Solar power tariffs in India appear to be in a free fall, in recently concluded Rewa and Bhadla Solar Park bids, the tariffs touched INR 2.62/unit which is approximately 18% lower than average price of INR 3.20/unit charged by NTPC for electricity generated by its coal fired plants. Having said that, this is the clear demonstration of aggressive bidding as IRR (Internal Rate of Return) for projects having tariff INR 4.3/unit comes out to be 14.20% which is much lower than benchmark IRR of 18%. Several risk factor such as fluctuations in foreign currency, capacity utilisation factor, operations and maintenance cost escalation etc. are not being taken into consideration while bidding and if the base assumptions go wrong then having a financial feasible project will be a challenge. Does, this risk opens up business opportunity for Open Access transactions in India?
Key Queries Resolved
- Which state has least regulatory barriers or least cross-subsidy surcharge (CSS) applicable to bulk buyers
- Whether the tariff discovered in third-party power sales agreements sustainable for long-term i.e. for a period of 10-15 years?
- What are the various power procurement models which shall be most beneficial given the current regulatory paradigm and policy environment in India?
- Why only renewable players are reaping benefits of direct power purchase agreements and why not the thermal power producers under independent and captive category enjoy the same?
- Which region is most suitable for affecting the direct power purchase agreements having the largest cluster of industries, corporates and bulk consumers?
- Which region has more penetration of short term transactions through solar power?
- Which transaction i.e. bilateral or collective is preferred for solar?
Business Case For Open Access Mechanism In India
- Rising popularity among developers especially renewable players to go for third party direct agreements
- Benefits widely available to state transmission utilities and private transmission utilities to felicitate the open access mechanism through solar
- 1500 MW of green power is sold to big corporates through direct agreements and the trend is northbound as more and more corporates are joining in the race.
- Since solar generation is erratic, the utility can source power from them as per availability and supply to consumers as per their needs 24×7.
- Reduction in tariff by a quantum of 15-20% through this mechanism with respect to distribution utilities tariff
- States of Karnataka, Tamil Nadu, Andhra Pradesh, Telangana in southern region of India and Rajasthan, Punjab and Haryana in Northern region of the country are fast catching up with open access transactions.
- Increased impetus on rural electrification
- Increasing number of bilateral and collective transactions of power through Open Access