India’s race to the bottom for solar power prices has resulted in some unintended consequences. These range from some electricity distribution companies (discoms) wavering on signing power purchase agreements for projects awarded at higher tariffs to postponement of some tenders, according to consulting firm Bridge to India.
The latest milestone was the new record low tariff of Rs 3.15/kWh quoted by France’s Solairedirect SA at the auction of a project in Andhra Pradesh on April 12. This is expected to fall further during bidding for 750 MW of solar power projects in Bhadla, Rajasthan.
“Solar tariffs in the sub-Rs 3.50/kWh (US¢ 5.4) range should provide huge demand boost for solar power in the long run but ironically, lower tariffs have led to unique challenges in the short-term. Central and state governments are reconsidering their procurement policies leading to postponement of some tenders. Meanwhile, some discoms, having completed auctions with higher tariffs (notably Jharkhand and Odisha), are now having second thoughts on signing PPA’s,” Bridge to India stated.
The solar space has already seen a significant decline in tariffs from Rs 10.95-12.76/kWh in 2010-11. Solar power tariffs have declined sharply because of plunging prices of solar modules. Modules account for nearly 60 per cent of a solar power project’s total cost and their prices fell by about 26 per cent in 2016 alone.
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