India’s strategy of a foreign currency-denominated tariff plan for solar energy is aimed at providing solar power at a new low of Rs.4.75 per unit to the states.
Firms such as state-owned NTPC Ltd will call for bids from solar project developers for buying 15,000 megawatts (MW) on behalf of the ministry of new and renewable energy (MNRE) that will then be sold to the states. NTPC will run a reverse bidding process for procuring solar-powered electricity in foreign currency-denominated tariff to reduce risk. It will provide a purchase guarantee, making such projects bankable and help solar power eventually cost the same as that purchased from the grid (this is called grid parity).
This foreign currency denominated tariff plan may involve bundling with unallocated thermal power as a backstop arrangement, in the event of the rupee depreciating beyond a particular level. The move is aimed at attracting foreign investors to India’s solar energy sector by reducing the foreign exchange risk involved.
India may include yen along with dollar, euro in the basket of currencies it is considering for a foreign currency-denominated tariff plan for solar energy.