Why is Bihar signing a Solar PPA at Rs 12.50/KwH using CPV technology when Orissa is buying Solar power at Rs 7/KwH using Crystalline Silicon Solar Panels

There are news reports that the state of Bihar is signing a PPA with a US based investor Schanti Partners for building a 10 MW solar power plant at a rate of Rs 12.5/kwh. The company has received a no objection certificate from BREDA and is set to enter a 25 year PPA at Rs 12.5/ unit. This deal does not make sense as solar power plants are being built at Rs 7-8/kwh. During solar auctions being conducted by other states like Orissa, solar developers had come up with electricity rates which were at least 30% cheaper than what Bihar is set to sign with the US based investor.

Solar Electricity Price of 14c / KwH (unit) seen in Indian State Orissa Auction, Reaches Retail Electricity Price

The falling prices of solar panels has made, the almost impossible thought of solar electricity prices possible today. In a state auction of solar projects, a small company Alex Green Energy bid only 14c/ KwH to win the auction. The price is lower than that seen in the Indian federal subsidy auction JNNSM. Note Rs 7/ Kwh, that was bid is close to the Rs 6-7/ Kwh retail electricity prices in most cities in India. Note in the first phase of auction the lowest price was more than 50% higher at Rs 10/ kwh.

With Solar Panel prices expected to further decline in 2012, the prices of solar electricity are going to fall more which would make it more attractive for home owners in India. The Government of India which has so far concentrated on giving subsidies to large solar power farms is too thinking of giving subsidies for solar rooftops for small home owners. This would massively turbo charge the solar growth and allow to reach its growth potential. Orissa is thinking of giving a further 50 MW in solar auctions over the next several months. Note a number of India states have been giving individual solar subsidies with Gujarat leading with 1000 MW of projects awarded Feed in Tariffs.

Note it would be better for Bihar to do a competitive bidding in order to get the best rates for its citizens. Solar Technology is already quite widely available and cheap solar panels are being supplied by a number of top global companies. In fact the prices of solar panels have fallen around 5-10% in the last month which makes this deal even more dubious. The solar equipment being bought is being sourced from SolFocus which uses CPV technology. Note CPV technology like other solar technologies is losing out to the mainstream crystalline silicon technology where prices have fallen by more than 60% in the last year. It remains a big question whether SolFocus will be able to survive the current brutal solar industrial consolidation.

CPV companies in trouble

Crystalline Silicon PV Solar Technology is beating other rivals in the solar race hands down, with other technologies like thin film solar, solar thermal and concentrated PV facing survival questions. Tons of companies with their business models based on alternative solar technologies have already shut down with even the biggest thin film solar company, First Solar in severe problems. Already a number of leading solar thermal companies like Solar Millenium have gone out of business.

CPV technology uses mirrors to concentrate solar energy onto high efficiency solar cells made  of different materials. Now the concentrated PV solar technology companies are starting to feel the heat as well with one of the biggest companies Amonix closing down its factory and firing all its workers. Amonix was the leading designer and manufacturer of concentrated photovoltaic (CPV) commercial solar power systems. Originally developed for space-based applications, Amonix III-V multijunction cells use three different photovoltaic materials in a single cell, they extract more energy from the range of wavelengths in sunlight. Under concentration, this can exceed 39% in volume production (over 41% in world-record demonstrations).

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A US-based agency, Schanti Partners, New York, has expressed its keen interest in investing Rs 580 crore for a solar energy project in Kaimur district of Bihar. Initially, a 10MW unit would be set up. The agency has already submitted its proposal to the Bihar State Electricity Board (BSEB) and received approval from the Bihar State Investment Promotion Board as also no-objection letter from Bihar Renewable Energy Development Agency (BREDA).

The agency intends to enter into a 25-year Power Purchase Agreement (PPA) with BSEB. The proposed PPA rate is Rs 12.50/kWh.