Solar power closes in on grid parity in India with mega contract

Welspun Solar Madhya Pradesh Private Limited, a wholly owned subsidiary of Welspun Renewable Private Limited, has won the largest solar power contract in Indian history.

The company, part of the formerly textile-oriented Welspun group, won a contract for setting up a plant that will generate 125 million watts (megawatt or MW) of power.

In comparison, India’s total solar power generation capacity is estimated to be around 500 MW. The country has a target of achieving about 1,300 MW of capacity by 2013.

Welspun is one of the four companies selected by the Madhya Pradesh government to set up solar power projects in the state.

Most solar power plants in India are in the 2 to 5 MW range, with the occasional 25 MW plant also being awarded.

Welspun’s contract is also noticeable for the extremely low tariff that it quoted — Rs 8.05 (15 US cents) per unit (kWh).

The price is close to what industrial customers in India pay for ‘dirty power’ — electricity produced from fossil fuels like coal.

However, the price is still about 60% more than what heavy domestic consumers pay in India — about Rs 5 (10 cents) per unit.

“We have been continually demonstrating that solar tariff can be brought to grid parity. In close to two years tariffs have come down significantly,” Vineet Mittal, Co-founder and MD, Welspun Energy Ltd said. It is expected that solar power will reach parity with coal power by 2015 in sunny areas like India.

The bid price of Rs 8.05 per unit is also interesting in that it is about half of the tariff that the government of India has set as a benchmark for solar power producers, also known as the feed-in tariff.

However, solar companies have to bid lower and lower from the benchmark to qualify for contracts from government power distribution companies, such as the Madhya Pradesh Power Management Company (MPPMC).

The level of Rs 15-16 per unit was set just a year and a half ago, indicating how fast solar power production costs are declining.

Welspun expects building costs of around Rs 10 crore per MW ($1.8 per watt) for the photovoltaic projects.

It “proposes to develop this Project in the Mandsaur district in the Malwa region of Madhya Pradesh in a record time of 19 months from the date of signing the PPA,” the company said.

The project will power 6,60,000 homes, mitigating 2,29,550 tones of carbon annually, Welspun said.

It will invest of USD 225 M towards project’s development.

“We need to ensure widespread energy access at affordable prices as dependence on fossil fuels is not a sustainable solution. Solar energy is the best option today. I believe, India can be the path breaker, by bringing electricity at affordable prices to our cities and villages,” Mittal added.