The new government has made an ambitious target to set up 100000 MW by 2022, up from around 3300 MW set up now. This will require herculean efforts on all fronts in terms of execution, financing, coordination etc. However, the government seems to be confused on how to go about implementing it. There are a large number of government owned agencies and companies that are all moving in different directions trying to implement the target. The states are also moving in their own directions and policies to set up large gigawatt capacities. The companies involving in the governments’ solar melting pot are numerous:
i) NTPC planning to set up 10000 MW of its own and invite bid of 15000 MW for the government.
ii) Solar Energy Corporation of India (SECI) which has become a solar developer cum quasi regulator
iii) IREDA which is going to raise funds and
iv) MNRE which is the nodal ministry in charge of renewable energy.
Now the government has also introduced Power Trading Corporation (PTC) into the mix to buy solar power denominated in dollar tariffs. I have failed to understand why the Indian government is going to pay in dollar linked rupee payments to solar developers for their electricity. The reason is that then the developers can raise dollar backed loans and do not have to pay the hedging costs. However, someone will have to pay the hedging costs at the end of the day. The government will become liable to pay the higher cost, if dollar rises against the rupee.
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While there is no doubt that lower interest rate costs will help the solar developers, at the end of the day the Indian taxpayer is on the hook for the hedging cost either way. A better policy would have been to offer some kind of credit guarantee, or some kind of insurance against any sharp rise in the dollar. Interest costs in India are higher due to higher inflation. If inflation was lower, then interest costs would be lower. Paying in dollars will not solve the problem. I think it’s a stupid idea that should be buried.
As part of the government’s plan to push solar electricity by paying for it in dollars, power trading company PTC India Ltd may call for bids from solar project developers on behalf of the ministry of new and renewable energy (MNRE).The radical approach of dollar-denominated tariff expected to be followed by India’s largest power trader may be similar to that of state-owned NTPC Ltd, aimed at providing green power at less than Rs.4.50 a unit.With firms such as PTC making a purchase guarantee, these projects will become bankable and help solar power reach grid parity. The power sourced will be supplied to the states.Inviting?dollar-based tariff bids advocated by energy minister Piyush Goyal, along with sharing of hedging risks, is expected to reduce the solar power rate from around Rs.6.7 per unit to around Rs.4.37, with the firms freed from any foreign exchange risk.A PTC executive requesting anonymity confirmed the plans and said, “We are having discussions with MNRE. Micro issues are being discussed. It is a good idea. We are in positive talks.”
Source Mint