Why is the price of solar power higher in corporate PPAs when we compare with utility scale government tenders from SECI etc?

That’s a very good question, and we will try and answer it as comprehensively as possible here. Corporate PPAs in India have typically been at a 50 percent or higher premium over bids at government backed tenders, and for good reasons. Right at the top is the matter of scale. The low rates of Rs 2.50 and around that you see for solar tenders are for capacities that typically are in the 100 MW plus range, at the least.

Secondly, government tenders come with significant flexibility on location, something most corporate PPAs don’t. In a majority of cases, particularly large solar rooftops, the installations have to be in the same state or even corporate plant site. That impacts generation.

Then we have the issue of long term government PPAs versus corporate ratings, which affects cost of funds for the developer. Funds are typically raised for shorter tenures, at higher costs in case of corporate PPAs.

Finally, project timelines in government tenders are 24 months or higher, allowing developers to make the most of buying opportunities for key inputs like modules. In corporate deals, project timelines can be as little as 6 months, forcing developers to move faster with limited flexibility.

All of these add up to a significantly higher cost, and this is before taking into account multiple charges at state level open access regulations, versus supplying to discoms directly.