar tariff

Enthused by the competitive bids attracted by ultra mega solar parks at Rewa (Madhya Pradesh) and Kadapa (Andhra Pradesh), Odisha is ready to take on the two states in terms of solar tariff.

At a recent round of bidding, solar tariff touched a historic low at Rs 3.15 per unit in response to 250 Mw unit of the Kadapa park. Since NTPC had offered the Kadapa project, power offtake and payments were secure, contributing to the low tariff. Earlier, the Rewa solar park had witnessed the lowest bid price of Rs 2.97 per unit but the levelised tariff after factoring in annual tariff hikes worked out at Rs 3.3 per unit for a period of 25 years. The other reason for the plummeting solar tariff is the falling price trend of solar modules prices of which are likely to fall 20 per cent this fiscal on oversupply by China.

“Odisha is in a very favourable position to take on other states on solar tariff. We hope to ensure highly competitive tariff by offering to the developers a ready to build infrastructure, certainty of power procurement and payment security mechanism by way of government guarantee”, said Hemant Sharma, secretary (energy) with the Odisha government and chairman cum managing director of Gridco Ltd, the state owned power trading company.

The state government plans to develop a mega solar park of 1000 Mw under a scheme approved by the Union ministry of new & renewable energy (MNRE) on the public private partnership (PPP) mode. The government is expected to buy at least 20 per cent of the solar power while giving the developers the options to sell the balance power out of the state. The park has the potential to draw investments of the order of around Rs 5000 crore. Nationwide, 33 solar parks are proposed across 21 states with a generation capacity totaling 19,900 Mw.

The solar park planned by Odisha has caught the attention of some of the top notch players in renewable energy business. SB Energy (formerly SBG Cleantech), a joint venture between Japan's SoftBank Group, Bharti Enterprises and Taiwan-based Foxconn Technology Group and homegrown conglomerate Shapoorji Pallonji are among the major players keen to invest in the solar park. Others queued up for investments are Azure Power, Panchvaktra Holdings, Orange Renewable and SkyPower Global. The developers were awaiting bidding to take off.

Since it was not feasible to acquire 5000 acres of land at a single location, the Odisha government has decided to go for the cluster model to develop the solar park. Accordingly, land has been identified at disparate locations- Balasore, Bolangir, Kalahandi, Boudh, Jharsuguda and Deogarh.

“The state government has roped in International Finance Corporation (IFC) as the consulting agency for preparing the detailed project report (DPR). The revised DPR for the solar park would be submitted to the Centre by June this year”, said Sharma.

For Odisha, the bigger challenge to negotiate is tying up of firm power purchase agreements (PPAs) to ensure the developers' interest does not wither like Jharkhand. During bids for solar power held in Jharkhand in March 2016, developers won contracts for 1200 Mw capacity across 45 locations, the largest single auction in the country. However, developers felt slighted as the concerned state government did not honour its commitment to issue PPAs.

Odisha aims to reach a renewable energy capacity of 2750 Mw by 2022. As per estimates by KPMG, this needs an investment of Rs 13500 crore. Of the total pegged capacity, 2200 Mw is expected to come from solar power.

To meet the targeted solar generation targets, Odisha has issued Letter of Intents (LoIs) to NLC Ltd (formerly Neyveli Lignite Corporation) and North Eastern Electric Power Corporation Ltd (NEPCO) to install capacities of 250 Mw and 200 Mw respectively. The agreed tariff for these projects has worked out at Rs 4.15 per unit but the Odisha government is renegotiating tariff with NLC and NEPCO to arrive at a fresh price discovery in the light of dwindling solar power tariff.