India’s renewable energy sector has turned a corner with record low bids winning contracts for supplying wind and solar power. Developers quoted Rs3.46 per kilowatt-hour (kWh) for a 1 gigawatt (GW) wind tender by staterun Solar Energy Corp. of India (SECI) on Friday.
This comes two weeks after bids for Rs2.97 per kWh won the contracts to build a 750 (megawatt) MW solar plant at Rewa in Madhya Pradesh. This has resulted in wind and solar becoming competitive sources of energy without the help of subsidies to bring tariffs down, said PiyushGoyal, minister for power, mines, coal, new and renewable energy, in a telephone interview to Mint.
In India, the biggest greenhouse gas emitter after the US and China, renewable energy accounts for about 15%, or 45,917 MW, of the total installed capacity of 310,005 MW.
Goyal also spoke about conventional sources of electricity having an important place in India’s energy mix and the likelihood that low wind profile areas may not receive the same level of low-price bids. Edited excerpts.
Your reactions to the record low wind tariff bids of Rs3.46 per kWh?
The wind power procurement has the potential to save thousands of crores of rupees; in effect, public money, which would otherwise go to private hands. And it is estimated that consumers of India, or for that matter everywhere in the world, would have had to bear the burden of the extra cost.
Whereas, competitive prices discovered through (a) most transparent auction process has reduced the burden and that’s the effort of this government. It’s one more significant achievement towards putting an end to corruption, black market and discrimination.
And, do you realize that this is without GBI (generation-based incentive)?…So effectively, imagine the profiteering which was happening.
Were you expecting such low tariffs?
I was expecting it to go below Rs4 per unit but when the opening bid itself came at Rs4 per unit, it was felt that it will go much lower. My initial own estimates were between Rs3.50 and Rs3.55 per unit…It was an accurate assessment.
For solar bids also, my office had calculated before the bidding that what could be an estimated price and we were 3 paise off. We had calculated Rs2.94 per unit (for the first year tariff), given the current pricing structure internationally— of equipment, and the advantages that India has because of good irradiance. We had estimated that the bid will come down to Rs2.94 per unit plus 5 paise (per annum escalation in tariff for 15 years).
The wind industry is so much used to the pricey tariffs and has over the years demonstrated a higher equipment price. Possibly that could have been one of the reasons why wind was being bid at higher prices in the country.
I have been saying, from the day that I took office, to these guys, to come and bring in transparency in tariffs…My own gut feeling was, unless the prices come down, the demand may not be there for wind. And that’s exactly what happened. Let me add a word of caution there. Because there is competitive procurement, we must bear in mind that there is much better counter-party risk and the developer is allowed to set up the project at any place of his choice.
So, obviously, they will be putting it up at places of better wind potential and higher output. So, when there is a tender for low wind profile area, we may not be able to discover exactly the same price on a bid to bid basis.
What bearing will these bids have on conventional sources of electricity such as coal -fuelled projects?
I think everybody has a place with India’s growing demand. We will probably be having the world’s largest growth in global electricity consumption in two decades, and probably the only large country in the world to have this kind of growth.
It is expected that we will quadruple our consumption of electricity. In this scenario every sector will have its place.
After all, without a base load, what will wind and solar energy do?
Will these low bids impact electricity tariffs from other fuel sources?
I don’t think so. Most of the other sectors have already come in the competitive bidding fold. You can’t sell thermal power without the competitive bidding. It is already there.
Should these tariffs be seen as a statement from India on our clean energy commitments?
India has been developing its green energy resources. Our sense of the environment is an article of faith as Prime Minister Modi has said. It’s not that because somebody else told us to do it or because we signed the United Nations Framework Convention on Climate Change.
We have been working towards providing a clean environment to the people of India and we are doing it out of our own conviction.
25 Feb 2017 | mint ePaper | BY MAYANK AGGARWAL & UTPAL BHASKAR firstname.lastname@example.org
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