Since “states are not very keen on purchasing” solar power even at the lowest price discovered of Rs 2.44 per unit (wind tariff are higher at Rs 2.76 per unit under latest auction), the country’s installed renewable energy capacity might get stranded, Union power minister RK Singh has warned. In a recent letter to finance minister Arun Jaitley, Singh wrote: “If any discom purchases renewable energy at Rs 2.44 per unit, then along with the fixed cost (which they will have to pay thermal stations under PPAs, whether or not electricity is lifted), the total cost per unit would come to Rs 4.04, which is higher than the average price (Rs 3.25/unit) which pay for thermal power.”

He added: “And renewable energy is intermittent… In such a situation, the achievement of renewable energy capacity of approximately 88,000 MW (71,300 MW established and 17,500 MW under construction) could only happen after constantly pursuing the states, but the states flatly refused (sic) to sign PPAs for renewable energy if the rates are any higher.”

The power minister also pointed out that the state-run Solar Energy Corporation of India (SECI), the intermediary for renewable energy projects, will have to shell out Rs 40 lakh/year each for every MW of renewable capacity sans PPAs over 25 years. Stating that “this is not a situation that SECI can afford”, Singh said, “Therefore, there is absolutely no question of SECI getting into a situation, where it accepts a bid and then cannot get the PPA signed by the states for the power at that rate.”

Meanwhile, reflecting the government’s continued focus on the sector, Prime Minister Narendra Modi will inaugurate three major renewable energy events here on October 2 — first assembly of International Solar Alliance, second Indian Ocean Rim Association’s Ministerial Meeting on renewable energy and the second edition of RE-INVEST 2018.

The states already have power purchase agreements (PPAs) with different thermal generating units for meeting their power requirements. The payment of thermal power is made by a two-part tariff structure — the fixed-cost per unit (average is about Rs 1.60/unit) and the variable-cost (approximately Rs 1.65/unit) —and the average unit cost of thermal power to be about Rs 3.25/unit.

About 4 gigawatts of recent solar bids have been scrapped due to high prices discovered, including a 1 gigawatt by Uttar Pradesh and a 500 megawatt by Gujarat. The problems could be exacerbated with the imposition of 25% safeguard duty on import of solar cells/modules, which is seen to make solar power more unattractive to states due to potential rise in prices. The ministry of new and renewable energy has clarified that rise in costs on account of the duty would be passed on in solar tariffs.

India has an ambitious target to increase its solar capacity to 100 gigawatt by 2022 from 23 gigawatt at present.

Source: Financial Express