The mood is positive

The green economy in India seems to be shrugging off the pandemic, and the uncertainties associated with it. Renewable energy auctions are going ahead, and companies are actively participating. This should ensure the tariffs discovered are competitive.

After successfully closing a 2-gigawatts solar auction last month — at a tariff of Rs 2.55 per unit, which is lower than the 2019 average tariff — India completed a reverse auction for round-the-clock green power last week.

The project will likely be a solar-wind hybrid with storage, though details are yet to be announced by the auction winner, Renew Solar Power. The first year tariff for the supply of this power is below Rs 3 per unit. With an annual escalation of 3 per cent for the first 15 of the 25 years of the agreement, the effective tariff for the 400-megawatts project works out to Rs 3.59 per unit.  

This power would have the same characteristics as conventional power — it would be firm and schedulable — but it would be far more competitively pri­ced. “Compared to the tariffs witnessed in conventional sources of generation, this tariff offers a much better proposition for the distribution companies to meet their energy demand through 100 per cent renewable energy supply,” a statement from the ministry said.

 

 
And industry players expect the tariff declines to continue. “Despite all the uncertainty, I still expect solar tariffs to be at around Rs 2 per unit by end-2021 bids,” Sunil Jain, CEO, Hero Future Energies, told BloombergNEF. “As we are likely to have surplus power, if you don’t have low tariffs, nobody will buy power,” he added.  

The mood is fairly positive in the corporate green power market too, though the pandemic has led to unprecedented situations, with almost-zero demand from malls and offices. In the US, the largest market for such corporate green deals, buyers and sellers of power are working together to overcome the challenges. “I am seeing a lot of cooperation between offtakers and developers, which is great. 

 
The litigation risk is not huge in my opinion,” Caileen Kateri Gamache, partner with legal firm Norton Rose Fulbright, who specialises in crafting corporate power purchase agreements, told BNEF.
  
Google, the tech giant that has purchased more clean energy than any corporation, at over 6 gigawatts, has announced its intention to shift de­mand at its data centers to times of high renewables supply. It would do this using its new carbon-intelligent computing platform. “Our data ce­ntres now work harder when the sun shines and wind blows,” a statement from the company said. Google aims at 24X7 carbon-free energy on an hour-by-hour basis.

In the world of green financing, showing good numbers through this time are social bonds, and sustainability-linked loans, according to BloombergNEF’s tracker.
The author is editor, global policy for BloombergNEF, vgombar@bloomberg.net


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