Fixed tariff model to aid solar thrust

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Auction route for projects may be dropped

Fixed tariff model to aid solar thrust
In a bid to boost solar power generation, the ministry of new and renewable energy (MNRE) is toying with an idea of setting fixed tariffs for solar power projects against the competitive bidding or auction process.

Tarun Kapoor, joint secretary MNRE, said at a renewable energy summit in New Delhi that the government is planning to emulate the German and Spanish models of fixed feed-in rates for solar power generation as against competitive bidding or reverse bidding auction for projects at the central level.

The move is likely to remove restrictions on who can bid and the size of the projects. It is also likely to give a kick to solar power generation as more clarity would emerge on the return on investment and lenders would be willing to invest in projects where generators are able to lock in prices.

Ajay Goel, CEO of Tata Power Solar told Financial Chronicle the other issue under discussion is the escalating tariff, which the government may fix at the lower rate of, say, Rs 5 per unit and increase it every year to keep up with inflation. It is believed higher rates may not be welcome at an initial stage but the ability to pay improves with time. It would be the right approach to give an assured returns to generators, who can even fix the financial models. Till now, serious bidders were worried about the reverse bidding model as aggressive players would drive them away.

Visa Powertech MD Satinder Agarwal commented, "Although the rate of interest in the solar sector is still very high, it would be possible to get a better return of 17-18 per cent, provided the government also enforces the renewable purchase obligation (RPO) along with the fixed tariff and renewable energy certificates (REC) trades.”

If India has to progress at 7-8 per cent GDP growth, then solar power can support the overall power generation requirement. According to an estimate, India has around 2,500 mw solar capacity and can produce around 35,000 mw if fixed tariff is implemented and other benefits are given, as all other issues of land, environment and investment persist.

India still has some catching up to do with the major solar power countries like Germany, Spain and Japan. Germany as of now has a capacity of around 35,000 mw.

The ideal tariff, according to experts, should be around Rs 5-5.5 per unit provided the government enforces the renewable purchase obligation and renewable energy certificates, otherwise at that rate the generators would require viable gap funding.

And without the renewable purchase obligation and renewable energy certificates, the ideal tariff would be around Rs 7-7.20 per unit.

Kumar Manoj, assistant vice president, marketing and projects of Kotak Urja, said some states like Gujarat and Karnataka already have feed-in rates for off-grid and rooftop projects.

Besides, there are plans to even start net metering, where the surplus power could be sold to the grid, making profits in the process.

“Under net metering, the power generated is not wasted. Rather, the consumer is entitled to sell the surplus power to the grid during peak hours and at night, when it needs power.

“Consumers can even import power from the grid. In such cases, they only pay for the difference between import and export. If import is negative, then the points accumulate and the government pays the consumer over the next six months,” the Kotak Urja official said.

If net metering is introduced along with the fixed tariff method, then there would be a strong boost to solar power generation at the city level and a lot of demand could be met through off-grid solar establishments.

Besides, it leaves that much more power in the grid to be used by people who need it. If India sets up 35,000 mw of solar power in the next seven years, the Indian government would save huge amount on foreign exchange on reduced import of coal, crude and gas, said experts.

India is blessed with limitless solar potential, with 58 per cent of its geographical area being solar hotspots.

Theoretically, by only using desert and barren land, India has the potential to produce over 2,000 gw of solar energy – more than the current total capacity of the US and China combined.

Solar energy has, therefore, the undeniable potential to solve India’s energy problem, while helping it achieve power independence and energy security.

A lot, however, depends on strong political and bureaucratic will. To achieve any meaningful results, the approach has to be holistic as against the current piecemeal approach.


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