Led by an increase in raw material prices and demand in China rising to an all-time high, tier-1 module prices have gone up to around 38-39 cents per watt peak — they were estimated to stay in the sub-30 cents/watt peak range.
For, solar power developers have had to confront the sobering reality of a more than 15% rise in prices of solar panels over the last four months.
Even as falling tariffs at renewable auctions have made headlines in recent months, the naysayers who question the viability of such projects have more to cite in their favour. For, solar power developers have had to confront the sobering reality of a more than 15% rise in prices of solar panels over the last four months. Led by an increase in raw material prices and demand in China rising to an all-time high, tier-1 module prices have gone up to around 38-39 cents per watt peak — they were estimated to stay in the sub-30 cents/watt peak range.
Significantly, going by the trend of a 2-cent fall every quarter, solar developers were expecting module prices to drop to 25 cents per watt peak when they bid aggressively. Modules make for nearly 60% of a solar project’s costs. Module prices fell by about 26% last year, benefitting new and under-construction solar projects — tariff fell to a record low of rs 2.44 kWh at the Bhadla Phase III project in Rajasthan in May this year, a drop of around 17% from the bid rate of Rs 2.97/kWh in February.
Somesh Kumar, executive director at E&Y holds tariffs were sustainable till the level of Rs 3-3.20/kWh keeping in mind the module prices (+-15-20%). “However, Rs 2.44/kWh seemed a little ambitious in the current scenario. Such tariffs are not sustainable, unless developers have tied up cheap finances where increase in equipment cost won’t hit project viability.”
Explaining the rise in module prices, IHS Markit, an information handling and analytics company, has said 26 GW of solar installations were completed in China in the first half of 2017, and another 12 GW are expected in the third quarter of 2017. It has forecasted 45 GW of installations for the country in 2017. Gajanan Nabar, CEO of CleanMax Solar, tells FE that Chinese panel manufacturers are seeking renegotiation of prices given the sharp rise in panel prices. “The challenge as of now is the volatility in prices that puts a question mark over future tariffs,” he says.
Unlike their Chinese counterparts, Indian solar panel manufacturers have passed on the increase in panel prices. Nimish Jain, head- global sales, Modules, Vikram Solar, India’s largest solar module manufacturer says, “since our price commitments hold for only 6-7 days, we do not need to renegotiate contracts.” Industry experts say companies need to be careful while bidding for solar projects in the near future, even as projects that saw aggressive bidding will feel the heat if prices do not start falling by March-April next year.
Kunal Chandra, India head of UK-based solar power company Proinso, is more optimistic, saying module prices should drop after December when demand in China is expected to come down. “Even if demand from developers slackens by 50% in China as the FIT or subsidy on solar PVs is reduced, the impact on panel prices would be substantial. We expect the prices to fall from the first quarter of calendar year 2018,” he says. Chandra highlights that projects like the Bhadla project in Rajasthan have around an 18-month period of execution, conceding that high module prices beyond March-April next year could spell trouble for developers.
Source: financialexpress
