Some reliable sources have revealed that India’s solar power tariffs, which were reduced last December, are starting to rise again. The reasons for it are some factors such as higher commodity prices and an increase in imported solar equipment costs from next year.
Recently it has been showing up that solar developer’s bid for some areas with comparatively low solar radiation, which increases the cost of generating electricity. Along with this, rising costs in April 2022, 40% basic customs duty on solar modules and 25% on solar cells, are discouraging developers to bid.
For Example:
a) An auction for the 550 megawatts (MW) Agar solar park
- It is a joint venture between Solar Energy Corp. of India (SECI) and Madhya Pradesh UrjaVikas Nigam Ltd.
- The quoted winning bids by O2 Power Pvt. Ltd is ₹2.44 per kWh for 350MW.
- The quoted winning bids by Avaada Energy Pvt. Ltd is ₹2.45 per kWh for 200MW.
b) An auction for 500 MW Maharashtra State Electricity Distribution Co. Ltd (MSEDCL)
- The quoted winning bids by Acme Solar Holdings Ltd is ₹2.42 per kWh for 300MW.
- The quoted winning bids by ReNew Power Ventures Pvt. Ltd is ₹2.43 per kWh for 200MW.
c) For a 450 MW at RUMSL’s Shajapur solar park,
- State-run NTPC Renewable Energy Ltd won the bidding
- The winning bids were ₹2.35 per unit for 105MW and ₹2.33 per kWh for 220MW.
- Solar Arise India Projects Pvt. Ltd also got a deal at ₹2.33 per kWh.
As per the industry experts, from here on the tariff will remain constant.
“While the tariffs are firming up, the returns are stable. The current bids in Maharashtra and Madhya Pradesh reflect that once you move out of solar radiation-rich areas such as Fatehgarh, the tariffs quoted by developers increase due to lower radiation intensity. Also, commodity prices being at an all-time high has impacted the cost of structures and other BO (balance of system) items,” said Peeyush Mohit, chief operating officer at O2 Power Pvt. Ltd.
“A high solar module price of 25 cents per kWh may not only reduce returns on bid-out projects by 200 basis points but may also increase solar power tariffs by 10-15 paise per unit in future bids,” Crisil Ratings.
“Along with these factors, the notification of basic customs duty on solar modules and cells issued by the government is also reflecting in the recently quoted tariffs,” said Mohit of O2 Power.
India is running the world’s largest clean energy program. At present, the solar generation capacity of India is 41.09 GW and by next year India is planning to increase it to 100 GW.
As of now, the domestic capacity manufacturing capacity is only 3GW for solar cells and 15GW for solar modules.
Seeing this, the recovery of tariff from the record lowest point of ₹1.99 from last year’s December auction is very important.
“The increase in recent solar tariffs is a reflection of the increased customs duty that will come into force in April. This is probably the new normal for solar tariffs as the era of cheap imports comes to an end. While this will lead to an increase in electricity tariffs for consumers, it helps companies to manufacture solar modules under Make in India initiative,” said Sanjeev Aggarwal, founder and managing director of Amplus.
“Surely everyone would have their logic for the quoted tariff and have a process of tariff approval within their system. Also, this is dependent on how much is the bid MW part of the total portfolio and helps move the needle in the scheme of things,” said Sanjay Aggarwal, MD of Fortum India Pvt. Ltd and global head for solar at Fortum.
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