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A South African company has been instrumental in bringing the price of solar power tariffs in India down. Phelan Energy Group, based in Cape Town, won the auction for the rights to build a 50 MW solar power plant in Rajasthan, bidding Rs2.62/kWh (R0.54/kWh).

Paschal PhelanThis price is lower than the average rate of power generated by the coal-fuelled projects of India’s largest power generation utility, NTPC. A total of 27 bids aggregating 3,250MW were received for the 250 MW capacity on offer, the Hindustani Times reported.

State-run Solar Energy Corp. of India (SECI), which is also running the bid process for another 500MW of solar power capacity at Bhadla, had set the reserve price at Rs3.01 a unit prior to this auction. Experts are now predicting that the tariffs may fall further.

“The result from this bid has proved that solar power is no longer simply an alternative, but is the de facto cheapest form of power available in a coal power-dominated market such as India,” PEG chairperson Paschal Phelan said in a statement.

The Indian solar market had already seen a significant decline in tariffs in 2010-11. The previous low was Rs3.15 per kWh, bid by France’s Solairedirect SA in an auction in April to set up 250MW of capacity at Kadapa in Andhra Pradesh. This low was preceded by Rs3.30 per unit quoted for a 750MW project at Rewa in Madhya Pradesh.

Indian media reports that SECI has attributed the bidders’ interest to tripartite agreements between the Reserve Bank of India, the Union government and the state governments, “providing comfort to power producers against payment defaults by state electricity boards”. India plans to generate 175GW of renewable energy by 2022. Of this, 100GW is to come from solar power projects.

8.8GW of capacity addition is projected for 2017, making India the third-biggest solar market globally in 2017. Local media has reported Phelan’s intentions to bid on further projects.

An Indian KPMG representative said that the Bhadla tariffs change the equation for every form of electricity generation in the country. However, some analysts have expressed concerns about the sustainability of such low tariffs. Consulting firm Bridge to India termed the recent low winning bids for solar power projects in India “unsustainable” and warned that “inadequate risk pricing poses a severe viability challenge for the sector”.

Image credit: http://www.solarcapital.co.za/blog/category/paschal-phelan/

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