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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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Wednesday, 20 October 21
CHINA COAL HITS RECORD HIGH AMID TIGHT SUPPLIES - REUTERS
China coal prices hit a record high on Tuesday buoyed by a widening power crunch and cold weather despite Beijing’s efforts to bolster supply ...
Wednesday, 20 October 21
MARKET INSIGHT - INTERMODAL
IMO 2020, Ballast Water Treatment regulations, Green Recycling, GHG emissions, EEXI, CII, ETS, Fit for 55, Carbon price/levy, the Poseidon Principl ...
Tuesday, 19 October 21
SPONGE IRON SECTOR MIGHT REPORT NEGATIVE GROWTH DUE TO COAL CRISIS: SIMA - PTI
The domestic sponge iron industry might report a negative growth in the ongoing December quarter “if the shortage of coal is allowed to conti ...
Tuesday, 19 October 21
COAL INDIA, THE FALL GUY FOR POWER CRISIS - INDIA EXPRESS
The post-Covid economic recovery has led to a major increase in the demand for power, both in India and globally. In India, coal-based power plants ...
Saturday, 16 October 21
SOLAR INSTALLATION SURGE PUTS INDIA ON TRACK TO CAP COAL-FIRED POWER AS EARLY AS 2024 - IEEFA
Recent increase in solar power installations could push coal to peak sooner than expected
If India keeps installing solar capacity a ...
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- Bharathi Cement Corporation - India
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- Wilmar Investment Holdings
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- The University of Queensland
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- Indian Energy Exchange, India
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- Africa Commodities Group - South Africa
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- Wood Mackenzie - Singapore
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- Romanian Commodities Exchange
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- Bukit Asam (Persero) Tbk - Indonesia
- Sree Jayajothi Cements Limited - India
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- Sical Logistics Limited - India
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
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- AsiaOL BioFuels Corp., Philippines
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- Georgia Ports Authority, United States
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
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- Petron Corporation, Philippines
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- Banpu Public Company Limited - Thailand
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- San Jose City I Power Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Standard Chartered Bank - UAE
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- European Bulk Services B.V. - Netherlands
- Miang Besar Coal Terminal - Indonesia
- Parliament of New Zealand
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- Larsen & Toubro Limited - India
- Madhucon Powers Ltd - India
- Indonesian Coal Mining Association
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- Sojitz Corporation - Japan
- Bahari Cakrawala Sebuku - Indonesia
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- International Coal Ventures Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- Attock Cement Pakistan Limited
- Bulk Trading Sa - Switzerland
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- Vedanta Resources Plc - India
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- Sindya Power Generating Company Private Ltd
- Planning Commission, India
- Parry Sugars Refinery, India
- Kartika Selabumi Mining - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indian Oil Corporation Limited
- Gujarat Mineral Development Corp Ltd - India
- Interocean Group of Companies - India
- Price Waterhouse Coopers - Russia
- Vizag Seaport Private Limited - India
- Ceylon Electricity Board - Sri Lanka
- Mjunction Services Limited - India
- Global Business Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Essar Steel Hazira Ltd - India
- Heidelberg Cement - Germany
- Edison Trading Spa - Italy
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- Simpson Spence & Young - Indonesia
- Iligan Light & Power Inc, Philippines
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- Manunggal Multi Energi - Indonesia
- PowerSource Philippines DevCo
- Carbofer General Trading SA - India
- Savvy Resources Ltd - HongKong
- Baramulti Group, Indonesia
- Chamber of Mines of South Africa
- Coastal Gujarat Power Limited - India
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- India Bulls Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Aditya Birla Group - India
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- Mercator Lines Limited - India
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- Singapore Mercantile Exchange
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- Lanco Infratech Ltd - India
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- Neyveli Lignite Corporation Ltd, - India
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
- Australian Commodity Traders Exchange
- Renaissance Capital - South Africa
- Thiess Contractors Indonesia
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