As top executives of some of the leading Indian and international project developers slugged it out for more than 24 hours at a stretch in the May earlier this year to outbid one another in some the fiercest of competitive solar auctions in India to date, the winners would have hoped that they have overcome one of the biggest challenges. Now, it seems the winners could face another uphill task of keeping the project costs in check.
According to media reports, price of Chinese modules have increased by more than 47% from the price project developers of India’s cheapest solar power projects had assumed during the competitive auctions in May. According to business daily Mint, project developers bidding for 750 megawatts capacity at Bhadla solar power park had assumed cost of modules at 23¢ per watt. these prices have now increased to 34¢ per watt for delivery scheduled in August.
An increase of 47% in the cost of a component that comprises of a big majority of the project cost of a solar PV power plant is a matter of deep concern for a developer, to put it mildly! The concerns become a huge problem and challenge when the developer has quoted a tariff as low as Rs 2.44/kWh (3.8¢/kWh), the lowest-ever in India.
The rapid decline in solar power tariff bids in India has been fuelled, in a large part, due to the falling prices of Chinese modules which hold an overwhelming share in the Indian market.
Since February 2017 this year four major solar power auctions have taken place in India with the lowest tariff bids falling by as much as 26% between the first and the latest auction.
Over the years, dependence on Chinese imports has increased significantly.
According to Mercom Capital, project developers imported solar modules worth US$763 million between April and August 2016, an increase of 53% from imports worth US$497 million during the same period last year. Share of modules from China also increased sharply. Chinese modules accounted for 85% of the total modules imported in India, followed by Malaysia at distant 9%; modules from Taiwan, the US and Singapore accounted for 3% to 1% each.
In financial year 2014-15 (April 2014 to March 2015), India imported 161.5 million with 70% of them coming from China. During the preceding financial year, the share of Chinese modules in total imports was 65%.