India: Coal plants to subsidize solar

The government of Indian Prime Minister Narendra Modi has ordered state utility NTPC to bundle and sell electricity from coal-fired power plants and solar farms to the grid — a move aimed at making PV more competitive, according to Bloomberg.

The order, issued on July 17, is expected to reduce the price distribution companies pay for solar power and force them to purchase more renewable energy.

"The lower price ensures the competitiveness of this power in the wholesale market, thus easing the search for alternative buyers," Bharat Bhushan Agrawal, a solar analyst for Bloomberg New Energy Finance in New Delhi, told the news agency.

The ruling makes it easier for India’s state-run distribution companies, which have had difficulties covering the costs of electricity bought in the market, to acquire solar power and support Modi’s ambitious target of achieving 100 GW of solar capacity by 2022. India’s current solar capacity stands at just over 4 GW. The NTPC is to build 15 GW of solar plants by 2019 as part of the program, according to Bloomberg.

The government’s push to increase the use of solar power may meet with opposition, however. Praveer Sinha, CEO and executive director of Tata Power Delhi Distribution, told Bloomberg that distribution companies may resist purchasing bundled power, pointing out that “the average cost of procurement is already higher than the billing rate” and bundling coal and solar power would increase prices.

Five coal plants in the country with a total capacity of 8,960 MW will take part in the program. The Singrauli plant in northern India will be the first to begin bundling its electricity with solar power. The 1.7 GW plant’s output will be sold along with electricity from 3 GW of solar installations, according to the Bloomberg report.

The news agency quoted A.K. Jha, chairman and managing director of NTPC, who explained in an earnings call that, in the case of Singrauli, if the present tariff was INR 1.80 ($0.0269), the combined tariff would be INR 3.12 ($0.0467) or INR 3.15 (0.0471). Jha added, however, that bundled price might be cheaper than the current market price of power from thermal plants.

Currently, the price of solar power in wholesale markets ranges between INR 5 ($0.0748) and INR 6 ($0.0898).

Critics of the government plan argue that it makes little sense to extend the lives of ageing coal-fired plants in order to subsidize solar energy when PV is becoming increasingly competitive on a stand-alone basis.