India achieved a record low solar tariff of Rs 3.29 (US¢ 5.1)/kWh in the Rewa tender in February. That record was surpassed last week in an auction conducted by National Thermal Power Corporation (NTPC) for a 250 MW project in Kadappa, Andhra Pradesh, where Engie’s Solairedirect submitted the winning bid of INR 3.15 (US¢ 4.9)/kWh.
The project will be built in a solar park, developed by the state government. Ostro, Canadian Solar, Greenko, Azure Power, Adani and Mahindra were some of the unsuccessful bidders.
Overall risk profile for Rewa and Kadappa projects is somewhat similar although it can be argued that the Rewa tender is more beneficial to project developers, says market research firm Bridge to India.
"It [Rewa project] incorporates many unique provisions such as state government guarantee, deemed generation benefit and extended construction period of 18+12 months (additional reduction in module costs). It is therefore difficult to explain why Kadappa tariff has come even lower than the Rewa tariffs particularly as solar park charges are relatively higher in Kadappa," the report says.
Bridge to India explains that a logical explanation for a new low is that Kadappa was the last of the 3,000 MW solar PV projects tendered by NTPC, the best off taker in the Indian solar market.
"We had recently highlighted that pace of new utility scale solar tender announcements and project allocations has slowed down considerably to just 4.2 GW and 6 GW respectively, down 70 percent and 33 percent between FY16 and FY17. This slowdown is putting severe pressure on the 30-40 active developers in the market. The developer community is hungry for more projects to meet their internal targets and to scale up to monetize previous investments," says Vinay Rustagi, MD, Bridge to India.
Tariffs for NTPC projects have declined by about 32 percent in the last eighteen months since its first auction in Andhra Pradesh in November 2015 for the 500 MW project won by SunEdison. This sharp decline is largely due to steep fall in module costs (33 percent in the respective period) and intense competition in the sector.
"We expect the trend to continue in the upcoming 750 MW auction by Solar Energy Corporation of India (SECI) in Bhadla solar park in Rajasthan," Rustagi said.
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