Solar power price in the country went below a low threshold when a bid price of Rs 3.29 per kwH was finalised for over 25 years in the bidding for a 750 MW mega solar power project in Rewa in Madhya Pradesh last week. For the first time in history, solar power tariff dropped below Rs 4 and even Rs 3, because in the first year the bid price is just Rs 2.97 per kwH. It was a group of three companies which won the bid and they based their price quotes on some assumptions about the industry and concessions from the government. The major assumption is that the cost of solar panels, which account for 40% of the costs, would drastically fall in the coming months. This should hold, because the price has been steadily falling with improvements in technology. The state government’s guarantee of grid availability and timely payment of dues also encouraged the companies to quote the lowest possible price. The price might serve as a benchmark now.
This is an important breakthrough because solar power is now competitive in real terms with that from other renewable sources like wind and from conventional coal which is the cheapest. While solar tariffs may even fall further, that cannot be said about coal. The real advantage, however, is that it is clean and helps to fulfil the country’s commitments under the Paris agreement on climate change. The falling prices should also help the country meet the ambitious target of creating an installed capacity of 100 gigawatts of solar power by 2022. Though the national solar mission was set up in 2010 and the initiative has received much attention in the last two years, performance till now has been tardy. The 2016-17 target is unlikely to be achieved. But the trend has been positive with more capacity being created. It is felt that attainment of even 75% of the targeted capacity by 2022 would be a game changer. But there is no reason why the target cannot be achieved if the present trends continue. There are some concerns and uncertainties about solar power which need to be addressed. Much of the initiative is directed at setting up grid-connected solar plants which produce power on a large scale. But more attention should be given to the setting up of roof top solar units with the involvement of citizens. It will make the system more self-reliant and less dependent on availability of land, which is a problem in many states. Power utilities should take more interest in the matter. The impact of GST on solar plant costs should also be clarified.
