After crude, gas and coal, now solar module prices on a boil
NEW DELHI: A global rally in prices of conventional fuels such as crude oil, gas and coal has extended to the solar space with module prices touching a high of 28 cent kilowatt-hour (kWh), the highest since 2019, two people aware of the development said.
The surge is due to China’s worst-ever power shortage, with factories running on limited days. With modules making up nearly 60% of a solar power project’s total cost, any price increase will impact the internal rate of return (IRR) from such projects, many of which have already signed power purchase agreements (PPAs). With India having strict commissioning deadlines, the failure to meet them will result in penalties for developers.
Solar panel companies have pending supplies of around 5 gigawatts (GW) to Indian developers till March 31, 2022. Mint reported earlier about Chinese solar equipment makers such as Trina Solar Ltd, one of the largest Chinese solar power equipment makers, serving force majeure notices on its Indian clients, citing inability to supply equipment as per schedules.
“The jump in solar module prices will impact the project economics of already bid out projects. Not only the supplies are getting impacted but also the prices at which these modules will be made available is a big question mark,” one of the two people said requesting anonymity.
Solar equipment supplies to India from China have already been impacted due to disruptions in shipping lines, high freight and a severe container shortage. Meanwhile, India will enforce a basic customs duty on imported solar cells, modules and inverters from 1 April next year, making such imports costlier.
“It’s a wake up call, I guess. Tariffs were being priced to perfection with no room for error or contingency. It just shows how returns in non-risk mitigated tariffs go up in smoke when the tide turns and the music stops. Solar continues to be a great place to invest, but it’s time, reality checks in,” said Sanjay Aggarwal, president of Fortum India Pvt. Ltd and incharge of Finland’s state-controlled power utility Fortum Oyj’s business in India.
India has also been hit by the rally in global oil prices with petrol and diesel prices ruling at record highs. The price of imported Indonesian coal has also jumped from $60 per tonne in March to $200 per tonne in September and October leading India’s imported-dependent thermal power projects to lower generation.
Queries emailed to Chinese solar equipment manufacturers such as Trina Solar Ltd, Jinko Solar, ET Solar, Chint Solar, and GCL-Poly Energy Holdings Ltd on Thursday remained unanswered.