Policy

Dollar tariff for solar power on the anvil

Richa Mishra Debabrata Das New Delhi | Updated on January 23, 2018 Published on May 17, 2015

Power Minister Piyush Goyal

Can help achieve grid parity from day one, says Goyal

The Ministry of New & Renewable Energy (MNRE) is looking at a dollar-denominated tariff mechanism for solar power at grid parity (where the price is equal to or cheaper than grid power) as it gears up to reset the country’s solar mission target to 100,000 MW by 2022.

Aware that the cost of electricity is a critical component whichever source it is generated from, Minister of State (Independent Charge) for New & Renewable Energy, Power, and Coal, Piyush Goyal, told BusinessLine: “We are planning to approach the Cabinet to reset the solar mission target. Simultaneously, we are looking at innovative financing models. Dollar tariffs can perhaps bring solar power down to grid parity from day one, with the added advantage of 20-25 years of stability of tariffs, which no other source of electricity can give.”

Under dollar-denominated tariff bidding, distribution utilities quote their price (the rate at which they will buy from the generator) in dollars for 25-year contracts, but the end consumer will be sold the electricity in rupees.

Currently, the electricity that is generated from solar energy is priced at around ₹6 a unit, from coal at ₹3-4 a unit, and from gas at ₹4.7 a unit.

To make the mechanism a success, the ministry may also consider imposing a ‘hedging cost’ on the dollar tariff. The money (hedging cost) collected will be put in an escrow account to cover for the depreciation of the rupee versus the dollar.

Energy security

Goyal said this mechanism, coupled with zero dependence on imports, will make India an energy secure country.

“In a worst-case scenario, we will have the sun, wind and water to serve the people of India. We are very confident of meeting our targets and setting up 175 GW of combined renewable capacities in 5-7 years. I am very confident that we will multiply renewable energy generation by five times and become a superpower in renewable energy,” he added.

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Published on May 17, 2015
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