By finalising a bid price of ₹3.29 per kwH over 25 years (and ₹2.97 a kwH in the first year), the 750-MW Rewa ultra mega solar power project marks a watershed in India’s solar power programme. It is the first project to breach the ₹4-kwH barrier (the lowest tariff prior to this was ₹4.34/kwH), thanks essentially to panel costs, which account for 40 per cent of the fixed costs, falling by 25-30 per cent worldwide in 2016. The winning bidders for three units at the park, Mahindra Renewables, ACME Solar Holdings and Solengeri Power, prevailed over 18 others, affirming that solar power is a truly happening sector. What makes this bid unique is the enabling role played by the Madhya Pradesh government. It not only provided guarantees for grid availability and payment of dues but also time to bidders to familiarise themselves with the site, and enough time —18 months against the usual 12 months — to set up their projects. While the bids essentially involve a bet on global trends in panel prices, there is little reason to believe that these technology-led advances will be reversed in the foreseeable future. India’s solar installations have grown remarkably in the last two years, with more than half of its 10-GW installed capacity having come up since April 2015. This trend promises to continue, with 10 GW expected to come up in 2017-18 alone. Even if India reaches only 70 per cent of the targeted 100-GW solar by 2022, it will be a game-changer. Solar power accounts for just 2.5 per cent of total installed capacity in power at present, but this may look very different five years from now.
At ₹3/kwh, solar poses a threat not just to wind, whose tariffs are in the range of ₹4/kwH but even coal, whose price outlook over the next two decades cannot be easily predicted. The Government must revisit the viability of future investments in both wind and thermal power; uncertainties over coal prices, as well as the financial health of discoms, more generally speaking, pose risks.
However, the solar story has some grey areas. The impact of GST on project costs is not known, unless these are placed in the zero-per cent bracket. It is unclear whether the bids and contracts have taken this into account. Land could account for a major share of costs, unless rooftop solar (which accounts for just 1-GW capacity) gathers momentum. Tamil Nadu, Rajasthan, Gujarat and Andhra Pradesh account for 60 per cent of solar installations as land is quite easily available in these States. The discoms should facilitate open access to large consumers, as stipulated under the Electricity Act, so that society benefits from the falling trend in power prices. But finally, India has most to gain from decentralised rooftop solar and medium-scale plants to meet rural demands. This can resolve last-mile electricity access issues and usher in numerous socio-economic benefits.