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Home » Solar market » Solar off grid tariff in India
Solar off grid tariff in India
With my this understanding, I wish to inform you that CERC approved tariff, for projects going to be commissioned in 2013-24, is @ Rs 8.75 per unit for normal depreciation and @ Rs 7.87 per unit for accelerated depreciation. In spite of this, the developers are bidding @ Rs 6.5-7.5 per unit in RfPs of various SNAs.
The issue of 20-30% reduction in tariff bid (as against CERC FIT) can only be addressed when the developers are bringing debt at lower interest rates than that available from local FIs. LIBOR + 150-200 basis points is a typical borrowing pattern from overseas, which the developers are passing on fully to lower the tariff bid.
Such borrowings are available to any developer / promoter after due-diligence by the FI. Surely, large corporations have a better balance sheet which is essential for an ECB. I am well aware, that no good Indian company is denied an ECB and Indian companies are submitting some of the lowest tariff bids. These Indian companies have no complaint about the fulfilment of domestic content requirement. They are rather happy about it.
It is the US companies who are complaining about level playing field and not the Indian companies.
I personally do not see any loss to the DISCOM if 25 years PPA is signed with the developer at the bid price of Rs 6.5-7.5 per unit, with 5% escalation on YoY basis. It is almost grid parity as on 1 Apr'14. I also see that in next 3-4 years (may be 5 years max), Solar PV tariffs would be lower than the conventional power tariff. It would be interesting to watch the movement of APPC (Average Power Purchase Price) of each State utility for next 5 years.
Further, in my understanding, Solar off grid business model is an entirely different ball game which definitely needs capital subsidy, VGF, etc. Just the interest subsidy in off grid application would not suffice. In absence of capital subsidy and VGF, 400 million people in India would continue to be deprived of Electricity, as has been in the last 66 years since Independence and the number would increase as population grows.
The issue of 20-30% reduction in tariff bid (as against CERC FIT) can only be addressed when the developers are bringing debt at lower interest rates than that available from local FIs. LIBOR + 150-200 basis points is a typical borrowing pattern from overseas, which the developers are passing on fully to lower the tariff bid.
Such borrowings are available to any developer / promoter after due-diligence by the FI. Surely, large corporations have a better balance sheet which is essential for an ECB. I am well aware, that no good Indian company is denied an ECB and Indian companies are submitting some of the lowest tariff bids. These Indian companies have no complaint about the fulfilment of domestic content requirement. They are rather happy about it.
It is the US companies who are complaining about level playing field and not the Indian companies.
I personally do not see any loss to the DISCOM if 25 years PPA is signed with the developer at the bid price of Rs 6.5-7.5 per unit, with 5% escalation on YoY basis. It is almost grid parity as on 1 Apr'14. I also see that in next 3-4 years (may be 5 years max), Solar PV tariffs would be lower than the conventional power tariff. It would be interesting to watch the movement of APPC (Average Power Purchase Price) of each State utility for next 5 years.
Further, in my understanding, Solar off grid business model is an entirely different ball game which definitely needs capital subsidy, VGF, etc. Just the interest subsidy in off grid application would not suffice. In absence of capital subsidy and VGF, 400 million people in India would continue to be deprived of Electricity, as has been in the last 66 years since Independence and the number would increase as population grows.
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