India has awarded solar power projects of around 9,000 Megawatt capacity after bidding in the past five months under the national solar mission and the state utilities schemes
New Delhi: Solar power tariffs are facing upward pressure thanks to the latest Depreciation of the Rupee against the Dollar, imposition of safeguard duty and rising interest rate scenario.
“While there has been a fall in PV module price level, solar bid tariffs in the near term remains exposed to cost pressure due to depreciation of Rupee by about 7 per cent over the last four months, given the import dependence on modules, an imposition of safeguard duty (which is currently on hold and rising interest rate scenario,” said Sabyasachi Majumdar, Group Head of Corporate ratings at ICRA.
He also said in a scenario where both the PV module price level and forex movement are volatile, the recent proposal of cap on tariff for solar tenders by the Ministry of New and Renewable Energy (MNRE) may impact bidding interest by the project developers.
India has awarded solar power projects of around 9,000 Megawatt capacity after bidding in the past five months under the national solar mission and the state utilities schemes. The weighted average bid tariff in in the current year stands at Rs 2.7 per unit, with lowest bid tariff quoted at Rs 2.44 per unit in July 2018.
This decline was largely driven by a 20 per cent fall in PV module price since May 2018 after policy changes in China impacted demand in that country and resulted in oversupply conditions there.
The agency said MNRE is proposing to cap solar power tariffs at Rs 2.68 per unit for projects using imported cells and modules, including the impact of safeguard duty. If the duty is not imposed on the imported cells or modules, the tariff cap would be reduced by 18 paise per unit. “If implemented, this may dissuade developers from participating in upcoming solar bids given the volatility in PV module prices and rupee-dollar exchange rate,” ICRA said.
While the matter on safeguard duty is sub-judice, in a positive development, the power ministry recently issued a directive to Central Electricity Regulatory Authority (CERC) to issue final orders on the change in law in a timebound manner.