Yesterday, ET reported that the Solar Energy Corporation of India (SECI) has postponed their 1200MW solar tender for the third time due to the lack of interest from developers. The new audition is slated for September 16.
In an effort to generate developer interest, SECI has increased the ceiling tariff from Rs 2.65 to Rs 2.68.
However, Firstpost reported yesterday, too, that India had achieved its 2022 target of installing 20GW of solar power four years ahead of schedule. The target was reportedly met in January last year, according to the Adviser and Head of Climate Change Programme of the Department of Science and Technology, Dr Akhilesh Gupta. The government is now aiming for 100GW of solar energy by 2022.
Disregarding why this came up more than a year after the fact, we wondered why solar energy production in India should be so dependent on large corporate developers.
The trouble with tariffs
Solar tariffs have taken a steep plunge over the last 3 years. This 2016 Down To Earth article gives Rs 4.34 per unit of electricity (a bid by Fortum Finnsurya Energy) as “the lowest ever for electricity from solar in India”. Fast forward to 2018, where the lowest tariff quoted for a solar power project was Rs 2.44/kWh (quoted by Aveda Power, ACME Solar, and Aditya Birla Renewables).
India is the world’s cheapest producer of solar power. The reverse bidding auction process leverages competition to drive down prices, and the Indian solar sector reaped the benefits of this until last year. Now, in 2019, developers are expressing dissatisfaction over the government’s refusal to abolish ceiling tariffs for solar energy auctions bids.
To succeed in the Indian solar market, companies need to play the long game. For the first time in India’s history, solar made up over 50 per cent of new power capacity in 2018. We will continue to see a steady shift toward solar as prices continue to drop. This is going to be the new normal as coal plants continue to shutter.Raj Prabhu, CEO and co-founder, Mercom Capital Group
A ‘steady shift towards solar’ is only possible if developers are willing to take up the projects; in the current market scenario, this doesn’t seem to be the case.
To make sure that everyone, regardless of income block or tax bracket, has access to energy, it would be far more efficient and effective to focus on setting up small-scale, decentralised power-producing units. Perhaps even community-managed. Of course, this would be a death-blow to corporate developers, but with 65.9% of our population in rural areas, it’s highly unlikely that the community would be able to afford the services of an Aveda or an Aditya Birla.
With government aid (through a government portal created for the purpose), they might be able to. But the developers (and the government) would have to be ready to accept significantly low tariffs for the project. Which, given the relatively lower projected output, would be par for course.