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Falling tariff fillip to solar power

New Delhi, March 12: With solar power tariffs expected to fall below the current average of Rs 3.30 per unit in the next fiscal, the generation capacity is expected to grow at a fast pace, as the government pushes for renewable energy sources to meet galloping demand.

Solar power generation crossed 10,000 megawatts, more than three-fold jump in less than three years.

"Bright Future: India has crossed 10,000 MW of Solar power capacity today. More than 3 times increase in less than 3 years," power, coal, mines, new & renewable energy minister Piyush Goyal tweeted.

India solar power generation capacity stood at 2.6 GW on May 26, 2014. In 2016, about 4GW of solar capacity was added, the fastest pace till date. As much as 14GW (or 14,000 mega watt; 1000 mega watt make up a giga watt) of solar projects are currently under development and about 6 GW is to be auctioned soon.

According to power ministry estimates, another 8.8 GW capacity is likely to be added in 2017, including about 1.1 GW of rooftop solar installations.

Earlier last month, lower capital expenditure and cheaper credit had pulled down solar tariff to a new low of Rs 2.97 per unit in an auction conducted for 750 MW capacity in Rewa Solar Park in Madhya Pradesh.

Analysts said solar power generation costs are set to dip further during third and fourth quarter of 2017-18, helped by expected softening of interest rates and a drop in solar panel prices due to a supply glut in the international market.

"Interest rates are expected to soften this year thus bringing down cost of generation of solar power plants. This would thus bring down generation tariffs further from the new low achieved in February," said Sabyasachi Majumdar, senior vice-president at Icra Ratings.

Solar power costs had hit a low of Rs 3.30 per unit last month, which is equal to the average generation tariffs of NTPC, which produces bulk of its power from coal.

NTPC's lowest cost of generation from one of its old plant is around Rs 1.80 per unit, but on an average solar power prices are expected to become significantly lower than thermal power as solar generation prices fall further.

Such low tariffs will help the government's solar energy drive, which is aimed at reducing dependence on thermal power and reducing greenhouse gas emissions to meet India's commitments within the United Nations Framework Convention on Climate Change (UNFCCC).

The country's demand for renewable energy is expected to grow seven times by 2035, according to the latest edition of BP Energy Outlook. This means the share of renewable energy in the country's fuel mix will increase from 2 per cent to 8 per cent by 2035.

India, world's third-largest energy consumer after the US and China, plans to achieve 175 gigawatt (GW) of renewable energy capacity by 2022 as part of its global climate change commitments. Of this, 100 GW is to come from solar.

Thermal woes

Low capacity utilisation of power plants is the prime reason for high electricity tariffs, a Parliamentary panel has said in a report.

"The committee are of definite opinion that the prime reason for higher tariff is lower PLF (plant load factor or capacity utilisation)," Parliamentary Standing Committee on Energy said in its report tabled in Parliament today.

The panel noted that the power sector seems to be trapped in vicious cycle of low PLF causing high tariff and high tariff suppressing the demand.

It observed that PLF of thermal power plants touched record low and dipped below 60 per cent during the previous year and several of those are running at 0-40 per cent of PLF. The committee said that it is not a desired scenario as it is known that under- utilisation of power plants will only lead to higher tariff rates.

It observed that despite abundance of power generation capacity in the country at present, the tariffs have not gone down, rather there is an increasing trend in this regard.


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