Solar tariffs fell to record lows last month when major players, including foreign firms, won separate contracts for building a 750 MW solar park in Rewa, Madhya Pradesh, with bids to supply power at less than Rs 3 per unit.
With solar power tariffs falling below Rs 3 per unit in auctions last month, a major player in the solar rooftop space says they are on course to fall further given that the recent demonetisation measure has come as a boost to industry because of the availability of cheaper finance. “Demonetisation is helping the industry get cheaper loans,” Kushagra Nandan, President of SunSource Energy, told IANS in an interview. SunSource Energy is a key player in the Indian solar space with 100-odd commissioned and under-execution projects spread across 14 states. “Even at the retail level prices are getting competitive with solar tariffs having come down to the range of Rs 5-6.50 per kilowatt hour (kWh). Tariffs are going to get lower,” Nandan said.
Solar tariffs fell to record lows last month when major players, including foreign firms, won separate contracts for building a 750 MW solar park in Rewa, Madhya Pradesh, with bids to supply power at less than Rs 3 per unit. Nandan said that banks being flush with funds, for lending at easier rates after the November demonetisation of high-value currency, has come as a boost for an industry to which investors are being drawn by the lure of good returns. “Investors are keen to invest in solar, which has become a proven investment mechanism offering 13-15 per cent return on investment, as compared to the single-digit returns coming in from FDs, for instance.
“Besides, there are tax concessions given by the government for investing in solar. We have a situation where a lot of inward enquiry is coming in for setting up in the sector,” the SunSource President said, referring to the Centre’s push for solar generation under the National Solar Policy 2010. “India has quickly become a mature solar market where people now understand that solar is the way to saving,” he said, pointing out that while the agriculture sector in India benefits from the cheapest electricity tariffs, for residential use rates range from Rs 4 to Rs 8 per unit, while power for commercial use fetches the highest tariffs ranging between Rs 6-14 per unit, depending on the region.
The government has set a solar generation capacity target of 100 gigawatt (GW) by 2022, and hopes to add 10.86 GW of utility-scale solar and grid-connected rooftop solar capacity by end of this fiscal. The Noida-headquartered SunSource, co-founded by Nandan and Adarsh Das, both of whom had studied and worked in the US, has come a long way since it was also launched in the year of the solar policy announcement in 2010. Company turnover this fiscal has touched Rs 100 crore and Nandan said they have set a target of Rs 500 crore by 2020.
Nandan said that the company has nearly 100 ongoing projects across the country and has opened offices in the US, as well as in Singapore in order to pursue business more aggressively in the Southeast Asian region with an ongoing 100 MW project in the Philippines. This complete solar solutions provider offering services on an engineering, procurement and construction (EPC) basis has to its credit some prestigious solar rooftop projects here like at the India Habitat Centre and Vasant Valley School, among others. Nandan and Das are among a breed of young entrepreneurs who have successfully developed a viable business model for rooftop solar in collaboration with corporates which have large rooftop spaces and other empty areas, at a time when ground-based large solar projects are discovering tariffs fallen to record lows.
Companies like SunSource have been offering big corporates like Tata Motors and Maruti Suzuki, as well as entities like airports, which have available large rooftop spaces and empty areas, to set up the entire project at the builders’ investment . In return, a long-term power purchase agreement is signed offering the industrial house tariffs cheaper than diesel generators, and which are also quite competitive with the industrial and commercial rates offered by distribution companies (discoms).
Unlike discom-scale solar projects, rooftop solar projects compete with diesel generators and industrial or commercial electricity rates. In this regard, Nandan said that they are also setting up solar projects for corporate customers providing systems to integrate with power supply generated by using diesel. Delhi-based solar consultants Sunkalp Energy in a note on the recent record low tariffs said that these were discovered for three states only, which fall under special category and have 70 per cent subsidy support. Besides being applicable to limited capacities from 0.5-1 MW, these also apply only to non-profit entities, the note said. The flip side to low tariffs is demonstatrated by large firms like Singapore’s Sembcorp, Italy’s Enel, Softbank and Adanis bidding recennly at Rewa at below Rs 3 per unit. According to analysts, such bids are assuming solar modules prices, currently at below cost, to fall further, which would impact their quality.