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Solar power cost competitiveness to help India meet emission targets

Private energy producers once again bid for solar power projects at the lowest-ever tariffs in the latest auction that concluded on 19 January as India strives to cut carbon emissions by 35% and increase the use of renewable energy sources to generate at least 40% of its power needs by 2030.

Increased investor interest and bidding under the so-called reverse auction process where a winner is chosen based on the lowest price bid for the project are likely to make pricing of power generated from renewable energy sources more competitive, says industry watchers.

Fall in prices of solar panels and modules in global markets along with a firm policy push by the government in India to install 100 GW of solar power capacity by 2022—the largest renewable energy capacity expansion in the world—has increased investor appetite, leading to a tariff drop from Rs.18 per kWh a few years ago to a record Rs.4.34.

Restoration of accelerated depreciation benefit for solar projects from July 2014 in a bid to reduce tax burden and improve cash flow, easier foreign investment rules, viability gap funding for public-private partnerships, capital subsidy for grid-connected solar rooftop systems and state-level initiatives like treating land acquired for renewable energy projects as non-agricultural are the major incentives given to the sector.

India needs Rs.6 trillion to scale up solar power generation capacity to 100 GW from 5,100 MW at present. Rajasthan has the highest solar power capacity of 1,264 MW, followed by Gujarat with 1,024 MW, Madhya Pradesh with 678 MW, Tamil Nadu with 418 MW and Maharashtra with 378 MW. At present, about 70% of India’s 284 GW power capacity is fired by fossil fuels such as coal, gas and oil. Large hydroelectric projects account for 15%, while renewable sources account for about 13% and nuclear power about 2%.

In the latest auction of projects by the NTPC, six projects of 70 MW each have been bid out for a 420 MW capacity in Rajasthan. Finland-based energy firm Fortum Finnsurya Energy has quoted the lowest tariff of Rs.4.34 a unit.

Source: Livemint.com