Going by recent reports, it appears that the Union government is contemplating withdrawing all kind of incentives that are being provided to renewables-based electricity by 2022. It is said that there will not be any targeting of renewable energy after 2020 (presumably no renewable purchase obligations, or RPOs, after 2022). Moreover, the draft National Energy Policy 2017 proposes gradual withdrawal of the provision of “must run” status and other support such as non-levy of interstate transmission charges. The sharp reduction in bids for solar and wind power forms the basis of the argument that now these technologies are ready to face markets.
If this is really the direction being pursued, there is an urgent need to view things in the right perspective. While the record low prices of solar power in the recent past have been on account of very low global prices of solar photovoltaic modules and accessories, there have been other underlying reasons as well. For instance, in the case of the Rewa solar park, the fact is that a payment security mechanism was put in place along with provisions for guaranteed uptake of electricity from the solar park. These critical aspects in turn helped bring down the cost of capital that constitutes about 70% of renewable electricity prices. Read More…
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