'Solar power tariff may drop to Rs 1.5/unit on cheap credit, falling costs'

Solar power developers are bullish on the clean energy and hopeful of tariff coming down to as low as Rs 1.5 per unit on falling equipment cost and cheaper credit with assured purchase pacts.

Solar power tariff came down to all-time low of Rs 2.44 per unit in the auction conducted for Bhadla solar park last month mainly due to lower equipment and borrowing costs.

The new rate of solar power is even below the average rate of coal-based power produced by state-run NTPC at Rs 3.30 per unit.

"The developers are bullish on renewables particularly solar energy. They think that even Rs 2.44 per unit tariff is high in view of lowering of the cost of equipment and avenues available for cheaper funding through various channels," a source in the Ministry of New and Renewable Energy said.

"The developers are ready for another round of aggressive biddings and think that the solar power tariff is viable even at Rs 1.5 per unit," the source said further.

The cost of solar equipment was around Rs 20 crore per Mw and tariff was around Rs 15 per unit about 7-8 years ago. But with the passage of time and economies of scales at play, the cost of equipment today ranges between Rs 4-4.5 crore per MW and cost of borrowing has come down by about 4 per cent.

Similar is the case with wind power wherein tariff dipped to Rs 3.46 per unit in an auction earlier this year.

The source said that with strictness on meeting the Renewable Purchase Obligation, lower equipment cost and cheaper credit, the tariff of renewables would nosedive further.

A banker on the condition of anonymity said that the instance of bad loan is even less than a fraction of a percentage point, which is a clear indication that these renewable projects with low tariff are viable.

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