Record prices
The recent auction by SECI for 1,070 MW of solar projects in Rajasthan resulted in bids at a rate of Rs 2 per kilowatt hour by Sembcorp Energy India Ltd., NTPC Ltd. and Al Jomaih Energy and Water Co, based in Saudi Arabia.
In December, NTPC, Torrent Power, Aditya Birla Renewable and Al Jomaih submitted bids at Rs 1.99 per unit, the lowest of any company, in an auction led by Gujarat Urja Vikas Nigam for a capacity of 500 MW.
According to Kashish Shah, a research analyst at the Institute for Energy Economics and Financial Analysis, solar tariffs in India are now lower than the fuel costs to run existing coal-fired power plants.
The low tariffs stem from the enthusiasm of foreign companies to enter the Indian market, lower borrowing costs and lower module price expectations, said Prashant Sinha, chief risk officer at L&T Infrastructure Finance Co.
In March, India approved a basic tariff of 25% on imported photovoltaic cells and 40% on imported solar photovoltaic modules from April 1, 2022. Prices of imported modules also increased due to rising input costs and plant closures in China. Components contribute half the cost of a project.
Sabyasachi Majumdar, senior vice president of ICRA Ltd., sees project costs increase by almost 23-24%. This would increase tariffs from 45 to 50 paise per unit, but still below Rs 3 per unit, he said.
Subrahmanyam Pulipaka, chief executive of the National Solar Energy Federation of India, predicts an increase of at least 25-30%.
Future costs
Industry will have to take into account transport costs, currently borne by thermal power plants and waived for renewable projects until mid-2023. Pulipaka said the industry has written to the Ministry of New and Renewable Energy to extend the waiver until December 2023 so that projects under construction are not affected.
If the interstate transportation costs remain, it will encourage companies to set up projects in consumer states, Tuli said. The other possibility is that depending on the new charges introduced, companies can continue to invest in countries with strong sunshine or strong winds and pass the additional transmission costs on to customers, he said. “In any case, the political framework for renewable energies will have to evolve to ensure the continuation of the energy transition. “
