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Rajasthan lowers solar tariffs ahead of bid deadline

According to reports, the Rajasthan Electricity Regulatory Commission has lowered the tariffs for the purchase of electricity from solar power plants in the State by the state utility.

A solar power producer in the State who completes his project by March 31, 2014, will get Rs 10.12 a unit if he does not claim ‘accelerated depreciation’ and Rs 8.85 a unit, if he also claims accelerated depreciation.

Earlier, these figures were Rs 15.32 and Rs 13.19 a unit for projects that would be put up by March 31, 2012. These downward revisions were announced on January 23, barely 25 days ahead of the February 17 deadline for submitting bids.

Rajasthan has a fairly large programme, of 200 MW, equally divided between photo voltaic and thermal.

The revised tariffs demonstrate the falling trend in prices. In the first round of bidding under the National Solar Mission, the benchmark tariff was Rs 17.91. (In the reverse bidding process, bidders would offer discounts on this, and the lowest bidders would win the projects.)

In the second round, NTPC Vidyut Vyapar Nigam Ltd (NVVN) which was the buyer of the electricity and the agency nominated for handling the bidding process on behalf of the National Solar Mission, the benchmark tariff was Rs 15.39. The actual average tariff of the winning quotes turned out to be Rs 12.16 for the first round, and Rs 8.78 for the second.

Meanwhile, Gujarat had announced a fixed tariff of Rs 15 a unit for the first 12 years and Rs 5 for the following 13years. But these were applicable for projects that would be completed by December 31, 2011. However, the deadline was extended to January 29, 2012.

After the deadline expired, Gujarat came out with revised tariffs for projects that would be set up in the State in each of the following next three years — Rs 9.28, Rs 8.63 and Rs 8.03, respectively. (These figures are for megawatt scale PV plants. For kw-scale and thermal projects, the tariffs are higher.)

Projects worth 970 MW were taken up for implementation under the Gujarat programme and as of January 29, it is understood that half of the projects have been completed.

The falling trend in tariffs is important because each time a regulatory commission fixes the tariff at a certain level, it becomes a benchmark for other regulators. Today, several States such as Tamil Nadu, Maharashtra and Andhra Pradesh are close to announcing their own solar programmes.

If the Rajasthan tariffs are attractive, developers who will win projects in Karnataka, where the tariff promised is Rs 14.50 a unit, will make windfall profits. The State has an 80 MW programme, (50 MW for PV and the rest for thermal), and the financial bids are yet to be opened.

“Compared with the average bid price of Rs 8.78 a unit in the second round of the National Solar Mission, the Rajasthan tariff is still very attractive and is bound to get a good response from developers,” says Mr Vineeth Vijayaraghavan, Editor of Panchabuta, an online newsletter, which tracks the solar industry closely.

Mr Vijayaraghavan further notes that lower tariffs are not necessarily bad for developers, as the burden of bank guarantees also comes down commensurately.

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