Analysing the impact of various incentives on solar tariff in India

Abstract

In India, solar tariff has been witnessing a continuous fall since the announcement of revised targets for the National Solar Mission (NSM) in the year 2015. This paper discusses components that decide the solar tariff and demonstrates the role of various incentives being provided in bridging the tariff gap between solar and conventional power. The paper concludes with a comparison of various incentives (viability gap funding (VGF), accelerated depreciation (AD), generation-based incentive (GBI), etc.) based on the cost-effectiveness index. Based on the analysis, it is recommended that as levelised cost of energy (LCOE) is coming down, the government may think of pulling back some of the incentive schemes such as VGF, AD, and GBI while some hidden incentive schemes such as waiver of inter and/or intrastate transmission charges and losses, etc may continue.

Keywords

• levelised cost of energy
• solar tariff
• viability gap funding
• generation-based incentive
• accelerated depreciation
• cost-effectiveness index