India makes a splash with solar generation auctions

The International Energy Agency predicts the U.S. will have 17 GW of solar capacity by 2020. Both India and China, starting from very low bases have ambitious plans to beat that number. India aims to build up to 20 GW of solar energy by 2020.

In December the country auctioned 620 megawatts of solar projects to 37 companies, such as Lanco Infratech Limited, KVK Energy Ventures, and Rajasthan Sun Technique, a unit of Anil Ambani’s Reliance Power Ltd.  Other companies selected  include Indian Oil Corporation (a public sector undertaking) , automaker Mahindra & Mahindra Limitd,  construction company Punj LLoyd Ltd. and Azure Power.

The auction awarded 470 megawatts of solar thermal capacity and 150 megawatts of photovoltaic capacity. For photovoltaic projects, energy from the sun is converted directly to electricity using semi-conductor like technology, while in solar thermal projects, the sun’s energy is first used to make steam which is then used to generate power.

The average bid for solar thermal projects was for 11.48 rupees per kilowatt-hour compared with the government rate of 15.31 rupees. Deepak Gupta, secretary of the Ministry of New and Renewable Energy, said  that the average bid for photovoltaic plants was to sell a  kilowatt-hour of electricity at 12.16 rupees (27 U.S. cents) compared with the government’s proposed rate of 17.91 rupees. The global average rate solar thermal developers need to earn is about 28 U.S. cents (12.70 rupees) a kilowatt-hour, according to New Energy Finance data quoted in Business Week.

According to an article in the Wall Street Journal, “At current capital costs of 150 rupees-160 rupees million for each megawatt, solar projects are only profitable if tariffs are at least 14 rupees/kWh,” said Narasimhan Santhanam, co-founder of Energy Alternatives India, a consultancy firm. The Journal also quoted Deepak Verma, chief operating officer at consultancy Emergent Ventures India,who  said “in order to build viable projects at these low tariffs, developers will have to cut corners and squeeze vendors.”