Renewable energy firm SunEdison has won 500MW of solar capacity in the National Solar Mission (NSM) auction of the Indian state of Andhra Pradesh, quoting a record low tariff of INR 4.63/kWh (US$0.071).
As the online reverse bidding process for the second round of the auction progressed through the night, PV Tech reported yesterday that the tariffs were signalling a paradigm shift for the entire Indian power sector as they dropped below INR4.80/kWh, which is at grid parity with wind power and even new greenfield coal-fired power generation, which tends to have tariffs between 4.5 and 5 rupees per unit.
Secretary of the Ministry of New and Renewable Energy (MNRE) Upendra Tripathy told Reuters today that SunEdison had won the entire capacity of the auction.
Jasmeet Khurana, associate director, consulting, at analyst firm Bridge to India, told PV Tech that the bidding process took place from 2:30pm yesterday until well past midnight. At the close, another developer Yarrow Infrastructure had also quoted INR 4.63/kWh, however, SunEdison had submitted its bid first and is expected to be invited to sign a power purchase agreement.
Japanese firm Softbank, much-touted for its announcement of investing US$20 billion in India’s renewables market, is thought to have stayed in the second round until the bids dropped to INR 4.80/kWh.
Khurana said that while 28 companies were involved in the bidding process, in total nine companies submitted bids that were below the INR 5/kWh mark, including Enel Green, Reliance, Renew, Solar Arise, Acme Solar and Orange Renewable Power.
The previous lowest solar tariff in India was awarded to PV developer SkyPower at INR 5.05/kWh in the state auction of Madhya Pradesh.
Khurana noted several other major developers who were unsuccessful in their bidding yesterday, including SkyPower, Azure, Fortum, Welspun, Trina Solar and First Solar.
Once again Khurana said the industry will debate for several weeks how sustainable SunEdison’s “very aggressive” tariff is.
He added: “The assumptions for cost of equipment, cost and other terms of finance, return expectations and presumed future benefits through securitization of assets and/or perceived premium in valuations in case of an exit are all being considered at levels that are more aggressive than what we would generally assume."
The tariffs dropping below the five rupee mark yesterday sparked an online debate about whether PV projects are workable at such low prices, with even Jigar Shah, the well-known clean energy entrepreneur and co-founder of SunEdison, who leads specialist finance company Generate Capital, commenting on Twitter that it is “time to scrap auctions”.
Shah also told PV Tech: “Returns today are simply not high enough for investors.”
However, Khurana said: “Despite all the doubts surrounding the sustainability of these tariffs, the writing on the wall is that utility-scale solar PV is establishing itself as a mainstream source of power and is expected to play an increasingly important role in the country’s future power generation mix.”
The auction marks the first central government led allocation under India’s NSM since prime minister Modi took office. The next auctions for capacity within solar parks under the NSM will take place in Rajasthan and Karnataka.