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Thursday, 01 July 21
WHY INDIA’S SOLAR POWER TARIFFS ARE CLIMBING AFTER HITTING RECORD LOWS LAST YEAR - IEEFA
What’s behind the recent increase?
Solar tariffs are deflationary. Prices have fallen by 75% in seven years in India, and in 2020 solar tariffs hit record lows.
From 2019 to the first quarter of 2020, most of India’s newly-auctioned solar projects saw tariffs in the range of Rs2.5-2.87/kilowatt hour (kWh). Then in February 2020, the Ministry of New and Renewable Energy (MNRE) removed ceiling tariffs for all new solar and wind tenders to hasten tender activity and capacity allocation. From Quarter 2 of 2020, prices were in the range of Rs1.99-2.97/kWh, with bids thereby hitting the new record low tariff.
The reasons for such low tariffs were access to low cost financing (cheaper interest rates) by international developers based out of Saudi Arabia (Aljomaih Energy and Water Co.) and Singapore (Sembcorp) as well as government entities like NTPC which can secure debt at a rate of 7-7.5%. And since they can source funds at lower rates, their return on equity expectation is also lower. Also, these tenders are likely to be exempted from the Safeguard Duty (SGD) and Basic Customs Duty (BCD) on solar cell and module imports. Another key factor was power purchase assurance for the developers, for example, the power sale agreement (PSA) between the intermediary procurer, Solar Energy Corporation of India (SECI), and the buying entity, Rajasthan power distribution company (Discom) Rajasthan Urja Vikas Nigam Ltd. (RUVNL). The other tender was issued by Gujarat Discom, Gujarat Urja Vikas Nigam Ltd. (GUVNL).
In 2021, however, solar tariffs saw an upward trend. In January and February, the lowest tariffs discovered in auctions were Rs2.22/kWh and Rs2.25/kWh, by Torrent Power Ltd. (TPL) and NTPC Ltd. The tariff increases could be attributed to lack of participation by international developers like Aljomaih Energy and Water Co. and Sembcorp. Moreover, module prices increased from US$0.20/Wp in July 2020 to US$0.22-0.23/Wp in January 2021, causing solar prices to increase. Further, module suppliers are now selling modules at FOB (free on Board) prices instead of CIF (cost, insurance, and freight) prices, which is also impacting solar prices in India.
Then in March, the Government of India announced it will impose a 40% basic customs duty (BCD) on solar modules and 25% on solar cells from 1 April 2022 in a move to promote domestic manufacturing. The imposition of BCD is likely to increase solar tariffs by approximately 25%. The lowest tariff delivered in the first solar auction result after the BCD announcement – GUVNL’s 500MW auction in Gujarat – was Rs2.22/kWh, a 21 paisa (12%) increase per kWh from the previous GUVNL tender under the same conditions.
Lower prices are favourable for renewable energy growth. However, aggressive tariffs come with risks, and developers need to properly factor these risks into their bids. With improved module technology, generation will increase. Another factor that will pull down solar prices is access to low cost financing. On the other hand, a rise in module costs due to various global demand and supply factors and floating interest rates that change in line with Reserve Bank of India (RBI) guidelines could push prices upwards.
Vibhuti Garg is an Energy Economist and Lead India at IEEFA
This article was first published in SolarQuarter India
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Monday, 25 October 21
A QUESTION OF POSSESSION - THE BALTIC EXCHANGE
Possession and tangibility are closely related concepts long established under English law. Yet a change to these concepts is around the corner. Th ...
Monday, 25 October 21
CHINA VOWS TO SEVERELY PUNISH MARKET VIOLATIONS AMID LOW COAL FUTURES PRICES - GLOBAL TIMES
Domestic coal futures had plunged for three consecutive trading days after the government vowed to crack down on soaring prices, and China’s ...
Monday, 25 October 21
FARMERS MAY JOIN THE COAL COMMODITY MARKET TO REDUCE RISKS - GLOBAL TIMES
A recent trip to by the Global Times to East China’s Shandong Province to get a glimpse of China’s coal supply chain revealed a surpris ...
Monday, 25 October 21
CHINA COAL PRICES MARK WORST WEEK SINCE MAY ON GOVERNMENT INTERVENTION - REUTERS
China’s thermal coal futures plunged on Friday and turned in their worst week in five months, following Beijing’s strongest interventio ...
Friday, 22 October 21
THE BIG PICTURE: ENERGY MARKETS - BREAK WAVE ADVISORS
The shipping markets have been pulled further into wild markets of coal and other energy sources. Given how nebulous this sector is, it’s alw ...
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- Bhushan Steel Limited - India
- Rashtriya Ispat Nigam Limited - India
- SMC Global Power, Philippines
- Holcim Trading Pte Ltd - Singapore
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Jaiprakash Power Ventures ltd
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- Miang Besar Coal Terminal - Indonesia
- Renaissance Capital - South Africa
- Karbindo Abesyapradhi - Indoneisa
- Coalindo Energy - Indonesia
- Grasim Industreis Ltd - India
- ICICI Bank Limited - India
- SN Aboitiz Power Inc, Philippines
- Indika Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Medco Energi Mining Internasional
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Economic Council, Georgia
- Goldman Sachs - Singapore
- Orica Mining Services - Indonesia
- Deloitte Consulting - India
- OPG Power Generation Pvt Ltd - India
- Malabar Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Kumho Petrochemical, South Korea
- Sarangani Energy Corporation, Philippines
- Interocean Group of Companies - India
- Mjunction Services Limited - India
- Kartika Selabumi Mining - Indonesia
- Lanco Infratech Ltd - India
- Rio Tinto Coal - Australia
- Vijayanagar Sugar Pvt Ltd - India
- India Bulls Power Limited - India
- Barasentosa Lestari - Indonesia
- MS Steel International - UAE
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- Tamil Nadu electricity Board
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- Latin American Coal - Colombia
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- Baramulti Group, Indonesia
- Ambuja Cements Ltd - India
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- SMG Consultants - Indonesia
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- Meralco Power Generation, Philippines
- Chamber of Mines of South Africa
- Attock Cement Pakistan Limited
- Banpu Public Company Limited - Thailand
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- Bhatia International Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- Australian Coal Association
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- Indian Oil Corporation Limited
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- Coal and Oil Company - UAE
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- Mercator Lines Limited - India
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- Petron Corporation, Philippines
- Carbofer General Trading SA - India
- Neyveli Lignite Corporation Ltd, - India
- Bharathi Cement Corporation - India
- Billiton Holdings Pty Ltd - Australia
- Gujarat Sidhee Cement - India
- Indian Energy Exchange, India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Riau Bara Harum - Indonesia
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- GMR Energy Limited - India
- Africa Commodities Group - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- New Zealand Coal & Carbon
- Toyota Tsusho Corporation, Japan
- TNB Fuel Sdn Bhd - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Makarim & Taira - Indonesia
- The University of Queensland
- PowerSource Philippines DevCo
- Thiess Contractors Indonesia
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- Coastal Gujarat Power Limited - India
- Chettinad Cement Corporation Ltd - India
- ASAPP Information Group - India
- Metalloyd Limited - United Kingdom
- AsiaOL BioFuels Corp., Philippines
- Wood Mackenzie - Singapore
- Vizag Seaport Private Limited - India
- Romanian Commodities Exchange
- Siam City Cement - Thailand
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Kaltim Prima Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Planning Commission, India
- The State Trading Corporation of India Ltd
- Standard Chartered Bank - UAE
- Bukit Makmur.PT - Indonesia
- Energy Development Corp, Philippines
- Edison Trading Spa - Italy
- Globalindo Alam Lestari - Indonesia
- Central Electricity Authority - India
- PTC India Limited - India
- Leighton Contractors Pty Ltd - Australia
- London Commodity Brokers - England
- Minerals Council of Australia
- Jorong Barutama Greston.PT - Indonesia
- Videocon Industries ltd - India
- Alfred C Toepfer International GmbH - Germany
- Bangladesh Power Developement Board
- Altura Mining Limited, Indonesia
- Global Green Power PLC Corporation, Philippines
- Mercuria Energy - Indonesia
- Sojitz Corporation - Japan
- Cigading International Bulk Terminal - Indonesia
- Australian Commodity Traders Exchange
- GN Power Mariveles Coal Plant, Philippines
- CNBM International Corporation - China
- Kobexindo Tractors - Indoneisa
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- VISA Power Limited - India
- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Eastern Energy - Thailand
- Bukit Baiduri Energy - Indonesia
- Georgia Ports Authority, United States
- Sical Logistics Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Indogreen Group - Indonesia
- White Energy Company Limited
- Anglo American - United Kingdom
- Thai Mozambique Logistica
- Agrawal Coal Company - India
- Xindia Steels Limited - India
- The Treasury - Australian Government
- Maharashtra Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Heidelberg Cement - Germany
- Oldendorff Carriers - Singapore
- International Coal Ventures Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- IEA Clean Coal Centre - UK
- Ministry of Transport, Egypt
- Electricity Authority, New Zealand
- Power Finance Corporation Ltd., India
- Pendopo Energi Batubara - Indonesia
- Central Java Power - Indonesia
- Timah Investasi Mineral - Indoneisa
- CIMB Investment Bank - Malaysia
- TeaM Sual Corporation - Philippines
- Cement Manufacturers Association - India
- Kideco Jaya Agung - Indonesia
- IHS Mccloskey Coal Group - USA
- Antam Resourcindo - Indonesia
- Intertek Mineral Services - Indonesia
- San Jose City I Power Corp, Philippines
- Energy Link Ltd, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Directorate General of MIneral and Coal - Indonesia
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- Price Waterhouse Coopers - Russia
- Kalimantan Lumbung Energi - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GVK Power & Infra Limited - India
- Vedanta Resources Plc - India
- Larsen & Toubro Limited - India
- Sindya Power Generating Company Private Ltd
- Trasteel International SA, Italy
- Savvy Resources Ltd - HongKong
- Simpson Spence & Young - Indonesia
- Port Waratah Coal Services - Australia
- Essar Steel Hazira Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Uttam Galva Steels Limited - India
- McConnell Dowell - Australia
- Ceylon Electricity Board - Sri Lanka
- GAC Shipping (India) Pvt Ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Iligan Light & Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Therma Luzon, Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Electricity Generating Authority of Thailand
- Parliament of New Zealand
- Wilmar Investment Holdings
- Star Paper Mills Limited - India
- Straits Asia Resources Limited - Singapore
- Bayan Resources Tbk. - Indonesia
- Indo Tambangraya Megah - Indonesia
- Aboitiz Power Corporation - Philippines
- Ministry of Finance - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Meenaskhi Energy Private Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Binh Thuan Hamico - Vietnam
- Eastern Coal Council - USA
- Global Business Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- Borneo Indobara - Indonesia
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