Home India Chinese winter for solar plants as PV module prices rise
Chinese winter for solar plants as PV module prices rise

Chinese winter for solar plants as PV module prices rise

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Even before electricity-generation could start at the solar parks that saw rock-bottom tariff bids, these projects may face financial troubles thanks rising prices of Chinese solar photo voltaic (PV) modules.

This, coupled with aggressive bidding is likely to impact the viability of the solar projects that were recently awarded, especially the ones where bid tariff is below Rs 3.50 a unit.

Solar PV modules are primarily procured from China as manufacturing them in India is not financially viable. If PV modules are made in India, the final product would cost much more than what it is available in the global market, shared an industry player.

“The imported photo voltaic module price levels have shown an upward trend over the last three to four months, increasing by about 15%, from about 30-32 cents/watt in May 2017 to about 35-37 cents/watt in August 2017,” read an Icra Ratings report.

This rise is due to the advancement of module sourcing from China by the US companies in anticipation of an imposition of anti-dumping duty on Chinese modules by December 2017. Another factor is the extension of feed-in tariff regime for solar power projects in China till September 2017, thereby increasing the domestic demand in the country.

Sabyasachi Majumdar, senior vice president and group head of Icra Ratings said in the report, “Such pricing pressure, if sustained over the next three to six month period, will adversely impact the viability of recently-bid solar power projects, where bid tariff is below Rs 3.50 per unit. Further, any delays in delivery schedule, dishonouring price terms agreed earlier by Chinese original equipment manufacturers to the Indian independent power producers having solar power projects under implementation may lead to risks of delays along with cost over-run.”

Earlier this year, Solar Energy Corporation of India and NTPC’s ultra mega solar power project in Rewa, Madhya Pradesh, marked the beginning of low tariffs in this space. The bid for the first-year tariff was Rs 2.97 per unit of electricity and a levelised tariff of Rs 3.30 per unit over the term of 25 years.

As on August 2017, the solar energy project capacity awarded through National Solar Mission and state policy route, with tariff below Rs 3.5 per unit, stood at 3,250 megawatt (mw).

Of the 3,250 mw, 750 mw capacity has tariff below Rs 3 per unit, varying between Rs 2.44 per unit and Rs 2.65 per unit, while the tariff for balance 2,500 mw capacity varies between Rs 3.15 per unit to Rs 3.47 per unit.

Due to such competitive bidding, distribution companies have been unsuccessfully asking power producers to renegotiate power purchase agreements.

An earlier report by global rating agency S&P, analysts had raised concern that rapid growth in India’s renewable energy industry has led companies to become highly leveraged and face operational risks. Perhaps, this concern is likely to turn out to be a reality.

Source: dnaindia
Anand Gupta Editor - EQ Int'l Media Network

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