Solar power rates to drop 20% by 2013

The first phase of the National Solar Mission, that ends in 2013, would bring down solar power tariff by around a fifth to Rs 4.50 per unit.

At present, the average cost of solar power in India is over Rs 15.30 per unit according to the norms fixed by the electricity regulator CERC.

According to the ministry, the 20 per cent drop in cost at which solar power would be sold henceforth to distribution companies has been made possible because of huge discounts quoted by developers who have put their bids for setting up projects under the Phase-I of the solar mission.

“The CERC tariff is Rs 17.9 for Solar Photo Voltaic (PV) and Rs 15.3 for solar thermal. If this power was to be bundled and sold to distribution companies the average cost was coming out to be around Rs 5.5 as per our earlier estimate. Now, it is going to be less than at Rs 4.50 owing to the discounts offered,” said Deepak Gupta, secretary in the Ministry of New and Renewable Energy (MNRE).

This, according to Gupta, will ensure that there will not be any payment defaults by distribution companies under the solar mission.

NTPC Vidyut Vyapar Nigam (NVVN), a wholly-owned subsidiary of power generator NTPC Ltd and the nodal agency for implementing the solar mission, had opened bids for around 300 solar PV and 66 solar thermal projects on November 16. The average discount offered by developers on the CERC tariff was Rs 5.75 for PV and Rs 3.82 for thermal projects.

Seven bidders, including Reliance Power, Lanco and KVK Energy, have been shortlisted by the ministry for developing solar projects under Phase-I of the mission. The heavy discounts offered by the companies are on account of technological advancements and innovative financing, said Gupta.

“People are confident that there are savings in solar projects. More efficient cells are coming in now. There is a significant decline in equipment cost. In thermal, for instance, the cost of installation is much less here in India. People are also looking for innovative ways of financing, like accessing low-cost funds from outside. This is helping drive down the cost,” he said.

To further protect NVVN from risks on account of payment defaults by distribution companies, the ministry has worked out a built-in payment security mechanism in the Power Purchase Agreements (PPAs) to be signed between the developers and NVVN.

“We have written in the PPAs that the ministry of power has communicated the decision of the ministry of finance that should there be any difficulty for NVVN to get payment from the state utilities, the government of India will cover that,” said Gupta.

The idea is to cover default in payments that might occur from the ministry’s budgetary support.

“If the default takes place, then a reserve is available in the form of budgetary support. This can be made available if needed. This has been agreed upon by the finance ministry. We are in the process of seeking cabinet approval for this. Next year in our budget, the money would be there,” he said, adding that a “reasonable amount” would be accrued from the ministry’s budgetary allocation for covering payment risks.

The ministry is hopeful of getting PPAs signed between developers and NVVN in January next year after which projects would be set up within stringent time frames under the solar mission guidelines. While a PV project should be developed within a year, a solar thermal project has to be set up within 28 months from the signing of the PPA.