Karnataka discovers Rs 2.36 per unit tariff for solar energy

Karnataka has discovered solar tariff of RS 2.36 perunit in an auction conducted by the Solar Energy Corporation of India (SECI). The tariff is higher than the Rs 2.17 a unit discovered in December 2021 for auctions conducted by SECI for power supply in Rajasthan.

Although location plays a role in tariff determination, the higher tariff in the Karnataka auction also reflects that companies are taking into account the impact of rising costs of commodities and solar panels while placing their bids.

The response to the current round of auction for 600-megawatt (MW) capacity from domestic and foreign developers has been strong. According to sources, Ayana Renewable Power — backed by investors such as UK’s CDC and the National Investment and Infrastructure Fund — quoted the lowest tariff for building 300 MW of solar projects. A subsidiary of European energy firm Fortum has been shortlisted for the remaining capacity against its quoted tariff of Rs 2.37/unit.

Other bidders participating in the auctions were ReNew Power, Tata Power, Adani Green Energy and state-run NLC India and Coal India. This is the first auction after the imposition of 40% and 25% basic customs duties on solar module and cell imports, respectively, from the beginning of FY23 was announced recently in the Union Budget. Although it is seen to encourage local production, experts have pointed out that it may also result in higher product costs, which will ultimately translate into higher electricity tariffs.

Module costs comprise about 60% of the total project expenditure for solar plants, and owing to cheaper rates of imported modules, solar capacity addition has mostly been done through foreign products, especially Chinese. The current installed renewable energy capacity— mainly solar and wind — is around 104 gigawatt (GW). About 50 GW renewable energy capacity is under implementation and another 32 GW projects are in various stages of bidding.

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