Fear continues over sustainability of India’s low tariff projects, say developers

ICRA, the Indian rating agency has warned in early September, due to increasing prices of imported panels by 15% over the last three months,  PV projects planned to sell power below INR 3.5/kWh are at risk.

While module prices have increased from $0.30-0.32/W in May 2017 to $0.35-0.37 at present. In accordance to May prices, Acme Solar attained the lowest ever bid in India at INR 2.44 ($0.037)/kWh for Bhadla Solar Park in Rajasthan.

However, Manoj Kumar Upadhyay, Acme Solar’s chairman, told the Financial Times, that he would not make the same bid again, stating that it will not work at the current price of $0.35/W, and may increase the project expense.

Apart from two critical reasons for the price increase; that is, the growing import of Chinese modules in the U.S. market and the extension of the feed-in tariff regime for solar power projects in China. Upadhyay also reasoned introduction of a goods and services tax in India.

He said, “While the tax on a solar panel is only 5%, that of other materials we use, such as steel or copper, inverters, has gone up to 18%.”

Upadhyay said that if he was bidding again, “the price would be closer to INR 3 ($0.046)/kWh.”

However, India’s solar sector is continuing to rise, and will achieve 8 GW of solar installations at the end of this year. But the prevailing power surplus situation in India suggests that slowdown in solar power demand may continue for three to four years to restrict installation to only 5-6 GW per year, says Bridge to India.

Similarly, market experts are warning that the developers who reached such low tariffs and won projects will be unable to build the projects.

“People are making aggressive assumptions, and not all these new parks will get built at the prices being offered,” said Sumant Sinha, Chairman, and CEO of Renew Power, which failed to match the Bhadla’s winning bid, told the Financial Times.

Upadhyay insisted Acme Solar would complete its part of the Bhadla 200 MW project, but added that the final price might have to rise.

“The contracts have a clause to say we can get compensation if a change in law pushes our costs up,” he mentioned. “That would apply to the GST or anti-dumping measures.