Pass-through facility and likely fall prices of Chinese PV modules enthuse investors.
After a brief lull caused by fears of a rise in the cost of imported modules, solar developers have regained their competitive aggression. The latest reverse auction for 2,000 MW capacity has discovered tariff of 2.44 per unit, which matched the lowest ever rate that was found in May 2017 for Rajasthan’s Bhadla projects.
An impending threat of a hefty 70% safeguard duty on solar cells and panels had pushed up the tariffs to as high as Rs 3.54 per unit, giving credence to the analysts’ fears that the lower rates would be unsustainable.
The possibility of China’s export prices for photovoltaic modules plunging in the wake of a policy to slow the pace of solar capacity addition in the country and a recent regulatory decision to allow pass-through of extra costs due to duty hikes seem to have enthused the players in the sector. Icra has estimated that every 8-cent-per-watt decrease in module prices (as a result of cheaper imports from China) would lower capital costs of Indian developers by about 13%.
According to sources, ACME Solar bagged a 600 MW project with the lowest tariff quote in the recent auction. Shapoorji Pallonji Infrastructure Capital quoted `2.52 per unit, winning 250 MW; Hero Solar Energy, Mahindra Susten and Azure Power have been awarded 250 MW, 250 MW and 600 MW, respectively, all at `2.53 per unit; Adani’s Mahoba Solar was awarded 50 MW for `2.54 per unit.
The Solar Energy Corporation of India would sign 25-year power purchase agreements with the winning bidders and sell the power to electricity distribution utilities. The ceiling tariff for the auction was set at `2.93 per unit. Acquiring land, permissions and other infrastructure to connect the upcoming solar projects to the electricity grid would be the responsibility of the developer.
The country’s renewable energy capacity stood at 69.6 gigawatts (GW) at the end of FY18. The target is to achieve 175GW of renewable power (including 100 GW solar and 60 GW wind) by FY22, which would require investments of $125 billion — $87.5 billion debt and the balance as equity. Recently, the government announced that the country would likely surpass the target and could install 225 GW of green power by 2022.
The threat of safeguard and import duties on solar panels had a dampening effect on bidders for new projects, with several states postponing and cancelling auctions due to muted interest from developers.
Recently, the Directorate General of Trade Remedies (earlier known as Directorate General of Safeguards) heard stakeholders’ proposals and suggestions on the issue; it is expected to take a call on the matter soon.
While domestic solar manufacturers want these duties, developers, who rely heavily on the imported products, wish otherwise. The ministry of new and renewable energy earlier this month amended the bidding norms for solar projects, clarifying that all duties can be passed through by raising tariffs under the “change in law” provision.
A recent study jointly conducted by the Council on Energy, Environment and Water and the International Energy Agency showed that solar projects are receiving a boost owing to the greater size of the capacities being put up for auction, by helping the developers manage the risks related to land acquisition and the availability of evacuation infrastructure. The lowering of these risks, besides aiding the achievement of economies of scale through large project sizes in solar parks, has also contributed to the significant decline in tariffs.