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.
The tariff-based competitive bidding for 1 GW wind projects brought down the tariff to a record low of Rs 3.46 per unit in February this year which further dropped to all time low of Rs 2.64 per unit in a similar auction earlier this month.
"We will go for 2-3 more such auctions for the wind power projects as there were very encouraging results in bidding this month for 1 GW capacity where tariff dropped to Rs 2.64 per unit," a senior official of Ministry of New and Renewable Energy told PTI.
Asked whether these auctions would be held by this fiscal end, the official replied they may stagger to 2018.
"There is a due process for conducting such auctions and these are purely demand based. It will all depend on demand. But we are sure about 2-3 more round of auctions for wind power project," he said.
The ministry had planned auction of 4 GW wind projects during the current fiscal, which is also needed to meet the target of having 60 GW of wind generation capacity by 2022.
At present, India has wind power capacity of 32.5 GW. Therefore, India would have to add around 6 GW to achieve the target of 60 GW by 2022.
Solar power has seen a similar play, where the tariff had dropped to a record low of Rs 2.44 per unit in a tariff-driven bidding earlier this year.
The competitive wind and solar tariff will be a big boost for India's ambitious target of achieving 175 GW of renewable energy by 2022. Investment of $100 billion is required to achieve this target, as per the government estimates.
India already has an installed renewable power generation capacity of 60 GW.
Buoyed by the success of 2 tariff-based bidding for wind power projects, the government will go...
Wind power tariffs have touched new lows after price discovery through competitive bidding began. Mahesh Palashikar, CEO, Onshore Wind Asia Pacific, GE Renewable Energy, believes that the company’s global experience and technological expertise will help it sail through the transition phase. The wind equipment maker recently forayed into wind farm EPC with a 50 MW turnkey project in Andhra Pradesh, Palashikar says in an interview with Anupam Chatterjee. The company is also preparing to come up with products customised to be set up in places with relatively lower wind speed. Excerpts:
Is GE taking any specific measures to confront the current transition in the wind energy sector?
The biggest advantage GE has in this scenario is that being a global player, we have learnt to prepare for such situations from all across the world. The transition from FiT to reverse auction is a reality across the globe. GE has dealt with similar transitions in the wind sector in Brazil, Germany, Spain and Chile. We have realised that wind tariffs would come down and ultimately technology plays the biggest role in doing so. To that end, we are continuously working on research and development at our centre in Bengaluru. We are coming up with different kinds of value addition solutions. We have realised that as developers use up the most conducive places in the country to set up wind power projects, we are gradually entering a low wind-speed regime. Our technology team in Bengaluru is working on products to cater to such needs.
With power tariffs coming down, do you think equipment makers need to rethink their pricing strategy?
Primarily, to let renewable energy grow, it has to be made affordable. Power producers would ultimately gain when their turbines produce more units of electricity, at lower costs, through better technology. Therefore, we have decided to maintain our focus on providing reliable and sustainable technology to our customers. We have a plethora of value addition services for our customers.
Our life-cycle services solutions help customers improve reliability and sustainability of wind projects. GE also offers financing solutions to customers who need them, as with lower tariffs this is one particular aspect which would play a crucial role in determining the IRRs of power producers. Our wind farm engineering team in Bengaluru analyses the wind pattern in a particular area and suggests the most suitable technology that needs to be adapted so that developers can generate maximum revenue from that place. Our philosophy is simple, if our customers make money, then at the end of the day we will make money.
Of late, equipment makers are participating in wind development auctions to capture markets. What are your views on such business model?
Every company has their own strategic priorities. We intend to keep our focus on our strong points: technology, digital and financing. There are pros and cons of every kind of strategy. We are also foraying into the turnkey project development business. We have started looking into good potential windy sites. There are customers who prefer to be offered a complete package of ready-made projects. We have successfully completed one such 50 MW project in Andhra Pradesh. We will execute these projects in compliance with GE standards. This also allows us to grow further. We believe there is merit in this model. We may not participate in bids ourselves, but our customers can take up such completed projects after they quote the lowest tariff in reverse auctions.
What do you think are the main challenges, policy or otherwise, that the renewable industry is facing today?
The government is extremely supportive to the renewables industry. The industry is going through a transition and we must stay committed and invested as the sector passes this phase. Adaptation and improvisation is the key.
The other challenge that the sector faces concerns the infirm nature of power it generates. Development in the wind-solar hybrid technology might improve the reliability of renewable power. The MNRE is charting documents on the wind-solar hybrid technology. When the policy takes such a pragmatic approach, we believe that solutions to match the policy would definitely follow.
GE has come up with a wind-solar integrated solution at the turbine level and we are still working to improve it. I think storage is going to be the next frontier of technology breakthrough for renewable energy. Our Bengaluru research centre is specifically focused to find a cost-competitive storage solution.
The country's energy projects could face difficulties with officials demanding...