Records Keep Falling at Bhadla Solar Park Auctions as Tariff Breaches Rs.2.50 (~$0.038)/kWh in the 500 MW Phase-III Solar Park Auction
Solar Tariff Falls 7 Percent in a Week
May 15, 2017
In India, the solar tariff breached Rs.2.50 (~$0.038)/kWh, making it cheaper than thermal power in some cases. In the 500 MW Bhadla Phase-III Solar Park auction, ACME quoted a tariff of Rs.2.44 (~$0.037)/kWh to win bid to develop 200 MW of solar. The other winning bid was that of SBG Cleantech, which quoted Rs.2.45 (~$0.038)/kWh to develop 300 MW. Tariffs fell by 7 percent between the tariff quoted in the 250 MW Bhadla Phase-IV Solar Park (Rs.2.62 (~$0.0405)/kWh) auction and the lowest tariff quoted in the 500 MW Bhadla Phase-III Solar Park (Rs.2.44 (~$0.037)/kWh) auction, just one week prior.
The project completion timeframe is 12 months from the date of signing power purchase agreements (PPA) and developers will enter 25-year PPAs with Solar Energy Corporation of India (SECI), the off-taker. The SECI set up a payment security mechanism in order to ensure timely payment to the developers. This fund will cover three months’ payments.
ACME Solar was the lowest bidder, quoting a tariff of Rs.2.44 (~$0.037)/kWh to develop 200 MW of solar. The capacity comprises of two projects of 100 MW each. SBG Cleantech was the other winner, who won a bid to develop 300 MW of solar by quoting Rs.2.45 (~$0.038)/kWh.
In all, 10 developers quoted tariffs below Rs.3 (~$0.046)/kWh, out of which six quoted a tariff lower than the previous low tariff of Rs.2.62 (~$0.0405)/kWh.
“We were expecting prices near Rs.2.65 (~$0.041)/kWh, similar to the Bhadla Phase-IV 250 MW auction, but developers have surprised us. Within a week, we have successfully put thermal behind solar on price,” stated an official at the Solar Energy Corporation of India. The competition is getting tougher in the solar sector, added the SECI official.
We did not expected the solar tariff to cross Rs.2.50 (~$0.038)/kWh yet. It is a pleasant surprise and shows that the efforts by the Ministry of New and Renewable Energy (MNRE) are finally showing, stated an MNRE official. The MNRE has clarified the tender guidelines, made the entire process transparent and formulated policies like payment security mechanisms, which have provided a boost to developer’s morale and the results are here for everyone to see, added the MNRE official.
The MNRE official further stated that the sector is becoming mature and the developers know it. Lending rates have gone down and these developments have pushed tariffs lower. The tariffs are sustainable, otherwise developers wouldn’t have bid at such prices. Whether they are okay for the small developers or not, we will see eventually, added the MNRE official.
The developers that won the auction are both backed by some strong investors.
ACME Solar, part of ACME Cleantech Solutions, has now won two big record breaking auctions – 250 MW in the Rewa auction, which was touted as a game changer, and now the 200 MW Bhadla Phase III solar park project. ACME won the Rewa project at Rs.3.30 (~$0.051)/kWh in February and Bhadla Phase III project in May at Rs.2.44 (~$0.037) a 26 percent drop in 3 months. ACME raised Rs.5 billion (~$73 million) last November from Piramal Enterprises and the Dutch Pension fund, APG Asset Management NV. The investment was to buyout EDF Energies Nouvelle and EREN Energies’ which each held 25 percent stake in ACME Solar.
SBG Cleantech has also won two big projects at record low tariffs in a short period of time. It won a 100 MW project in Bhadla Phase IV park at Rs.2.63 (~$0.0409)/kWh and a 300 MW project in the Bhadla Phase III park auction at Rs.2.45 (~$0.038)/kWh a 7 percent difference. SBG Cleantech is a joint venture between Softbank Group, Foxconn Technology and Bharti Enterprises.
The market is changing; we did not expect prices to fall so low even Rs.3 (~$0.046)/kWh is more, stated a source at Mahoba Solar, a Adani subsidiary. This is good for the consumers who will get cheaper power and for the utilities as their profit margin will increase, but the small developers will have to rethink their strategies. The larger players are fighting for each paisa, added the source at Mahoba Solar.
Officials at SBG Cleantech, which won bids to develop 300 MW (3*100 MW) were unavailable to comment. SBG Cleantech is the only firm to win bids in both the 250 MW and the 500 MW auction.
“Neither solar insolation nor component prices changed much in two days, but tariffs still fell 7 percent. The size of the winning project was definitely bigger but all other aspects are the same compared to the Bhadla Phase IV park. It is now down to two things: access to large pool of low cost funds and praying that module and component prices continue to go down rapidly,” said Raj Prabhu CEO and Co-founder of Mercom Capital Group.
Image Credit: “Dunayskaya Solar Park” (CC BY-NC-SA 2.0) by Activ Solar