Boom time for India’s renewable energy sector
The world’s third-largest greenhouse gas emitter has seen the cost of producing alternate energy resources tumble to levels where they can compete with coal-fired plants
The Modi government has been somewhat on the back foot defending demonetisation. Amid the din of Twitter and a TV war of words, significant achievements that could be at the forefront of discourse of the establishment, have been lost. One such arena where India is making rapid progress, courtesy the commitment of Modi, has been renewable energy.
The cost of producing alternate energy resources in India has tumbled to levels that they can effectively compete with conventional power generated by polluting coal-fired plants, the main source of electricity in the country. What is more, tariffs are quoting the new low rates without government subsidies and more fiscal support of consequence, which means that clean energy in India has come of age, become a sustainable business model.
A portion of the credit needs to be assigned to the Modi government that has played a stellar role in ensuring flow of investments into renewable power, while also building a fairly transparent paradigm for companies to function. India, the world’s third-largest greenhouse gas emitter, has set a target of raising its renewable energy generation to 175 giga watts by 2022, around five times current levels. With more than 200 million people in India still without access to electricity, alternate non-grid sources of power can play a critical role in plugging the supply gaps.
The costs tumble
In what is being seen as an extraordinary step forward to achieve the aims set, solar tariffs in India have broken the 3 rupees (4 US cents) per unit barrier for the first time, quoting below the price at which electricity is supplied by state-owned NTPC, the country’s biggest coal generator. The sub 3 rupees rates were offered recently by three renewable developers who won the open bids to develop what could possibly be the world’s largest solar power plant of 750 mega watts at Rewa, Madhya Pradesh.
Mahindra Renewables, Acme Solar Holdings and Sweden’s Solenergi Power bid under 3 rupees per unit to win contracts to build 250MW plants each at Rewa. Piyush Goyal, India’s minister for power, coal, new and renewable energy, said in a tweet that the first-year solar tariff bid of 2.97 rupees per unit was a record low. “This is going to be the first time tariff of electricity based out of solar power plants is going to be at sub 3 [rupees] level,” said Manoj Upadhyay, chairman of Acme Group.
The low tariffs indicate bidders have accounted for major advantages in cost of finance and price of equipment, the bulk of which are imported from China. The last discovered lowest tariff through open reverse bidding for a utility or large scale solar project in India was 4.34 rupees per unit in Rajasthan.
Manu Srivastava, managing director of Madhya Pradesh Urja Vikas Nigam, that formed a joint venture with state-owned Solar Energy Corp of India (SECI) to set up the Rewa Ultra Mega Solar project, said the low rates have been achieved without viability gap funding or subsidies, making solar a competitive energy resource to take on coal-fired thermal power. “The cost of panels has come down. The last lowest solar tariff was 4.34 rupees per unit – 70% of that price was for solar panels. That makes it almost 3 rupees. Now, that has gone down by 26%,” said Srivastava, adding that efforts have also been made to keep cost of capital low. “We are the only solar power project in the country that has taken a World Bank loan as it was crucial for us to keep our cost low,” the official said.
And, mirroring the success of solar, last week, wind tariffs also tumbled to their lowest levels in India – under 3.5 rupees per unit. In an auction conducted by SECI for wind projects totalling one GW, five companies independently quoted a tariff of 3.46 rupees per unit.
Reuters has reported that Mytrah Energy, an arm of UK-based Mytrah Group, Ostro Kutch Wind, promoted by British PE firm Actis, Green Infra Wind Energy, owned by Singapore-based Sembcorp Industries and Indian entity Inox Wind have won projects for 250MW each. Economic Times has said that Adani Green Energy, part of billionaire Gautam Adani’s infrastructure group, is likely to be awarded another 250MW taking the total auction beyond the initial one GW.
“After solar cost reduction below 3 rupees per unit, wind power cost down to 3.46 rupees per unit through transparent auction,” Goyal said in a tweet. In another comment, the minister said, “These are exciting times, cleaner times. Our intention is to provide affordable 24/7 power, yet protect the environment and leave behind a brighter and cleaner future for the next generation.”
Indeed, the Modi government is missing a trick by not highlighting renewables as a noteworthy accomplishment, whether for electoral gains, or as a key success of its policies.
Siddharth Srivastava is a Gurgaon-based journalist. He can be reached at email@example.com