Rise and Fall: Recent renewable energy tariff trends

Recent renewable energy tariff trends

In the decade spanning 2010-20, se­v­eral countries shifted away from feed-in tariffs (FiTs) to the process of auctions for allocating projects. With an inc­re­asing number of countries making this move, India too adopted the new para­di­gm of reverse auctions for both solar and wind projects, resulting in greater competition and driving down solar and wind tariffs significantly as compared to the be­ginning of the decade. For instan­ce, from an all-time high of Rs 10.95 per kWh in 2010, tariffs fell roughly to the Rs 4.30 per kWh range in 2016 and reached as low as Rs 1.99 per kWh in December 2020. New entran­ts have also been discovered in the market, with greater participation of public se­ctor units in clean energy auctions.

The market has also witnessed a rising number of auctions for wind-solar hybrid pro­jects in recent years. The tariffs discovered in these auctions are highly competitive and much lower than coal and thermal tariffs. Auctions in the wind segment have, at the same time, been stagnant and limited. The segment had alrea­dy been witne­ssing slow growth over the past few years. This was exacerbated by the supply chain disruptions and mobility constraints cau­sed during the Covid-19 pandemic. To give a fresh boost to the se­g­ment, the government is rapidly encouraging hybrid-wind and round-the-clock projects. How­ever, with the ongoing policy changes, it is crucial to analyse the tariff trends across various segments and un­der­stand the various factors affecting them.

Solar tariff trends

The year 2021 witnessed many successful solar auctions. The lowest tariff of the year was discovered at Rewa Ultra Mega Solar Limited’s (RUMSL) auction for 500 MW of projects at the Neemuch Solar Park in Madhya Pradesh in August 2021. TP Saurya won the bid for 170 MW at a tariff of Rs 2.14 per kWh and for 160 MW at a tariff of Rs 2.149 per kWh, while AlJo­maih Ener­gy and Water Company won a capacity of 170 MW at Rs 2.15 per kWh. The lowest tariff in the year was hi­gher by nearly 8 per cent than the lowest tariff in 2020 in Gujarat Urja Vikas Nigam Limited’s (GUVNL) Pha­se XI auction for 500 MW of solar projects. This was followed by the Solar Ener­gy Cor­po­ration of India’s (SECI) auction for 1,785 MW of solar power projects (Tranche IV) in Raj­a­s­­than in Decem­ber 2021. ReNew So­lar Power and ACME Solar also won 600 MW and 375 MW respectively, at a quoted tariff of Rs 2.18 per kWh. The third-highest tariff was discovered in GUVNL’s auction to purchase power from 500 MW of grid-connected solar projects (Ph­a­­se XII) in March 2021, where Sprng Ujjvala Energy won a capacity of 120 MW quoting Rs 2.20 per kWh.

Among the solar auctions that have been undertaken so far since the beginning of 2022, the lowest tariff discovered has been Rs 2.29 per unit in GUVNL’s auc­tion for 500 MW of solar projects (Pha­se XIII) in March 2022. Most recently, in May 2022, three winners were dec­lared in RUMSL’s auction for the 600 MW floating solar park in the Omka­resh­war reservoir in Madhya Pradesh. The auction was undertaken for the first pha­se of the project, encompassing a ca­pacity of 300 MW. Amp Energy was awarded 100 MW at a quoted tariff of Rs 3.21 per kWh, NHDC was awarded 100 MW at a quoted tariff of Rs 3.22 per kWh and SJVN was aw­arded the remaining 100 MW capacity at Rs 3.26 per kWh. This is the highest discovered tariff in the past 15 months, and may be attributed to the higher costs of floating solar technology compared to ground-moun-ted projects. Further, the recently im­pos­ed ba­sic customs duty on im­ported cells and modules, and the imp­le­me­n­tation of the Approved List of Mo­dels and Manufac­turers (ALMM) have also impacted tariffs.

Wind tariff trends

Wind tariffs are relatively higher than tho­se discovered in solar and wind-solar hy­brid auctions. In May 2022, NTPC Re­ne­w­ables, Halvad Renewables, JSW Neo En­ergy and Torrent Power won SECI’s auction for the 1.2 GW interstate transmission system (ISTS)-connected wind pow­er projects (Tranche XII). NTPC Renew­ables quoted a tariff of Rs 2.89 per kWh while the rest quoted Rs 2.94 per kWh. The lowest tariff of 2021 was discovered in SECI’s auction for 1,200 MW of ISTS-connected wind power projects (Tranche XI) in Sep­tember 2021. ReNew Power, Green Infra Wind Energy and Anupavan Renew­ables won capacities of 300 MW, 180 MW and 150 MW respectively at a quoted tariff of Rs 2.69 per kWh. The tariff was roughly 2.9 per cent lower than the lowest tariff discovered in SECI’s previous auction of 1,200 MW of ISTS-connected wind projects (Tranche X), held in March 2021, in which Adani Renewable Energy, which won 300 MW of capacity, had quoted a tariff of Rs 2.77 per kWh. The highest bid over the past one year was quoted by Sem­b­corp, which won the entire capacity of 50 MW in REMCL’s auction for power consumption of the railways for traction in Maharashtra at Rs 3.11 per kWh.

Solar-wind hybrid tariff trends

The number of wind-solar hybrid project auctions has increased over the past few years. Recent tariffs discovered at these auctions are highly competitive with the present level of solar tariffs. During 2021-22, the lowest tariff discovered for hybrid projects stood at Rs 2.34 per kWh, found in SECI’s auction for 1,200 MW of ISTS-connected wind-solar hybrid power projects (Tranche IV) in August 2021. The discovered tariff was 3 per cent lower than the lowest bid of Rs 2.40 per kWh quoted in the wind-solar hybrid auction in December 2020. NTPC and Ayana Power won a capacity of 450 MW each, while NLC India was awarded a capacity of 150 MW at the same quoted tariff of Rs 2.34 per kWh. Azure Power was also aw­ar­ded a capacity of 150 MW out of 300 MW under the bucket filling method, at a quoted tariff of Rs 2.35 per kWh.

In May 2022, Tata Power, Amp Energy, NTPC and SJVN won SECI’s auction to develop 1,200 MW of ISTS-connected wind-solar hybrid projects (Tranche V) across India at a quoted tariff of Rs 2.53 per kWh. Since 2020, the highest tariff discovered in hybrid auctions has been Rs 3.01 per kWh, quoted by Hindustan Th­er­mal Projects at SECI’s auction for supply of 2.5 GW of round-the-clock (RTC) power from grid-connected rene­w­able energy projects, complemented with power from coal-based thermal projects.


A recent report by JMK Research and the Institute for Energy Economics and Finan­cial Analysis suggests that solar tariffs in India may increase by over one-fifth of current tariffs over the next one year as a result of the imposition of a 40 per cent ba­sic customs duty on imported solar mo­­dules, and 25 per cent duty on solar cells from April this year. Surging commo­dity prices, if not curbed, may also lead to such a rise in tariffs. As compared to In­dia’s record low solar tariff bid in 2020 at Rs 1.99 per kWh, 2021 saw a slight rise in tariffs due to higher freight charges and raw material costs.

Moreover, the implementation of the ALMM may also create supply- and price-related challenges in the short to me­dium term. The report states that in order to maintain low solar tariffs, the du­ration of the basic cu­stoms duty imposition as well as its expected trend (increa­se or decrease) on a year-on-year basis should be clearly stated by policymakers and government regulators. Mo­re­over, while hybrid projects are witnessing an uptick in the market, independent wind auctions must also take off in order to meet India’s ambitious tar­get of install­ing 500 GW of non-fossil fuel-based energy by 2030. At present, the tariff rates discovered in the wind auctions are largely viable only in states such as Gujarat and Tamil Nadu, which currently hold high po­wer load factors. Further­more, streamlining land acquisition for wind projects and speedy environmental approvals may also help bring down wind tariffs.

In the coming months, bids are also ex­pected to be issued for installing offsh­ore wind energy projects, following the an­­nouncement by the Union Minister for Power and New and Renewable Ener­gy in June 2022 at a meeting on transmission planning for offshore wind energy projects in India. As per the statement, bids for offshore wind energy blocks of 4 GW off the coasts of Tamil Nadu and Gujarat will be issued every year for the next three years.

Going forward, to successfully meet In­dia’s renewable energy targets, ensuring the competitiveness and sustainability of re­­newable energy tariffs is crucial. Poli­cy­makers must emphasise developing a greater understanding of the various dete­r­minants of tariffs such as fi­nancing costs, module prices, im­port duties and other equipment- and raw material-related aspects, instead of aspiring for unsustainably low pri­ces, to ensure quality projects that can last for 25 years.

Kasvi Singh