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Trailing solar energy cost through Goa Solar Policy
Trailing solar energy cost through Goa Solar Policy

By Indian Solar Market | Solar Energy in India, Tariff Trends | 0 Comments

If one would say that the cost of solar energy is going to drop in Goa, perhaps it wouldn’t surprise anyone anymore since the drop is now contagious across India and elsewhere on the globe. In fact, the drop was a phenomenon in India in 2015 & 2016 and may have now bottomed out in 2017. So what’s so special about Goa? The answer, Goa Solar Policy!

This solar policy perhaps plugs those gaps that have been overlooked by other states. Of all of those gaps, the most important is the inclusion of small prosumers who can set up a rooftop solar plant between 1-100 KW and can sell the entire energy generation to the grid of Goa Energy Department (GED) either with gross-metering. If they wish, they can go for net-metering as well. Large prosumers can set up a rooftop solar plant only with net-metering. Their requirement varies from above 100 kW & up to 2000 kW. Further, the solar policy introduces producers who can install capacities of various sizes in these brackets: (i) 100 kW-1 MW (ii) 1 MW- 5 MW (iii) 5 MW- 10 MW (iv) Above 10 MW. Producers will have to participate in reverse bidding in order to set up the project with gross-metering only.

The solar policy of Goa targets 150 MW solar project capacity by 2021. However, the fact that Goa is the smallest state of India, will limit the participation of MW scale projects. Therefore, smaller capacities are being included too. Team ISM analysed the solar policy, regulations and the tariff order to trail the cost of solar projects in Goa.


Goa Solar Policy is a step towards cost estimation of solar energy in consonance with other states

Regulation on grid Connected solar projects of Goa dates to May 2015. In July, the cost of solar energy started tumbling in India. Plummeting costs of solar panels and an unprecedented overly aggressive competition were the main reasons. This competition intensified further to record lowest solar energy tariffs. Currently, the solar tariff in India is around INR 3 per unit. Lowest tariff is INR 2.44. The regulation notified the feed-in tariff of INR 8.71 for capacities between 1-500 kW and INR 8.31 for capacities above 500 kW based on previous market trends.

In light of above, Goa Solar Policy comes out with greater clarity on capacity sizes and the tariff. Through the solar policy, the state government proposes to revise the tariff to INR 4 or below.


What will be the cost of solar energy after the formulation of the Goa Solar Policy-2017?

It is expected that by financial year end the solar policy of Goa will go fully operational. Anyone who wants to set up a new project will have to work in accordance with this policy. Until the first half of 2015, the cost of solar energy was high as the risk perceptions of the lenders were high. Subsequently, the investors’ expectations were higher too as shown here.

Trailing solar energy cost through Goa Solar Policy
Source: JERC; Indian Solar Market

However, those risk perceptions have moderated now. Also, the solar developers these days have access to cheaper finance.

Small Prosumers:

It is mentioned in the Goa solar policy that the state government will provide 50% of the capital cost as interest-free loans to small prosumers.

Accordingly, the graph shows a breakdown of the target tariff-INR 4. The figure in percentage shows the reduction in each of these components over the period of time. The analysis has been undertaken on INR 4, which is the solar policy of Goa targets as the maximum.  The cost will go below INR 4 per unit.

Trailing solar energy cost through Goa Solar Policy
* Figures are tentative; Source: Indian Solar Market Research

Team ISM has assumed the financing costs from the latest tariff determination regulation of CERC. Cost of equity is 14% whereas the interest rate on the long-term loan is 9.95%. As solar developers have access to cheaper loans and equity from overseas there still remains the scope of improving the economics. If the state government indeed provides the interest-free loan, the hurdle rate/WACC for these projects will be low. Investors may thus be able to supply equity at lesser rates.  In fact, these projects can have good economics even at IRRs between 7-8%.

Large Prosumers:

The solar policy does not endorse grants for large prosumers. Developers will, therefore, look overseas to raise funds to target these categories of consumers. Large prosumers can install rooftop solar plant only under net-meter. Goa solar policy defines large prosumers as HT consumers with a connected load between 100-2000 KW. Currently, these consumers pay the tariff to GED as shown:

Trailing solar energy cost through Goa Solar Policy
Source: JERC Tariff Order 2017-18; Charges include Energy charges, APPC & ED

As per the policy, HT consumers can use rooftop solar plant with the net-meter connection. They will have to consume most of the energy generated from the plant. Surplus energy will be offset against consumer’s bill. At the financial year end, any surplus unit will be credited at an average cost of GED. If the third party does the installation, it will charge the consumer a rate lesser than his tariff from the grid. As an example, an industrial consumer connected at 11/33 kV will ask the third party a rate lesser than INR 5.83. For more energy need grid will supply him energy at INR 5.83 or any other rate notified by JERC every financial year.


Producers can install solar plants with a gross-meter connection. They will have to sell the entire generation to GED. Here the cost is most likely to go below INR 4 for a number of reasons but will remain above INR 3.

The average cost of power purchase of GED is INR 3.47 per unit. The distribution licensee of Goa will, therefore, procure solar power at rates below INR 4. Even if the average cost of power purchase increases, GED will source solar energy at lower rates. But it is difficult to achieve a rate below INR 3. The solar policy states that land identification for setting up a project will be the responsibility of a producer. This takes away the advantage that had the bids with lowest tariffs where government identified the land for the bidders.

A number of states in 2017 have revised the capital cost of solar projects between INR 4-4.6 Cr. Team ISM analysis shows that the tariff moves between INR 3.20-3.55 per unit corresponding to the capital cost. IRR will be barely 6-7% and over 8% if the tariff is over and above INR 3.75.



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