NTPC is considering setting up of a solar power project without signing a power purchase agreement (PPA) with State Discoms.

A top company official said: “If solar power is really the cheapest source of electricity, the power generated should be bought by the power distribution companies (Discoms) or other entities without any hurdles. The power can be sold either through the power exchanges or through any other platform. We are considering the option of setting up a solar power project without a PPA.”

The official did not disclose the generation capacity or location where such a project is being assessed. The fact that NTPC is looking to set up solar power project without signing a PPA is reflection of the confidence that the power major has in being able to find buyers for the solar power generated by the project.

Currently, NTPC has 11 solar power projects with a combined generation capacity of 870 MW. The total power generation capacity of the NTPC group is 55,126 MW.

Commenting on the suggestion, Sambitosh Mohapatra, Partner — Power and Utilities at PwC India, said: “For these projects to be viable, the value chain for setting up the projects and stakeholders needs to be aligned. Right from lending institutions which favour projects with long-term PPAs to the prevalent industry and market structure wherein the option of selling power generated on the exchange or to own consumers is fraught with transient risks.”

India has recently become the world’s cheapest producer of solar energy, according a report by the International Renewable Energy Agency (IRENA).

“India was estimated to have the lowest total installed cost for new utility-scale solar PV projects that were commissioned in 2018,” the report said.

In India, the weighted-average levelised cost of energy of new utility-scale solar PV plants commissioned in 2018 declined by 21 per cent to $ 0.063 a unit, the report added.

But there are more costs that are built in when selling power without PPAs. “Currently, the regulators don’t provide comfort with cross-subsidy surcharge ranging from ₹0 to 2 or more per unit for supplying on open access. This rate is changed every year and adds much uncertainty to the viability of any projects that will depend on exchanges or non-PPA routes for offtake,” Mohapatra said.