Rewa – Solar Tariff touches Rs.2.97/kWh

Once upon a time, December 2011 to be precise, news headlines screamed ” historic day for solar – tariff breaks new barriers”.  5 years later, a lot of things have changed, but news headlines still scream “historic day for solar – tariff breaks new barriers”. The only difference is the tariff itself. In December 2011, the tariff broke the Rs. 8/kWh barrier, while in January 2017, solar tariff broke the Rs. 3/kWh barrier(at least from a headline perspective. The levelised tariff is Rs. 3.29/kWh since there is a Rs.0.05/kWh per annum increase). While the honours in 2011 was done by the French firm Solairedirect for a 5 MW project, the credit goes to 3 firms in 2017 – Mahindra Renewables(Rs. 2.979/kWh for 250 MW), ACME Solar Holdings(Rs. 2.970/kWh for 250 MW) and Solenergi Power (Rs. 2.974/kWh for 250 MW). (Source)

These 3 firms have won 250 MWof projects each in Rewa Solar Park in Madhya Pradesh. It may be recalled that a total of 20 companies participated in the bid, and together they had bid for 10 times the available capacity of 750 MW.

Rewa is one of the 34 sanctioned Solar parks proposed to be set up across the country. These solar parks will contribute 20 GW to the total target of 100 GW by 2022 under the National Solar Mission. (The full list of solar parks is available here).

Why the record low bids? Some points include

  1. Economies of scale which gives a very high leverage in procurement. (To give a perspective,  in the first round of bidding under JNNSM(Phase 1, Batch 1), a total of 150 MW of solar projects was allotted to 30 firms, each with a plant size of 5 MW. In comparison, in this bidding, a total of 750 MW was allotted to just 3 players, each with a plant size of 250 MW. While this has helped reduced cost, the flip side of it is that utility scale projects has long become a big boys’ club with a select few companies cornering all the projects, whereas smaller firms and entreprenuers are pushed the margins, and have to find growth opportunities in small scale rooftop projects).
  2. Drop in solar prices over the past months. With the imminent slowdown of the biggest solar market China, a glut of modules is expected, and this oversupply is likely to result in firesale/inventory clearance at a loss. (2017 could see a repeat of 2012 when there was huge module oversupply which led to the collapse of several module manufacturers). Developers are very likely to be betting on getting solar modules at extraordinarly low prices.
  3. Deemed generation compensation in case of grid unavailability(this eliminates curtailment risk being faced by renewable energy projects in states like Tamil Nadu and Rajasthan  and the associated loss of revenue) and payment security mechanism.
  4. More favourable debt financing options(longer loan tenure, reduced interest rate,etc)
  5. No land acquisition and evacuation infrastructure hassles since the entire infrastructure has been built and fully available. Land for the entire project is contiguous, thereby removing complications in site development.

More details here, here and here.

Update 1 (12 April 2017) : Tariff drops to Rs. 3.15/kWh in Kadapa Solar Park. More details here.

Update 2 (10 May 2017): Tariff reduces further to Rs. 2.62/kWh in Bhadla Solar Park. More details here.


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