The 2050MW capacity Pavagada Solar Park in Karnataka | Photo: Solar Compare

Ultra Mega Power Plants brought down solar power tariffs, kick-started clean energy transition in India: IEEFA Report

A new report prepared by the Institute for Energy Economics and Financial Analysis shows that adoption large scale ‘ultra-mega utilities’ for renewable power generation has led to a steep reduction in costs of power as well as simplification of investments, especially in solar power.

India’s targets of achieving 175GW of renewable energy by 2022 and 450GW by 2030 is supplemented by a push for ultra-mega power plants (UMPPs) which involves a state government or local distribution company facilitating a single central grid connection and taking on the procurement and time-delay risks relating to land acquisition. In 2016, India’s Ministry of New and Renewable Energy (MNRE) set a target for 40 industrial solar parks with a combined capacity of 20GW, and in 2017 doubled this target to 40GW by 2022. According to the IEEFA analysis “This approach has been instrumental in driving economies of scale and attracting global capital into India’s renewable energy over the last five years, with an immediate boon in the form of a halving of solar tariffs to a record low of Rs2.44/kWh (at the exchange of that time, this was US$39/MWh) achieved in mid-2017.”

“Indian utility-scale solar parks have kickstarted India’s energy sector transition. Amid myriad policy and project execution issues, India’s utility-scale solar park model has firmly stood its ground. India now houses multiple ultra-mega solar parks with capacity of more than 1GW, and two of them are the largest commissioned in the world,” says author of the report, Kashish Shah.

The analysis finds that of the 30GW of renewable energy capacity installed since the beginning of FY2017/18, coupled with an additional 50GW awarded to date, more than 90% has been contracted at tariffs ranging between Rs2.43-2.80/kilowatt hour (kWh) (~US$35- 40/MWh) with zero indexation for 25 years- up to 70% lower than the first-year tariff set for proposed new non-mine mouth coal-fired power plants in India.

The report points out that the UMPP model for large scale projects have eased land-acquisition worries for developers as state government renewable development energy agencies have helped in acquiring large-scale government and privately-owned land for the solar parks. Additionally, agreements with government backed power companies such as the Solar Energy Corporation of India (SECI) and the National Thermal Power Corporation Ltd (NTPC) have shielded developers from the financial weakness among power distribution companies which currently owe close to Rs. 90,000 crores to power generation companies.

“The ultra-mega solar parks have attracted foreign capital as well top global developers to India and in return have provided investors with an opportunity to join a US$500-700bn renewable energy and grid infrastructure investment boom in the coming decade,” adds Shah.

The study analysed seven of India’s large solar parks namely the Bhadla Industrial Solar Park in Rajasthan (2,245MW), the Pavagada Solar Park in Karnataka (2,050MW), the Kurnool Ultra Mega Solar Park (1,000MW), the Ananthapuramu – I & II Solar Park (2000MW) and the Kadapa Solar Park, Andhra Pradesh (1,000MW) in Andhra Pradesh, the Rewa Solar Park in Madhya Pradesh (750MW), and the Adani Kamuthi Solar Plant, Tamil Nadu (648MW), and found that the UMPP projects had contributed to a progressive reduction in costs of solar power. But the investments in India’s renewable push have slowed down in recent years. “After adding an average of 13GW of renewable energy capacity in FY2016/17 and FY2017/18, India’s renewable capacity was expected to grow on average at 20- 25GW in line with the target of 175GW by FY2021/22. However, less than 10GW of on-grid renewable capacity was added in FY2018/19. This was expected to grow to 12-13GW in FY2019/20, but has only managed to reach 9.4GW, thanks to global lockdowns caused by the COVID-19 pandemic,” the report states. The Dholera Solar Park in Gujarat (5000MW) which is to be the largest solar power plant in the world upon completion has remained under-subscribed by 700MW in its initial tendering for 1GW capacity addition over multiple rounds of auctioning. The report has identified land acquisition, labour and grid stability as issues that are still hindering the growth of UMPPs.

The complete report can be read here.