Year Tariff of Rs.2.97/kWh - One of the Lowest in the World
In the recently concluded 750 MW Rewa Solar Park auction in
Madhya Pradesh, bids reached a new record low of Rs.3.30 (~$0.494)/kWh (levelized
tariff over 25 years) over a rupee lower than the previous low tariff of Rs.4.34
(~$0.065)/kWh, which was recorded in the state of Rajasthan in January 2016.
The winning bid for first year tariff hit a new low of Rs.2.97 (~$0.0444)/kWh
and will escalate by Rs.0.05 (~$0.0007) over 15 years, bringing the levelized
tariff to Rs.3.30 (~$0.494)/kWh over 25 years.
In an extremely competitive auction, bids submitted were 10x
the tendered volume at 7,500 MW for a tendered capacity of 750 MW. Last year
the state government of Madhya Pradesh approved extending a payment guarantee
for the Rewa Solar Park. The guarantee will ensure against any payment default
to projects inside the solar park, stated an MPUVNL official. The official also
added that the solar park is a joint venture of Solar Energy Corporation of
India (SECI) and Madhya Pradesh Urja Vikas Nigan (MPUVNL). The payment
guarantee and deemed generation benefit were contributing factors in attracting
these low bids. The implementing agency (MPUVNL) did not put an upper limit
capacity for bidders - any bidder was able to bid for the entire capacity (750
ACME Solar won with the lowest bid to develop a 250 MW
project (Unit-2) quoting a tariff of Rs.2.970 (~$0.0444)/kWh for the first year
and a levelized tariff over 25 years of Rs.3.30 (~$0.0494)/kWh, followed by
Solenergi which won a 250 MW project (Unit-3) quoting a first year tariff of
Rs.2.974 (~$0.0444)/kWh at a levelized tariff of Rs.3.304 (~$0.0495)/kWh. Mahindra
Renewables was the other winner for a 250 MW project (Unit-1) with a first year
tariff of Rs.2.979 (~$0.0445)/kWh and a 25 year levelized tariff of Rs.3.309
“ACME is really proud to participate in the Indian
government’s continued effort to make renewable energy more bankable and
attractive for both financial investors and Indian utilities. Given the strong framework and infrastructure
readiness for this project, thus eliminating construction risk and counterparty
risk for lenders, there is already interest from the lender community,” commented
Mr. Manoj Kumar Upadhyay, Founder & Chairman, ACME Group.
“The REWA project is an excellent example of a win-win which
can be achieved by proactive measures from the government and increased awareness
of investor and lender requirements. Excellent work was done by project
advisors and government in devising notable features like sovereign guarantee,
running a very structured process, top rated off-taker “take or pay” and state
of readiness of the solar park. That coupled with our great experience with the
MP government and utility because of our existing plant in the state (25 MW)
gives us tremendous confidence to expand our 1.5 GW portfolio with this asset
win. We are sure this will be a great addition to our portfolio and we look
forward to execute,” continued Kumar.
Sembcorp Green Infra, SBG Cleantech, Hero Future Energies,
Enel Green Power, Solairedirect, ReNew Power, Azure Power, Adani, Aditya Birla, and Canadian
Solar were some of the other developers who participated in the auction.
record low bids largely because of our progress made on the solar park
infrastructure, unlike other solar parks where projects were tendered during initial
stages of park development. We in Madhya Pradesh waited to create conducive
infrastructure, and the results are here for everyone to see,” said an official at MPUVNL.
Another official at MPUVNL believes that this low tariff is
feasible. “The low tariff is not a
surprise as these projects are viable for developers at these costs. If you
factor that all of these projects are in the same location, developers have eliminated
a lot of extra work [costs] compared to, for example, a situation where the same
capacity is divided into 15 projects that would have included expenses like
temporary transmission and infrastructure costs related to each project. This
is not the case here,” stated
another official at MPUVNL.
The construction of a transmission substation within the
solar park has also led to heightened interest among developers said a
government official. This substation will take care of all evacuation from the
park. Inefficient evacuation infrastructure was one of the major problems faced
by developers in other solar parks, according to the recent Mercom Quarterly India Market Report.
this is the lowest tariff ever recorded in India, this auction has several
special attributes which makes it hard to directly compare with previous low
bids. The size and location of the projects, payment guarantees, deemed
generation benefit, longer construction timeline, the recent solar module price
crash, and yearly tariff escalation for 15 years - all make the low bids
unique,” said Raj Prabhu CEO of
Mercom Capital Group. “The
fear is that media, government officials and analysts will hype up the low bids
and other states will then start pressuring developers to match bids from the
Rewa auction tariffs, which has happened in the past. A positive takeaway from
this auction is it demonstrates that if you remove some of the developer risks
by offering payment guarantees and deemed generation benefits in a park with a
solid infrastructure, tariffs have room to come down. However - mostly thanks
to Chinese module prices declining by about 30 percent over the last year - without
which any bids to build projects below Rs.4.0/kWh would have been almost impossible,” he further commented.
Even though direct tariff comparison between countries is
challenging due to many variables, the new low tariff of Rs.3.30 (~$0.0494)/kWh, a record
low for India, is still not the lowest tariff in the world (see chart below).
IFC, a member of the World Bank Group, is extending
its global expertise to structure and implement the transaction to help attract
private investments of about $750 million (~Rs.50.2 billion) for the
development of the 750 MW Rewa Solar Park.
Article updated February 12, 2017 to include quote from ACME executive.