• Clean energy consultancy Bridge to India expects India's National Thermal Power Corporation (NTPC) to introduce some changes for the 5,000 MW solar power capacity it plans to auction over next three years
  • Solar tariff may be fixed at 6.7 cents per kWh making it affordable for discoms to procure solar power
  • Government may bring in generation based incentive for per kWh, where project developers will be compensated for any deviation in their tariff expectation, which will be determined under a competitive bidding process
  • The current system of NTPC bundling solar power with thermal may be done away in the new auctions

India’s National Thermal Power Corporation (NTPC) is expected to introduce some changes to the next batch of solar power capacity in its auction. A blog post by clean energy consultancy Bridge to India suggested that the Indian utility may fix solar power tariff at 4.50 INR per kWh (6.7 cents).

According to Bridge to India, the Ministry of New and Renewable Energy (MNRE) is finalizing guidelines for 5,000 MW of new solar power projects to be auctioned by the NTPC in next three years in its role as an off-taker. While fixing the solar power tariff will stop the prices from dropping further down, the government wants to continue encouraging competition.

The NTPC may now ask developers to bid for an additional Generation Based Incentive (GBI) per kWh. While the utilities to whom NTPC sells this solar power to bundled with thermal power will be able to buy the clean power with a pre-set tariff, project developers will be ‘compensated for any deviation in their tariff expectation – positive or negative – through GBI, determined under a competitive bidding process’.

Going forward, the NTPC plans to do away with the bundling system, according to the consultancy.

Power distribution companies (Discoms) in India have been battling financial issues for a while now. In order to help them, the government has introduced the so-called Ujwal Discom Assurance Yojna (UDAY) scheme. Under this, state governments will bear some Discoms financial debt, giving the latter some breathing space to incorporate renewables. Recently, the government also made it mandatory for discoms to procure 2.75% of their power from solar power plants (see Green Targets For Indian Power Producers).

The Ministry is understood to keep a financial corpus of 10 to 15 million INR per MW ($0.15-0.22 million) for GBI payments during project life. Bridge to India commented, “Based on recent tenders and softening cost trends, we expect actual GBI for future projects to be close to zero or even negative. But the move to GBI, a generation or performance linked payment mechanism, is preferable over Viability Gap Funding (VGF) structure as it incentivises better project performance and encourages quality consciousness.”

The new guidelines are likely to address the issue of grid curtailment and will be released over the next two months.