Indian utilities agree to buy power from Engie solar project
Power utilities in the Indian state of Andhra Pradesh have agreed, after some delay, to buy electricity from a 250 MW solar power project owned by Engie subsidiary Solairedirect. Initially, the utilities refused to buy power from the Kadapa solar power park even though it was offering a relatively low 25-year tariff of INR3.15 ($0.05)/kWh. Under the power purchase agreement, they will buy power from the solar project as long as it is bundled with 125 MW of coal-based electricity to ensure prices remain under INR3.15/kWh.
After months of uncertainty, Solairedirect has finally found a buyer for its 250 megawatt solar power project in the Indian state of Andhra Pradesh.

The original designated buyers of the project, power distribution companies in Andhra Pradesh, have come around and agreed to procure electricity generated from the 250 megawatt project in the Kadapa solar power park. Solairedirect, a subsidiary of French utility Engie, secured this project in a competitive auction earlier this year.

The project is one of the cheapest solar power projects, with a 25-year tariff of Rs 3.15/kWh (4.8¢/kWh). Thus, it was surprising that the Andhra Pradesh power utilities refused to purchase electricity from the project. Tariff bids had fallen to as low as Rs 2.44/kWh (3.7¢/kWh) within a few months of the Kadapa auction.

Consequently, the state power utilities had asked NTPC Limited (owner) to find new buyers for the project and even voluntarily offered exemptions from any likely charges for sale of power to other states. The power utilities stated that they have already contracted enough solar power meet their Renewable Purchase Obligation (RPO) — a regulation that mandates power utilities to procure a set minimum percentage of electricity from solar and other renewable energy technologies. Interestingly, the utilities face perhaps the highest RPO targets in the country and, at current rates, are likely to fall short of the solar power capacity required to meet those targets.

The Andhra Pradesh Electricity Regulatory Commission (APERC) has proposed to increase the share of renewable energy in its electricity mix to 25.25% by March 2022. For non-solar renewable energy technologies, APERC has proposed a target of 12.50% by March 2022. The commission has also proposed to increase the solar power share from 4.75% in 2017-18 to 12.75% in 2021-22.

According to the Ministry of New & New Renewable Energy (MNRE) at 8% solar RPO target, Andhra Pradesh would require 9,834 megawatts operational capacity by March 2022. At 12.75% this capacity requirement would increase substantially.

As of 31 October 2017, the state had an installed solar power capacity of just 2.1 gigawatts.

The utilities have now agreed to sign a power purchase agreement with the Solairedirect power plant, but with a condition. NTPC will ‘bundle’ 125 megawatts of coal-based electricity with the 250 megawatts of solar power. This would ensure that the overall cost of the electricity procurement is lower than Rs 3.15/kWh (4.8¢/kWh).

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