Solar energy tariffs drop to record highs as costs rise

India’s solar energy tariffs are starting to rebound from record levels last December, boosted by factors such as rising commodity prices and an increase in the cost of imported solar equipment from next year, said two people aware of the problem.

Recent auctions have shown that developers take into account comparatively lower solar radiation in some areas when submitting their bids. Lower solar radiation increases the cost of generating electricity. In addition, rising commodity costs and a base tariff of 40% on solar modules and 25% on solar cells that will be imposed from April 2022 are influencing the hotly contested auction rounds. , developers calibrating these new realities while placing bids.

For example, the 550 megawatt (MW) Agar solar farm auction called by Rewa Ultra Mega Solar Ltd (RUMSL), a joint venture between Solar Energy Corp. of India (SECI) and Madhya Pradesh UrjaVikas Nigam Ltd, saw winning bids for 2.44 per kWh for 350 MW and 2.45 per kWh for 200MW quoted by O2 Power Pvt. Ltd and Avaada Energy Pvt. Ltd, respectively.

In addition, an auction called by Maharashtra State Electricity Distribution Co. Ltd (MSEDCL) for 500 MW resulted in bids for 2.42 per kWh for 300MW and 2.43 per kWh for 200 MW by Acme Solar Holdings Ltd and ReNew Power Ventures Pvt. Ltd, respectively.

The trend continued for tenders for 450 MW at RUMSL’s Shajapur solar farm, where winning bids from 2.35 per unit for 105MW and 2.33 per kWh for 220 MW were cited by the state-owned NTPC Renewable Energy Ltd. In addition, SolarArise India Projects Pvt. Submission Ltd. 2.33 per kWh to land a 125 MW contract.

The offers are part of one of the largest 9 gigawatt (GW) slices of clean energy contracts currently on offer. These contracts, representing an investment of more than $ 4 billion, are offered after a long lull and relate to the assembly of solar, hybrid and wind projects, as reported. mint earlier. While the 6.68 GW capacity is auctioned by SECI, MSEDCL and RUMSL are bidding for contracts for 1 GW and 1.5 GW, respectively.

Industry experts predict that prices will remain firm from now on.

“As prices firm up, yields are stable. Current offers in Maharashtra and Madhya Pradesh reflect that once you leave areas rich in solar radiation such as Fatehgarh, the rates offered by developers increase due to lower radiation intensity. In addition, commodity prices reaching an all time high had an impact on the cost of structures and other balance of system (BO) elements, ”said Peeyush Mohit, COO at O2 Power Pvt.

A high solar module price of 25 cents per kWh may not only reduce the yields of bidding projects by 200 basis points, but may also increase solar power tariffs by 10 to 15 paise per unit in future bids. , Crisil Ratings said in a recent statement.. Solar power tariffs in India hit a record high of 1.99 per unit in December 2020 at auction conducted by Gujarat Urja Vikas Nigam Ltd. “Along with these factors, the government issued notification of basic tariffs on solar modules and cells is also reflected in the recently cited tariffs,” Mohit said. of O2 Power which is backed by Temasek Holdings of Singapore and Stockholm-based alternative asset manager EQT Partners.

The resumption of solar tariffs is gaining in importance as India runs the world’s largest clean energy program. India, which has a solar generation capacity of 41.09 GW, plans to increase it to 100 GW next year. Meanwhile, the domestic manufacturing capacity is only 3 GW for solar cells and 15 GW for solar modules. “The recent increase in solar tariffs is a reflection of the increase in tariffs that will take effect in April. This is probably the new standard for solar tariffs as the era of cheap imports comes to an end. While this will lead to increased electricity tariffs for consumers, it helps companies manufacture solar modules as part of the Make in India initiative, ”said Sanjeev Aggarwal, Founder and CEO of Amplus , owned by Malaysian oil and gas company Petroliam. Nasional Bhd.

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