Solar Power Costs Drop to Record Low in Rajasthan Auction in India

The price paid for solar power in India touched a record low of 4.34 rupees (or 6 cents) a kWh in the latest auctions held in the state of Rajasthan, where a total of 420 MW of capacity was awarded, a government official said.

“E-auction has yielded tariffs at 4.34 rupees a kWh, 4.35 rupees a kWh and 4.36 rupees a kWh,” B.K. Dosi, managing director of Rajasthan Renewable Energy Corp., said by phone. “Solar rates now seem to have reached grid parity.”

The lowest bid for solar projects before this was quoted at 4.63 rupees a kWh, by U.S. firm SunEdison Inc. and Japan’s SoftBank Group Corp. in November 2015 and December 2015 respectively, for auctions held in the southern state of Andhra Pradesh.

Foreign companies again emerged as the most successful bidders in the auctions for solar capacities in the Bhadla solar park in Rajasthan.

Out of the four firms that have bagged 420 MW solar capacity on offer, Fortum Finnsurya Energy Pvt Ltd., a subsidiary of Finnish utility Fortum OYJ, took 70 MW at 4.34 rupees a kWh.

Two companies – Rising Sun Energy Pvt Ltd. and Solairedirect Energy India Pvt Ltd., a subsidiary of the Paris-based Solairedirect Group – won 140 MW each at 4.35 rupees a kWh.

Yarrow Infrastructure Ltd. took the remaining 70 MW of capacity at a tariff of 4.36 rupees a kWh.

According to Dosi, higher solar radiation and lower cost of the park compared with Ghani in Andhra Pradesh are the reasons for the record low tariffs.

“It is cheaper by almost 1 million to 1.5 million rupees to set up a solar megawatt here as compared to Ghani solar park in Andhra Pradesh,” Dosi said.

The aggressive levels bid in the solar auctions are relieving concerns that the projects might not be built, according to Bridge to India, an industry research group.

“Rajasthan and Andhra solar projects have the best profile in the Indian solar market, so developers may be willing to accept low returns,” said Vinay Rustagi, managing director at Bridge to India. “The high quality of firms that these auctions have attracted mitigate all concerns about project conversion.”

The state of Rajasthan has the highest solar installations at 1,264 MW of the total 5,130 MW capacity installed in the country.

©2016 Bloomberg News

Lead image: Solar power plant. Credit: Shutterstock.

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