Low Solar prices in Rajasthan

When low solar prices were bid in Madhya Pradesh (central India) last year, everyone was taken by surprise that a developer could afford to bid as low as INR 5/kWh (around 7 cents) . Everyone thought that this was a flash in the pan and would be just be seen once. However, INR 5/kWh has become a standard price for solar in recent reverse auctions in India and is no longer considered a low price. Rajasthan in a recent tender saw a price of INR 4.34/kWh, which is the same price that was achieved by Finnish developer Fortum in a solar park JNNSM tender some time back. This 6 cents/kWh price had been considered to be irrationally low and expected to lead to bad returns for the project developer. But a new NTPC tender has seen three of India’s biggest and most reputed solar developers and investors putting the same price of INR 4.35-4.36/kWh in Rajasthan. These prices are also not for solar park land but for independent land parcels that the developer will have to acquire on their own. This is also a major reason why the foreign developers were not seen to be too aggressive in their bids. Indian developers generally win where the uncertainty and land acquisition is left to the developers themselves.

Read more about the low solar price trend in India.

Rajasthan has huge tracts of land at cheap prices and also gets a lot of radiation which makes it ideal for solar project development.  I think that 6 cents/kWh has become the new standard price at least in Rajasthan for solar development. Given that thermal power is now being sold in the open market from new plants at around INR 4.5-5/kWh, this marks a new competitive paradigm for the Indian power market where solar power starts competing not only with wind but also with coal power. Given that a solar project comes up in 12 months and does not face environmental and pollution issues, solar energy has become the dominant source in the Indian energy sector. While thermal power plants will still be needed for balancing and peaking purposes, it will become extremely hard for thermal power going forward as solar prices continue to decline with improving technology.

It is quite probably that most of the new power development from 2019-2020 onwards will be solar power only given the huge advantages that solar possesses now over other forms of generation.

Of the 130 MW on offer, 50 MW was won by Shapoorji Pallonji Infrastructure Capital and 60 MW by Mahindra Susten, both offering to sell electricity produced from their projects at an identical Rs 4.35 per kwH. The remaining 20 MW was won by Prayatna Developers of the Adani Group at Rs 4.36 per kWh.

Source – ET