Rewa project sets record for low ‘solar tariffs’

India’s power sector witnessed “record lows” in the Rewa Ultra Mega Solar PV reverse auction held in February 2017, for the upcoming 750 MW Solar PV Project in Rewa, Madhya Pradesh. Winning bids of Rs 2.97, Rs 2.974 and Rs 2.979 per unit were made by three developers, namely Acme Solar Ltd, Solenergi Pvt Ltd and Mahindra Renewables Pvt. Ltd, respectively for each 250 MW unit in the 750 MW solar PV Project.

The project is being developed by the Rewa Ultra Mega Solar Limited (RUMSL), a joint venture between Solar Energy Corporation of India and MPUVNL, a Madhya Pradesh State government undertaking. RUMSL has received a levelised tariff of  Rs 3.30 (5 cents/Unit, for 750 MW of capacity. This is more than Rs 1 lower than the previous lowest solar tariff of Rs 4.34 per unit in the Bhadla Solar Project in Rajasthan, a year ago.

This news got recognition from all over India and worldwide, too, since this level also happens to be close to the average power purchase cost and with these bids, grid parity has also been achieved.

This has not been achieved overnight; much effort and marathon brain storming has been done from the conceptualisation stage to the final outcome of the project. Manu Srivastava, chairman, RUMSL and Principal Secretary, Government of Madhya Pradesh, New and Renewable Energy Department, is the man leading this ambitious project.

According to Srivastava,  some of the unique features of the project which have led to low tariff are derived power purchase agreements with consumers like MP Power Management Company (state-owned power company) and Delhi Metro Rail Corporation (DMRC, an inter-state customer), state government counter guarantee in the form of payment security and bankable contracts/agreements which encourage efficiency and transparency and enhance the bankability of the project.

The reverse auction process itself was an innovative bidding process which allowed bidders unprecedented flexibility in bidding for RUMS project during the reverse auction process. Some of the features in the project were adopted for the first time in India.

The project also has some unique features such as energy based optimum scheduling, where the power off-take is structured on energy basis, instead of megawatt basis, to meet real-time demand of the DMRC, with take or pay mechanism for commercial settlement.

The project has also availed World Bank loan under the Clean Technology Fund (CTF) at super concessional interest rate of 0.25% (LIBOR free), for building infrastructure around the solar park.

Three sub-stations of 33/220 kV are being developed by RUMSL as internal evacuation pooling substations to “evacuate power” from the project.

Apart from this, 220/400 kV inter-state transmission system is being developed by the Power Grid Corporation of India to deliver power-to-power procurers. This has mitigated one of the biggest risks associated with “evacuation” of power to intended beneficiaries and induced another level of comfort for developers.

The RUMSL also had 97% land before start of the Reverse Auction (RA) process, which comprises 1,260 hectares of barren revenue land. These unique features mitigated the major risk of land and power offtake which encouraged the bidders to bid low to get the project and this has set another milestone and example of the ease of doing business for potential developers in the state. Through robust contracts, unique structuring and innovative bid process, Rewa Ultra Mega Solar has set a milestone towards realising India’s clean energy mission of 175 GW by 2022.