Media outlets are abuzz with the collapse in solar power tariff bids in India last week when 750 megawatts was allocated at the cheapest tariffs ever. The tariffs range between Rs 2.44/kWh (3.8¢/kWh) and Rs 2.62/kWh (4.1¢/kWh).
India’s minister for coal, power and renewable energy has repeatedly tweeted that the solar power tariffs are now lower than the cost of thermal power. Media reports have also noted that these new bids are much lower than the average tariff of India’s largest power generation company NTPC Limited.
The government-owned NTPC Limited owns more than 42.7 gigawatts of thermal power capacity based on coal and gas. According to reports, the average tariff for these projects is Rs 3.20/kWh (5.6¢/kWh), about 24% higher than the lowest solar power tariffs.
We decided to check to see exactly how cheap the new tariffs are. The Central Electricity Authority is a rich source of data on power generation costs of every conventional power plant in India. Although the latest data reported by this government body is for 2014-15, it is still worth taking a look at.
According to the data for 2014-15, there are 248 thermal power plants in India based on a variety of fuels including coal, lignite, imported coal, diesel and different forms of petroleum-based fuels. The new low of solar power tariffs — Rs 2.44/kWh — is less than the tariff of 227 of the 248 thermal power plants.
Most of the cheaper 21 thermal power plants are based on domestic coal while a few are based on lignite and one uses imported coal. Another thermal power plant that is not listed among the 248 is India’s largest thermal power plant, Sasan Ultra Mega Power Plant which has an installed capacity of 3,960 megawatts. This is also among the cheapest thermal power plants in India.
Solar power tariffs in India have reached a level where many are questioning the financial viability of new projects. India’s installed solar power capacity stood at 12.3 gigawatts at the end of 2016-17 with a target capacity of 100 gigawatts by the end of 2021-22. Thus, a huge potential for further decline in tariffs remains over the next few years.