Solar power developers in India wary as Chinese module prices seen firming up
India’s aggressive solar power tariff bids may get muted with Chinese module prices firming up.
Several developers and analysts spoke to said that the record low tariff of ₹2.44 per per kilowatt hour (kWh) at the auction of 500 megawatts (MW) of capacity at the Bhadla solar park in Rajasthan in May was quoted assuming the module prices to fall to around 23 cents per watt.
With the module prices currently around 32 cents per watt and the August delivery quoted at around 34 cents have made developers wary about the future tariff trajectory.
Modules account for nearly 60% of a solar power project’s total cost and their prices fell by about 26% in 2016 alone.
The module price have firmed up with China extending the feed-in tariff regime for the third quarter and US developers placing advance orders to shore up cell and module supplies in the backdrop of a demand for cap in prices for cheap imports.
Feed-in tariffs ensure a fixed price for power producers.
“There is a cause for concern given the aggressive solar power bids in the country,” added a project developer who had participated in the Bhadla solar park auctions conducted by state-run Solar Energy Corp. of India.
Most solar power developers in India have been sourcing solar modules and equipment from countries such as China where they are cheaper.
According to consulting firm Bridge to India, the Indian solar module market is dominated by Trina Solar (25.7% market share), Hanwha (10.5%) and Risen (7.6%), with domestic manufacturers’ accounting for only 10.6% market share.
“In an integrated international demand supply scenario, bidders have to take cognisance of the situation which can be largely beyond their control. If they assume an optimistic scenario while bidding and if one of the variables goes significantly wrong, then it can lead to complete unviability of the project,” added Sanjeev Aggarwal, managing director and chief executive of Amplus Energy Solutions Pvt. Ltd., a solar rooftop project developer.
India’s growing green economy has been fuelled by the government’s ambition around clean energy. India plans to generate 175 gigawatts (GW) of renewable energy by 2022. Of this, 100GW is to come from solar power projects.
“We feel there is a bit of irrationality in the competition,” said Pankaj Sehgal, chief executive officer, SUN Renewables, which is not present in the grid connected ground mounted large solar project space.
“The prices have gone up a bit in the third quarter, because in China, they were originally to do away with feed-in tariffs and move towards competitive bidding which is the norm in India. They have extended that feed-in tariff for the third quarter...Hence, the tariffs have tipped up rather than come down which has been the case,” added Sehgal.
Of China’s solar module manufacturing capacity, estimated to be around 70 gigawatts (GW) per year, the major markets are the US, India and China itself.
However, some believe that this is a temporary phenomenon. “It is a temporary phenomenon for the next three months,” said Sunil Jain, chief executive officer at Hero Future Energies Pvt. Ltd.
“The prices that developers have quoted are for projects that will be commissioned 12-18 month down the line. This present increase in prices of solar modules is not a long term trend. It’s a trend that will be reversed in a quarter or two after which prices will again come down. For developers, it is always a concern that modules prices may not fall as much as they estimated at the time of bidding. Timing has a lot of role to play,” added Jasmeet Khurana, associate director at consulting firm Bridge to India.