The solar power market in India is heating up rapidly, with a number of record-setting auctions being planned under the country’s National Solar Mission.
The Indian government is planning to launch a 3 GW solar power projects auction through the subsidiary of the country’s largest power producer, NTPC Limited. The global tender is expected to be floated this year, either all at once or in batches.
NTPC Vidyut Vyaar Nigam (NVVN) will be authorized to float tender and complete the selection process. NVVN will also buy the electricity generated by the solar power projects through 25-year power purchase agreements. NVVN is NTPC’s subsidiary that takes care of any surplus electricity generated from the latter’s thermal power plants by selling it on the open market. NVVN will bundle the solar and surplus thermal power together in a ratio of 2:1. This bundled electricity will then be sold to utilities across the country.
The price of the bundled power (2 units of solar power and 1 of thermal power) will be sold at a price lower than the price of 3 units of solar power. The price of bundled power is expected to be significantly lower than the tariff enjoyed by currently operational solar power projects. This would not only be because of the continued fall in raw materials and equipment costs, but also because of the structure of the auction.
For the first time in India, a solar power projects auction will take place in dollars instead of rupee. The government will build a separate corpus to hedge against fluctuation in the value of the dollar in the long-term. Through a dollar-based auction the government hopes to reduce the tariff considerably, hopefully in-line with the recent record low bids of around ¢8 per kWh.
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