Andhra Pradesh has opened the financial bids for allocation of 500 MW solar projects. Developers have quoted a tariff for the first year, which will then increase at 3% every year till the 10th year. The term of the Power Purchase Agreement (PPA) is 25 years. First Solar has quoted the lowest bid at INR 5.25/kWh (levelized at INR 6/kWh) and has shown the way to reach parity with imported coal.
- The lowest bid of INR 5.25/kWh (levelized at INR 6/kWh) is also the lowest in India
- Over 95% of the projects will be installed in the southern districts of Anantapur, Kurnool and Chittoor
- The bid shows solar as almost at par with imported coal
India has seen bids lower than this rate in the National Solar Mission (NSM) batch I phase II and Rajasthan state policy. However NSM offers viability gap funding and Rajasthan provides land and transmission infrastructure. The tariffs seen in Andhra Pradesh are now the lowest without a capital subs
The highest successful bid will likely be at INR 5.99/kWh (USD 0.1/kWh). The cumulative capacity offered by the bidders was 616 MW, 116 MW more than the proposed 500 MW. The levelized tariff for this bid would be INR 6.85/kWh (USD 0.11/kWh). The median winning bid will likely be at INR 5.86/kWh (USD 0.1/kWh), the levelized tariff of that will be 6.7/kWh (USD 0.11/kWh).
The most favored locations were the three southern districts of Anantapur, Kurnool and Chittoor. Over 95% of 500 MW is likely to be located in there. Incidentally a new solar park for an additional 1,000 MW under NSM batch II phase II will also be located in Kurnool district. Additionally, the central government has agreed to provide a grant of INR 5 bn (USD 83 m) for development of solar parks with a total capacity of 2,500 MW.
The developers might be tempted to approach the state government for land in the solar parks. However, under the current terms of bid document, the developers have to commission the project within 12 months from signing the PPA. Since, central government hasn’t declared the timeline for solar park development, developers may have to acquire land outside solar parks for this bidding.
Most project capacity are of 30 MW or more. BRIDGE TO INDIA estimates that developers will be able to get a turnkey EPC price at ca. INR 57 m/MW. Land prices in Anantapur, Kurnool and Chittoor districts are currently ca. INR 400,000-500,000 per acre (although that might rise now). Adding transmission infrastructure, financial cost during construction and other commissioning costs, the project cost will be ca. INR 65 m/MW (USD 1.08 million/MW). At a debt cost of 11% and a 30:70 debt equity ratio, the median tariff of INR 5.86/kWh (levelized tariff 6.7/kWh) could thereby achieve an equity IRR of over 15%.
The tariff offered by First Solar is only marginally higher than the cost of power from new, imported coal, which is between INR 5-5.5/kWh (0.08-0.09/kWh). However, the escalation in imported coal tariffs is higher than 5%. With further bid results in Telangana (500 MW) and Karnataka (500 MW) expected soon, India could likely see solar tariffs below the tariff of new, imported coal. NSM phase II batch II bids will quite likely see solar undercutting coal.
 The price of INR 57 m/MW has been calculated by considering 1.1 MW DC capacity and 1 MW AC capacity for project size of over 30 MW.
Mudit Jain is a Consultant at BRIDGE TO INDIA