Solar energy tariff is likely to go up by 20-25 paise per unit in upcoming bids for projects as compared with rates seen over the past six months, according to an ICRA report on renewable energy.
The report further adds that the tariffs are likely to remain competitive at less than Rs 3 per unit.
The reasons behind the projected hike is the increased cost of module prices and the GST of solar equipments, stated the report.
The increase in cell and module prices is likely to moderate the debt coverage and return metrics for the projects bid out over the past one year and with expected commissioning over the next 6-12 months, it said.
Also due to the supply chain constraints arising from disruptions in China are delaying the project execution timeline, the report said.
An increase in the polysilicon prices have increased the cost of Mono PERC PV modules in India by over 35% from 19-20 cents/watt in December 2020 to 22-23 cents per watt in June 2021 and further to 27-28 cents per watt in October 2021.
The disruption in manufacturing operations across the value chain of solar PV modules in China owing to the prevailing power cuts is leading to elevated price levels for solar PV cells and modules. Given the likely continuation of these power cuts amid the emission control targets in China, the prices are likely to remain elevated in the near term, it also stated.
Apart from the polysilicon, the cost pressures for solar power projects are arising from the sharp jump in the steel and aluminium prices which are used in mounting structures and back sheets for solar PV modules respectively, the report said.