This is in addition to NTPC’s plans to set up 10,000 MW of solar power capacity on its own.

NTPC will run a reverse bidding process for procuring solar-powered electricity in dollar-denominated tariff to reduce risk.

It will provide a purchase guarantee, making such projects bankable and help solar power eventually cost the same as that purchased from the grid (this is called grid parity).

Renewable energy accounts for only 31,692.14 MW of India’s power generation capacity of 267,637 MW.

NTPC has an installed capacity of 44,598 MW.

“Solar is a clean form of energy and to make solar palatable and acceptable, it must be brought to the grid parity level. It can’t be supported through the subsidy route. We will be procuring 15,000 MW on behalf of MNRE. We will be taking the risk of buying this power on our balance sheet,” said a senior NTPC executive who spoke on condition of anonymity.

The government is looking to provide green power at less than Rs.4.50 a unit, and NTPC will sell the power it buys to the states. A pre-bid conference has been called on Saturday to discuss the matter.

The idea of dollar-denominated tariff has come from Piyush Goyal, minister for new and renewable energy, power and coal, who has said that the government is exploring various financing models for the renewable energy sector.

A second NTPC executive who asked not to be identified confirmed this.

Inviting dollar-based tariff bids along with sharing of hedging risks is expected to reduce the solar power tariff from around Rs.6.7 per unit currently to around Rs.4.37 per unit, with the firms freed from any foreign exchange risk.

To start with, 3,000 MW of this procured solar power will be bundled with 1,500 MW of unallocated power to bring tariffs further down.

While the present installation cost of a solar project is around Rs.6 crore per MW, economies of scale are expected to drive down the cost to Rs.4.5 crore per MW.

An MNRE spokesperson did not respond to an email seeking comment.

India needs as much as $200 billion to meet its target to install 100 gigawatts (GW) of solar power and 60,000 MW of wind power by 2022. But securing affordable, long-term and adequate funds has been a challenge for developers of clean-energy projects in India, where interest rates are high.

“Unallocated power will be bundled with solar power to bring down tariffs,” said Piyush Goyal at a conference organised by the Vivekananda International Foundation (VIF) in New Delhi on Thursday.

The government has pushed renewable energy to the top of its energy security agenda. NTPC has ambitious green power plans to raise the contribution of renewable energy to 28% to its planned capacity of 128,000 MW by 2032.

Developers welcomed the move.

“The scale is largely unprecedented. With economies of scale, the tariff will come down,” said Inderpreet S. Wadhwa, chief executive officer at Azure Power, a New Delhi-based renewable power generation company.

NTPC also plans to raise $500 million each from its first global rupee and green bonds sale that is expected shortly.

Speaking at the VIF conference, Navroz K. Dubash, senior fellow at Centre for Policy Research, said, “Renewable energy can’t take off if we don’t have credit-worthy buyers.”

The plan to reduce solar power tariffs comes in the backdrop of state electricity boards (SEBs) increasingly showing a reluctance to buy power on account of their poor financial health.

With a debt of Rs.3.04 trillion and losses of Rs.2.52 trillion, SEBs are on the brink of financial collapse.

The emphasis on solar and wind power is also expected to strengthen the country’s standing at global climate change negotiations that culminate in a summit in Paris in December.