Solar Project Developers Request Government to Reconsider Proposal on Tariff Caps

MNRE had recently directed SECI to set the upper tariff ceiling at ₹2.50 (~$0.0344)/kWh


Raising concern over the recent proposal by the government to impose caps on solar tariffs, the Solar Projects Developers Association (SPDA) has written to the government cautioning against the move.

In a letter addressed to the Union Power Minister R.K. Singh, the SPDA raised its concern saying that the decision to cap tariffs at ₹2.50 (~$0.0344)/kWh needs to be reversed because it is likely to make solar projects unviable. Elaborating further, the letter explained that bids are determined to keep in consideration a range of issues like the changes in module prices, currency risks and varied solar radiation across states.

As reported recently by Mercom, the Ministry of New and Renewable Energy (MNRE) had issued a letter (reviewed by Mercom) directing Solar Energy Corporation of India (SECI) to set the maximum permissible solar tariff at ₹2.50 (~$0.036)/kWh without safeguard duty and ₹2.68 (~$0.038)/kWh if safeguard duty is levied.

The letter from MNRE was issued after the Minister of Power, R.K Singh, reviewed solar bids from NTPC’s 2 GW solar auction held on August 13, 2018, in which tariffs of ₹2.59-2.60(~0.037)/kWh was quoted inclusive of safeguard duty.

However, the association in its letter argued stating that the 2 GW auctioned by NTPC is going to be developed in Rajasthan, a state with one of the highest radiation levels in India and which supports economical land prices for the developers.

“Fixing the maximum permissible tariffs at ₹2.5 (~$0.036)/kWh for all future bids limits the possibilities for developing viable solar projects (ISTS connected) anywhere in India or within the demanding states as Rajasthan state will always have the advantage of higher generation over other parts of India,” the SPDA letter to the government stated.

Just recently, the lowest (L1) tariff of ₹2.44 (~$0.0338)/kWh was quoted in the recent auction held by Gujarat Urja Vikas Nigam Limited (GUVNL) for 500 MW of grid-connected solar projects.

Before this, SECI had auctioned 3 GW of Interstate Transmission System (ISTS)-connected solar photovoltaic (PV) in which ACME emerged as the lowest (L1) bidder by quoting a tariff of ₹2.44 (~$0.0355)/kWh to develop 600 MW. Solar tariffs in India have now stabilized at ₹2.44 (~$0.0355)/kWh mark with ACME emerging as the L1 bidder for the third consecutive time. Initially, ACME had quoted ₹2.44 (~$0.0355)/kWh in the 500 MW Bhadla Phase-III Solar Park Auction which was held in May 2017 and matched the tariff again in July 2018 during SECI’s 2 GW ISTS-connected solar auction. This time, ACME bagged 600 MW at the L1 tariff.

“Sector is going through enormous challenges at every aspect i.e. currency exchange rates, raising project loans, ambiguous tax structures, and vulnerable module prices.  Varied solar radiation levels between Rajasthan and Gujarat and other parts of the country is the basic and most essential factor for consideration. All these factors (are beyond the control of developers) decide the cost of generation and therefore the tariffs,” Shekhar Dutt, Director General, Solar Power Developers Association, told Mercom.

“Moreover, challenges associated with the availability of land and connectivity in other states as compared to Rajasthan can’t be ignored while deciding the maximum permissible tariffs. Therefore, SPDA has written to MNRE for reconsideration of maximum permissible tariff at ₹2.5 (~$0.0344)/unit for all future bids and requested that fixing the maximum permissioned tariffs should be done in consultation with CERC and stakeholders with detailed analysis of above factors in the present conditions and to arrive at viable tariffs for solar projects across the country, not just in a particular state,” Dutt added.

Image credit: EDF Renewables