Rewa bathes solar sector in new sunshine

[Source  – SOLAR QUARTER, Date – 19th July, 2017] See Link

Equity IRR seen at 12-13% despite bidding aggression; modules prices a key monitorableThe tendering out of 750 MW (250 x 3 blocks) of capacity at Rewa Ultra Mega Solar Park (RUMSL), a joint venture of Madhya Pradesh Urja Vikas Nigam Ltd and Solar Energy Corporation of India, in Madhya Pradesh on February 10, 2017, saw aggressive bids under Rs 3 per unit.

Up front, this reflects a newfound enthusiasm among the players, though we believe the low quotes can be attributed to the players’ quest for making a significant foray or building a large portfolio. Besides, the PPA is one of its kind in India, as it offsets the construction and operational risks via solar park infrastructure, a three-tier payment safety mechanism, guaranteed offtake of power and 5 paisa p.a. escalation in tariffs (for the first 15 years). Assuming that future PPAs are as sweet or better, and that the optimism sustains, this is good augury for the country.

The government plans to allocate 20 GW of ground-mounted solar-photovoltaic projects under the solar parks scheme, with an eye on faster execution of projects and a reduction in issues related to land availability, power evacuation and other allied infrastructure/utilities. As of January 2017, 34 solar parks had been identified for this across 21 states. Of these, three states with high solar irradiation and a high number of sunny days – Madhya Pradesh (2.7 GW), Andhra Pradesh (4 GW) and Rajasthan (3.3 GW) – are expected to host half, or 10 GW, of capacity.

We have assessed the economics of the bid winners, which have quoted Rs 2.97/unit, Rs 2.979/unit and Rs 2.974/unit, respectively, for the three 250 MW units