solar tariff

Weird – Record Low Solar Tariff Of Rs 2/unit Is Not Sustainable For All

The latest auction — conducted by state-run SECI for supplies to consumers in Rajasthan, saw the record low solar tariff of Rs 2/unit for building 200 MW and 400 MW solar projects, respectively — Saudi Arabia-based Al Jomaih Energy and Water and Green Infra Wind Energy, a unit of Singapore-based Sembcorp Industries, quoted them.

The record low solar tariff is a reflection of the current environment of lower interest rates, expectations of further decline in solar panel prices and having an assured buyer.

However, experts caution that if module prices do not fall and utilization levels of the plants are below 23%, the equity internal rates of return (IRRs) for the projects could slip significantly to single digits.

Earlier equity IRR of more than 14% was considered good, but now with falling tariffs and increasing competition, most developers are estimated to be getting equity returns of 12-13%, leaving very little margin for error if there are unplanned project delays or curtailments.

Expert claim that the aggressive low solar tariffs quoted by the foreign funded companies is due to their eagerness to establish themselves as serious solar players in the Indian market, where the renewable energy base is seen to quadruple in the coming decade.

Sembcorp, already has a significant presence in the country’s wind sector and has recently commissioned a 300 MW project in Gujarat which it had won in the third round of the SECI wind auctions where the lowest tariff of Rs 2.44/unit had been discovered.

solar tariff

Module prices currently stand at $0.17/wp, around 13% lower than last year, and it remains to be seen if the rates have already bottomed out. They comprise about 65% project cost for solar power plants.

Reference- Financial Express, JMK Research & Analytics Study, Economic Times, Mercom India