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India Solar and Wind power tariffs fall

  Mar 10, 2017

India Solar and Wind power tariffs fall to record low

Solar and Wind power tariffs have hit new lows in India. Tariffs for solar power have hitherto ranged from Rs3.9 per kWh to Rs5.9 per kWh. Recently, this has further gone below the sub Rs3/unit mark. Wind power has also followed suit as cost has come down to Rs3.46/unit.

Reasons for cost reduction:
  • Transparent auction mechanism
  • Auction of contracts to develop the world’s largest solar power plant of 750 MW capacity in Rewa, Madhya Pradesh have pushed the solar power tariffs to a record low of Rs2.97 per kWh.
  • India has set a target of generating 60GW of wind power by 2022, up from 28,700.44 MW at the end of December. The government plans to achieve 175 GW of renewable energy capacity by 2022 as part of its commitments to the Paris climate change agreement.
  • The price gap between electricity generated from thermal, solar and wind projects has been narrowing. This is primarily due to costs of solar modules and wind turbine generators falling by 80% and 20%, respectively, over the past five years.
Hindrances for Wind Power:
  • The wind sector has been hit by inordinate delays in signing of power purchase agreements and untimely payments;
  • Distribution firms have shied away from procuring electricity generated by wind projects.
  • With the discovered tariff of Rs3.46, this auction will be disruptive for the wind industry. It will be interesting to see how banks, OEMs (original equipment manufacturers) and developers work together to commission these projects—at these tariffs, the projects will need to be delivered at a substantially lower project cost to ensure viability.
  • This tariff should not be considered as a benchmark in lower wind regime states. Overall, this is a positive development as this brings competition and transparency in the sector.