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India’s Ultra-Mega Solar Plant to Sell Record-Low Power

India plans to sell power at a record-low rate from a 4-gigawatt solar photovoltaic farm that will more than double the nation’s sun-powered capacity.

Six state-owned companies, including Bharat Heavy Electricals Ltd. (BHEL) and Power Grid Corp. (PWGR) of India Ltd., will form a joint venture to build the first gigawatt by the end of 2016 and sell their output at a maximum 5,500 rupees ($89) per megawatt-hour, Tarun Kapoor, joint secretary at the Ministry of New and Renewable Energy, said in an interview.

The price is 10 rupees cheaper than the lowest solar power bid in India and about 32 percent below the global average, data compiled by Bloomberg show. The venture will receive a government grant, Kapoor said in New Delhi, without elaborating.

India, which suffers from peak-hour power shortages of as much as 25 percent in some states, seeks to boost generation and drive down the cost of electricity by building 100 gigawatts of ultra-mega coal-fired plants. The solar plant will be the nation’s first ultra-mega, clean-energy generator as policy makers try to diversify India’s power mix and reduce a current-account deficit exacerbated by fuel imports.

The rate at which the joint venture will sell power compares with 4,500 rupees per megawatt-hour charged by new coal power plants, according to Bridge to India, a New Delhi-based solar advisory.

Bharat Heavy will own 26 percent, while Rajasthan Electronics & Instruments Ltd.’s holding will be 3 percent, Kapoor said. The venture will seek bids for a contractor to design and build the plant, he said. Hindustan Salts Ltd., another investor, will provide 18,000 acres (7,284 hectares) of land near Sambhar Lake in Rajasthan state.

India plans to complete the farm by 2020. The remaining 3 gigawatts of capacity may be awarded through auctions to private companies, Kapoor said.

India had 1.8 gigawatts of solar capacity as of July 31, according to the Ministry of New and Renewable Energy. The biggest photovoltaic project is a 150-megawatt plant in Maharashtra state, according to Bloomberg New Energy Finance.

To contact the reporters on this story: Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net; Archana Chaudhary in New Delhi at achaudhary2@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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