Context
Article talks about the observations made in the recently released ICRA report
What has happened?
The recently-concluded bid for three 250 MW units in the Rewa plant in Madhya Pradesh saw tariffs falling below ₹3 per unit, sparking some concern in the industry that tariffs were becoming unviably low
ICRA (Investment Information and Credit Rating Agency)
After CRISIL, ICRA is India’s second credit rating agency which was set up in 1991
Observations
- Major improvement in cost competitiveness: The recently-concluded bid for three 250 MW units in the Rewa plant in Madhya Pradesh signifies a major improvement in the cost competitiveness of solar energy against both alternate renewable as well as conventional energy sources
- With competitive bidding route adopted for award of solar projects &fall in PV module price levels, cost competitiveness of solar PV bid tariff has thus significantly improved as evident in decline from ₹6.5/kwh in calendar year 2014 to ₹5.0/kwh in calendar year 2016, and further to ₹3.3/kwh for bidding of project capacity in the Rewa Solar Park
What is competitive bidding?
Transparent’ procurement method in which bids from competing contractors, suppliers, or vendors are invited by openly advertising the scope, specifications, and terms and conditions of the proposed contract as well as the criteria by which the bids will be evaluated
- Such low tariffs in Madhya Pradesh were enabled by a few favourable factors in the project power purchase agreements such as a
- State government guarantee for the contracted capacity by the utility
- Compensation for deemed generation(This means the producer is paid even if the electricity is not taken due to grid issues)in case of non-availability of the grid
What is deemed generation?
The energy which a station was capable of generating but could not generate due to the conditions of grid or power system, beyond the control of generating station
Wind vs Thermal plants
The average feed-in tariff for wind energy and competitively bid thermal plants in the last 24 months has remained at ₹ 4.8/kwh and ₹4-5/kwh, respectively
