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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, 08 September 21
MARKET INSIGHT - INTERMODAL
Last August was extremely hot in the dry bulk market with rates rising at levels that we have years to witness. The dry bulk index exceeded the 4,0 ...
Wednesday, 01 September 21
KOMIPO TO BUY 1.56 MILLION TONS OF 5600 NAR COAL OF AUSTRALIA OR SOUTH AFRICAN ORIGIN FOR 2022 - 2024
COALspot.com: Korea Midland Power Co., Ltd (KOMIPO) has issued an international tender for total 1,560,000 MT of Bituminous Coal to be used a ...
Wednesday, 01 September 21
MARKET INSIGHT - INTERMODAL
As the summer season is coming to an end, the dry bulk market continues to rally. The confidence that the outstanding freight market performance ha ...
Monday, 30 August 21
68% OF U.S. COAL FLEET RETIREMENTS SINCE 2011 WERE PLANTS FUELED BY BITUMINOUS COAL - EIA
In 2011, the United States had 317.6 gigawatts (GW) of coal-fired electric generation capacity. About 88.7 GW of that capacity was retired in the d ...
Friday, 27 August 21
ALL YOU NEED TO KNOW ABOUT COAL'S MASSIVE RALLY AND NEAR-TERM OUTLOOK - CNBCTV18
Australia’s thermal coal at Newcastle Port, the benchmark for the vast Asian market, has surged over 100 percent this year to trade above $16 ...
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- Chettinad Cement Corporation Ltd - India
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- Electricity Authority, New Zealand
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- Indika Energy - Indonesia
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- India Bulls Power Limited - India
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- Gujarat Sidhee Cement - India
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- Parliament of New Zealand
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- Attock Cement Pakistan Limited
- Chamber of Mines of South Africa
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- Global Business Power Corporation, Philippines
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- Coal and Oil Company - UAE
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- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- SMC Global Power, Philippines
- Trasteel International SA, Italy
- Bayan Resources Tbk. - Indonesia
- Sree Jayajothi Cements Limited - India
- TeaM Sual Corporation - Philippines
- International Coal Ventures Pvt Ltd - India
- Sical Logistics Limited - India
- LBH Netherlands Bv - Netherlands
- Borneo Indobara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- TNB Fuel Sdn Bhd - Malaysia
- Kapuas Tunggal Persada - Indonesia
- Ind-Barath Power Infra Limited - India
- Interocean Group of Companies - India
- Sarangani Energy Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- GMR Energy Limited - India
- Georgia Ports Authority, United States
- Price Waterhouse Coopers - Russia
- Lanco Infratech Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Central Java Power - Indonesia
- Marubeni Corporation - India
- Sakthi Sugars Limited - India
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- OPG Power Generation Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Orica Australia Pty. Ltd.
- GN Power Mariveles Coal Plant, Philippines
- The Treasury - Australian Government
- Carbofer General Trading SA - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Siam City Cement - Thailand
- SMG Consultants - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Agrawal Coal Company - India
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- Indonesian Coal Mining Association
- Iligan Light & Power Inc, Philippines
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Baramulti Group, Indonesia
- Rio Tinto Coal - Australia
- Therma Luzon, Inc, Philippines
- Bhushan Steel Limited - India
- Electricity Generating Authority of Thailand
- Savvy Resources Ltd - HongKong
- Power Finance Corporation Ltd., India
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- Uttam Galva Steels Limited - India
- Dalmia Cement Bharat India
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Samtan Co., Ltd - South Korea
- Indian Energy Exchange, India
- Orica Mining Services - Indonesia
- Eastern Coal Council - USA
- VISA Power Limited - India
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- Bhatia International Limited - India
- Bukit Baiduri Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kepco SPC Power Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coalindo Energy - Indonesia
- South Luzon Thermal Energy Corporation
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- Thai Mozambique Logistica
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- CNBM International Corporation - China
- Vedanta Resources Plc - India
- Essar Steel Hazira Ltd - India
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