India’s leading solar state, Gujarat, to consider tariff cuts

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Home to half of India’s solar capacity, the State of Gujarat is considering cutting tariffs after the state-run electricity board, Gujarat Urja Vikas Nigam (GUVN), submitted a petition to the Gujarat Electricity Regulatory Commisson (GERC) claiming solar power plant developers are reaping unfair gains. 

A hearing will be held on the 23 July to see if regulators GERC will act on the GUVN petition against 88 PV plant contracts, with a combined capacity of 971.5MW or 1550 million kWh of electricity annually.

The developers of the 88 plants, which include big names including Welspun Energy, Tata Power, Adani and Moser Baer India, have been under power purchase agreement contracts with the Gujarat state government since 2010,

The fixed tariffs decided by the Gujarat Solar Power Policy in 2009, of INR15 per kWh for the first 12 years, and INR5 per kWh for the next 13 years, could be cut as proposed by the petition to INR9 per kWh.

Madhavan Nampoothiri, founder and director of RESolve Energy Consultants said tariffs in Gujarat are “definitely among the highest in the country” and “naturally the returns from projects in Gujarat were better than projects elsewhere.” but would not call the higher profits “staggering”. 

Nampoothiri also said the proposed tariff revision “will definitely affect the investor sentiment” in India, saying “banks and lenders are concerned about such regulatory or policy risks in other states also now.” But is hopeful the government will find a solution after “actively promoting the state as ideal for investors”. 

The Western State of Gujarat is well known for its canal top solar projects, and for having India’s largest installed solar capacity. Gujarat was the first state to set up a Department of Climate change in India – and it aimed to be the “solar capital of the world” in 2012 according to a Gujarat Energy Department Agency (GEDA) report in 2012.

Gujarat’s target under the Solar Policy was for just 500MW of solar energy from solar plants, but 971.5MW were eventually contracted.

The petition arises just as the Gujarat Coastal Zone Management (GCZM) gave clearance for a 50MW tidal power project near Mandvi in Kutch, and Gujarat also announced approval for the 600MW Mithivirdi nuclear power plant. The plant is being contested by locals, environmentalists and NGOs.

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