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Solar power tariff falls to record low of Rs3.15 a unit

New Delhi: Solar power tariff discovered through auctions hit a new low on Wednesday with NTPC Ltd’s 250 mega watt (MW) project at Kadapa in south-central Andhra Pradesh getting awarded for a flat Rs3.15 per unit.

The project was awarded to the Indian arm of French clean energy firm Solairedirect SA, said an NTPC official, who asked not to be named. Solairedirect Energy India Pvt. Ltd already has 182 MW of projects in India including 97 MW in operation and 85MW under construction.

Power, coal, mines and new and renewable energy minister Piyush Goyal tweeted on Wednesday that solar tariff achieved another record low at a flat Rs3.15 a unit during the Kadapa auction by NTPC.

The previous low was Rs3.3 a unit levelised tariff recorded when the 750 MW project at Rewa in Madhya Pradesh was auctioned by Rewa Ultra Mega Power Ltd in February. Levelised tariff indicates the average fixed and variable tariff over the entire term of the power purchase agreement.

Solar power tariff has been declining on account of sharply declining prices of solar panels, better structuring of the project that reduces risk for project developers and better currency hedging deals that make financing available at competitive cost.

Also, many pension and sovereign wealth funds looking for not very high, but stable and long-term returns are willing to finance clean energy projects in India. At current rates, solar power generation cost is at par with that of thermal power generation.

That is prompting many businesses in the services and manufacturing sectors to go for captive solar power generation as they could save on the cross-subsidy component that makes power from the grid costlier.

When the first 150 MW of solar power project was tendered under the National Solar Mission (NSM) in 2010, the average tariff quoted was Rs12.16 a unit. Tariff has fallen since then almost in line with Chinese spot module prices, which have fallen by approximately 80% since 2010, according to Mercom Communications India, a clean energy intelligence provider.