India’s 25% safeguard duty on solar equipment from China and Malaysia came into effect on July 30, and the solar industry anticipated an immediate 10-15% tariff hike. The tariff in the Odisha auction, however, did not rise as much as feared.
Aditya Birla Renewables successfully bid for 75 MW at Rs 2.79 ($0.041)/unit, followed by 50 MW for Eden Renewable Varenne at Rs 3.19 ($0.047)/unit. Acme Solar won 30 MW at Rs 3.20 ($0.048)/unit, while Sukhbir Agro and Gupta Power Infrastructure got 25 MW and 20 MW, respectively, both at Rs 3.19 ($0.047)/unit.
The lowest tariff in the Odisha auction was under the lowest prices found in auctions in Uttar Pradesh, Karnataka and Gujarat this year.
“This tender allows pass-through of safeguard duty; but even then the low tariffs are a bit surprising because Odisha has lower Global Horizontal Irradiance (GHI) in comparison to other states. Add to it the ever-persistent land acquisition issues that could prevail over time,” solar consultant Urvish Dave told pv magazine.
“The PPAs have not been executed between the State and the bidders yet. Hence, one should not consider the low tariff at the Odisha auction as a benchmark for post duty-imposition tariff,” he added.
In April 2018, bidding norms were amended to allow pass-through of changes in taxation, allowing the developers to pass through the tariff increase to the off-takers.
The Odisha auction might have surprised the solar industry, but a tariff hike seems imminent. Sabyasachi Majumdar, Group Head, Corporate Ratings, ICRA, predicts a “likely increase in the bid tariffs to Rs 2.90-3.10 per unit for the upcoming bids” while Dave is anticipating “a minimum tariff revision and a hike of around 12-18% per unit from the bidders.”
In a statement, The Energy & Resources Institute (TERI) said that the safeguard duty will also result in higher average power purchase costs (APPCs) for the buying utilities, as well as higher consumer costs.
In 2010, when the first 150 MW of solar was tendered in India under the National Solar Mission (NSM) Batch-I, the average tariff quoted was Rs 12.16/kWh. Average tariffs have fallen by about 73% since 2010, almost in line with Chinese spot PV module prices, which have fallen by approximately 80% since 2010.