NTPC Eyes Dollar Bidding To Make SolarPower Cheap

State-run generation utility is considering dollar-denominated tariff to bring down cost of power from its solar projects to less than Rs 5 per unit, the lowest that promoters have bid for a project being set up by the Madhya Pradesh government."NTPC is selling solar power at Rs 3.50 a unit, which is currently the lowest in the market. There could be dollar-denominated bidding and the price may come down to Rs 4.50 or so," company chairman Arup Roychoudhury said on Monday before handing over charge to director A K Jha, the senior-most member on the board.Roychoudhury's five-year term ended on Monday after the government denied extension till his superannuation age, first reported by TOI on August 7. Jha will be in charge for three months, or till a new chairman is appointed, whichever is earlier. A search committee under power secretary P K Pujari has been tasked to select Roychoudhury's successor.

NTPC is selling solar power after bundling it with output from its traditional thermal plants. Mauritius-based SkyPower Southeast Asia Holdings has recently offered a tariff of Rs 5.05 a unit to MP Power Management Company, a state government utility. Solar power price has come down to an average of Rs 5.50 a unit due to the government's viability gap funding scheme and other subsidies.The dollar-denominated tariff bidding, first reported by TOI on march 25, is brainchild of coal and power minister Piyush Goyal, and being considered by several entities setting up solar power projects. Under this arrangement, discoms would quote their price in dollars while tying up solar power for 25-year contractsbut charge consumers in rupee."By all indications, we see a tariff in the region of 6 cents, or Rs 3.60 at an average exchange rate of Rs 60 to a dollar, with a normal rate of depreciation. Under accelerated depreciation, this would come down to 5 cents, or Rs 3," one key official involved in the discussions had told TOI.

A 'hedging cost' of 1.5 cents, or 90 paise or so, would then be added to the tariff. This money would be put into an escrow account used to cover depreciation in value of rupee. The final tariff thus would work out to be 7.5 cents Rs 4.50 a unit, which would make it easy for discoms to sell directly or bundle with supplies from traditional sources.The renewable energy ministry expects to generate a 'hedge fund' of Rs 6,000 crore. Sources said the 'hedge fund' would be enough to cover 3% depreciation in value of rupee over the 25-year contract. But, if the rupee devalues by 5% against the dollar, then the money would be good for 15 years.

Source: TOI