Credit rating body ICRA on Thursday stressed on the importance of enhancing tariff competitiveness of solar PV energy against both alternate renewable as well as conventional energy sources. With declining module price levels and the bidding process adopted, the tariff competitiveness for solar PV projects has been showing an improvement in the last three year period, as seen from a decline in the weighted average bid tariff of Rs 6.79/kWh in the calendar year 2014 to Rs 5.01/kWh in the calendar year 2016.
Improving tariff competitiveness of solar PV energy thus remains favourable for the distribution utilities, according to ICRA.
In a bidding concluded on April 12, 2017 by NTPC for award of 250 MW solar PV project in Phase II – Batch II (Tranche 1) in Kadapa Solar Park in Andhra Pradesh, the competitive bid tariff discovered remained the at Rs. 3.15/kwh, which is the lowest so far.
This in turn implies a further decline of 4.5 percent over the previous bid tariff at Rs. 3.33/kwh for Rewa Solar Project in Madhya Pradesh during February 2017.
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“Viability of such tariff for project developer from its credit perspective will be critically dependent upon the availability of long tenure debt (up to 18-20 year post project completion date) at cost competitive rate as well as more importantly, its ability to keep the cost of PV modules within the budgeted levels and execute projects in a time-bound manner,” said Sabyasachi Majumdar, Senior Vice President and Group Head, ICRA.
“On the other hand however, project developers may have an incremental upside arising out of their ability to improve the PLF using trackers (till the ceiling level) or by a further downward movement in equipment prices over the execution period” he added.
Based on its assumption of a capital cost of Rs. 4.5 Cr. /MW and PLF of 21 percent, ICRA estimated cumulative average DSCR over debt tenure of 18 year at 1.20 time and project IRR at below 10 percent. Thus, any deviation in project parameters and cost assumptions may have an adverse impact on project returns and debt service ratios.