Tariff will be lower than Rs 3.6 per unit: ReNew Power's Sumant Sinha

Goldman Sachs-backed ReNew Power, which won the country’s first round-the-clock solar power tender, is confident of providing power at a levellised cost that is lower than industry calculations.

ReNew quoted a winning tariff of Rs 2.9 per unit (kwh) for the complete capacity of 400 MW offered by the government. 

The tender allows a 3 per cent annual escalation in tariff for 15 years, taking the levellised tariff (average tariff over the life of the project) to Rs 3.6 per unit. 

Speaking with Business Standard, Sumant Sinha, founder & chief executive officer (CEO), ReNew Power, said the tariff quoted for the project is not high. Rather, it is very competitive. “I would say average tariff would be lower than what you are saying (Rs 3.6/unit),” he said.

At Rs 3.6 per unit, the tariff is closer to the average rate for thermal power in India. The round-the-clock tender was floated by Solar Energy Corporation of India (SECI) to supply power from the solar plant throughout the day. SECI is the nodal tendering agency under the ministry of new and renewable energy. The project will have 80 per cent plant load factor (operational capacity). 

Unlike most solar units, this project would provide power for 24 hours. The tender had proposed that solar power would either be blended with other sources such as wind or hydro or it could have an energy storage system. 

Sinha refused to disclose the option he will choose but said the project’s design and innovation would keep the cost in check. 

“For example, procurers won’t buy more than 100 per cent power from you. But in designing the plant, you end up with times when the power generation is more than 100 per cent. We have to account for conditions such as these. 

That is why the tariff has been so aggressive. But it was quite lower than what the government was expecting,” said Sinha.

He also said the capital cost of most companies is higher than what regulators assume in their calculations. This, therefore, increases the discounting rate that the companies take. 

The Central Electricity Regulatory Commission (CERC), in tariff determination for renewable power, provides for a discounting rate. This rate is the ‘post-tax weighted average cost of capital’ or the cost of capital over the period of the project. This rate is higher than the capital cost and is added to the total bid amount quoted by a company. Sinha said even after taking a higher discounting rate, the tariff quoted by his company is “lower than even the discounting rate of the CERC.”

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The Centre is also planning another round-the-clock scheme, which will involve blending thermal power with renewable, and selling them together at an average rate. 

Sinha said the idea behind this scheme is to help stranded thermal projects. 

“There is a lot of unsold thermal capacity in the country. I think this is an attempt by the government to combine the unused thermal capacities with renewables and provide a product that may be attractive to certain distribution companies,” he said.

Another idea was to have renewable power running at all hours. This is to have energy storage or hybrid units of wind, hydro and solar together. “It depends on the cost of storage, which is high currently. It also depends on the profile of power generation that matches the demand curve. I think by blending wind and solar, one can get fairly close to that demand curve,” said Sinha.