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Solar tariffs: Foreign firms emerge lowest bidders

LiveMint logoLiveMint 10-05-2017 Utpal Bhaskar

New Delhi: One of the winning bidders for Bhadla solar power park in Rajasthan is South Africa’s Phelan Energy Group.

The Rs2.62 per kilowatt-hour (kWh) bid by the Cape Town-headquartered firm is representative of a trend in India’s solar energy space wherein overseas firms have led the race to the bottom for tariffs to secure contracts.

Also SBG Cleantech, a joint venture between Japan’s SoftBank Group Corp., India’s Bharti Enterprises Ltd and Taiwan-based Foxconn Technology Group placed a winning bid of Rs2.63 per kWh for the Bhadla solar park.

A similar script was followed for the low bids at Rewa project in Madhya Pradesh and NTPC’s Kadapa plant in Andhra Pradesh.

While private equity fund Actis LLP’s green energy platform in India, Solenergi Power Pvt. Ltd, was among the winning bidders for the Madhya Pradesh project by quoting a tariff of Rs3.30 per kWh in February; France’s Solairedirect SA won the rights to set up a 250MW solar plant at Kadapa in Andhra Pradesh, and sell power to state-run NTPC Ltd at the previously recorded low tariff of Rs3.15 per kWh last month.

Experts believe that lower cost of foreign capital and the size of the Indian solar power generation market has helped script India’s solar story.

Anish De, partner, infrastructure and government practice, at consulting firm KPMG in India, said that both foreign firms and foreign capital has played an important role in India’s solar space.

“Their investment philosophy is very different. They are looking at the size of the Indian market and the opportunity it offers,” De said.

India has witnessed record low solar and wind tariffs due to falling equipment prices and the lower cost of raising finances. This, in turn, has put the focus on so-called patient capital, which seeks modest yields over time.

The other overseas firms active in the Indian solar energy space are France’s Engie, Italy’s Enel, Canadian Solar and Singapore’s Sembcorp.

These firms aim to take advantage of the country’s growing green economy which, in turn, is fuelled by the government’s ambitious clean energy goals. India plans to generate 175 gigawatts (GW) of renewable energy by 2022. Of this, 100GW is to come from solar power projects.

Of the total 100,000MW solar power capacity planned, 20,000MW will come from solar parks and 40,000MW each from rooftop and distributed generation projects. The government plans to set up 25 such solar parks. India has around 300 days of sunshine per year.

With 8.8GW of capacity addition projected for the year ahead, India is set to become the third-biggest solar market globally in 2017, overtaking Japan, according to the India Solar Handbook 2017 released by Bridge to India on Monday.

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