A rise in prices of Chinese solar modules and shift to tariff-based competitive auctions are affecting solar power and wind power projects in India. Acme Group and Inox Group that bid the country’s lowest solar and wind tariffs respectively this year now plan to exit the projects.
Inox Wind Infrastructure Services Ltd bid Rs3.46 per kilowatt-hour (kWh) to win a 250 megawatt (MW) wind power contract in a 1 gigawatt (GW) tender by state-run Solar Energy Corporation of India (SECI) in February.
Acme Solar Holdings Pvt. Ltd placed a winning bid of Rs2.44 per kWh in May to set up 200MW capacity at the Bhadla solar park in Rajasthan in another auction also conducted by SECI.
Any solar module price increase will impact the internal rate of return (IRR) with the power purchase agreements (PPAs) already being inked. Module prices account for nearly 60% of a solar power project’s total cost and are currently around $0.37 per watt. On the wind side—as the sector is transitioning from a FiT (feed-in tariff) regime to tariff-based competitive auctions, there is a complete standstill in addition of new capacities.
These developments have put a break on very few viable green-field opportunities and at the same time, brown-field acquisition opportunities appear better than greenfield projects. This has resulted in a sudden uptick in M&A (mergers and acquisitions) and so we are witnessing strong interest from yield investors and developers.