Key Driving factors for falling bids in india
Ashok Kumar Nehra CEO, Enfrosun Power Private Limited
India recorded its lowest-ever solar tariff of Rs 2.44/unit of electricity. That is a 73% fall since 2010, and compares favorably with India’s cheapest power source–coal, electricity from which now ranges between Rs 3/unit and Rs 5/unit.
Major factors which are driving identification of such tariff in reverse auctions are following
1. Drop in cost of modules, the prices for which fell 29% in India in the first quarter of 2017 over the previous year.
2. The cost of debt is a major input into the cost of solar generation, which are available at betterrates due to implementation of payment security mechanism and infrastructure risk mitigation with solar parks
3. Given the operating costs are near zero once built. The rapid upscaling of investment has also encouraged learning by doing, driving the costs of implementing solar down along the entire value chain from finance, regulatory approval, engineering, procurement and construction (EPC), and land acquisition to grid connection.
4. Global capital flows into India are playing a key role as well, endorsing, supporting and encouraging the positive policy moves of the Indian government
5. These tenders have 12-18 months’ time limits for delivery
These new low prices are truly phenomenal, prices don’t need to go lower, at these levels solar is the low-cost solution for India’s growing electricity needs. A major long-term win for Indian electricity consumers, is also that these solar tariffs are fixed in nominal terms for the 25-year contract duration.
Mr. Gurpreet Chugh, Consulting Director/ Principal ICF
We have seen a sharp downward trend in India’s solar auctions recently. While largely this has been driven by falling prices of modules, which account for roughly 50-55% of the project cost, falling BoM costs and design optimisation have also allowed bidders to reduce tariffs.
We have seen a sharp downward trend in India’s solar auctions recently. While largely this has been driven by falling prices of modules, which account for roughly 50-55% of the project cost, falling BoM costs and design optimisation have also allowed bidders to reduce tariffs. We witnessed a continuous fall in module prices over the last few years and more particularly in the last 2 years as more and more Chinese modules came into India. Based on this trend, it seems that some of the recent bids expected this downward trend to continue and expected module prices would reach US ¢20-22 /Wp. However, the falling trend of prices was recently arrested and prices went back to US ¢32-34/ Wp. This trend reversal was driven by an aggressive race to complete commissioning of large PV capacities in China by June 31st as the lucrative FiTs of last year were expected to reduce from July. Chinese manufactures therefore focused their attention to the local Chinese market for the last 2 months as China witnessed a record 24 GW of installations in 6 months of 2017. It is expected that this year China will install 35-40 GW of solar PV in all. If we compare the annual demand of 30-35 GW of PV installations within China with the installed module manufacturing capacity of 65- 70 GW, it means that there is excess capacity installed in China. With US and EU imposing antidumping duties for Chinese modules, India is the next largest market for Chinese module. An overcapacity in China coupled with good FiTs within China means that Chinese module suppliers can sell modules at very competitive rates in India – even going down to short run marginal costs.
Whether this trend of falling module prices will again start in future is debatable. Particularly as India begins an antidumping investigation into import of cells and modules from China, Taiwan and Malaysia, it will cause anxiety in the minds of developers that have already quoted aggressive bids but not entered into arrangements to procure the modules. In case evidence is found and any anti-dumping duty is imposed on Chinese modules coming into India, it will mean that the power tariffs that we have seen may not fall further and could stabilise.