India’s Record Plunge in Solar Prices Boosts Modi’s Green Goal

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  • Three firms each win 250-megawatt solar power projects
  • World Bank contest won by Acme, Mahindra and Solenergi

The price of solar power in India fell to a record in a competitive tender in the central Madhya Pradesh state, underscoring an appetite among developers to work in the nation as growth slows in leading markets of China and Japan.

Rewa Ultra Mega Solar Power, a joint venture involving Solar Energy Corp. of India and the state government, received a levelized tariff bid of 3.30 rupees a unit (5 cents) a kilowatt-hour for 750 megawatts of capacity, an official who helped organize the auction said late Friday. That’s lower than the previous record of 4.34 rupees a unit achieved a year ago.

The result erased concerns that the downward pressure on India’s solar costs was coming mainly from foreign companies such as SunEdison Inc., the prominent developer that went bankrupt in April 2016 and didn’t bid in this contest. Once the world’s biggest renewables developer, SunEdison scooped up half a gigawatt of capacity in November 2015 auctions at 4.63 rupees a unit, which at the time was a record low.

“India marches on towards realizing the clean energy vision of Prime Minister," power minister Piyush Goyal tweeted soon after the results were announced.

Plummeting costs for solar panels along with the structure of the tender helped reduce prices. The result will help Prime Minister Narendra Modi’s government meet its pledges to install 175 gigawatts of renewable capacity by 2022 and spur discussion about whether India can rely on solar for more of its electricity.

Mahindra & Mahindra Ltd’s clean energy arm Mahindra Renewables Pvt Ltd., along with the Indian solar developer Acme Group and Mauritius-based Solenergi Power Pvt Ltd. each won contracts in the tender on Friday, with bidding running through the night, according to Manu Srivastava, principal secretary of Madhya Pradesh New & Renewable Energy Department.

“The tariff expectation from the upcoming wind auctions will likely be closer to 4 rupees A unit, and it could also trigger a debate on the long-term energy mix planned for the country," said Shantanu Jaiswal, an analyst in New Delhi for Bloomberg New Energy Finance.

The two-day long bidding in the Madhya Pradesh tender witnessed a pitched battle between 18 companies, of which seven were foreign firms. 

The tender included a security fund being designed to protect investors if state power retailers, who are supposed to buy two-thirds of the clean power generated, default on payments. The World Bank extended a 2 billion-rupee loan toward building the infrastructure around the solar park, and the International Finance Corp. helped attract investments to the project.

“This tender is very unique as it offers strong risk mitigation by way of state government guarantee for payment and evacuation risks, two biggest challenges for the sector,” Vinay Rustagi, managing director of the research firm Bridge to India, said by e-mail.