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Solar power rates haven't fallen in 18 months: Study

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Source: The Economic Times
Friday, March 17, 2017

 NEW DELHI: Amid widespread talk of falling solar tariffs, a recent study has thrown up a contrary conclusion. 


"Adjusted for changes in capital costs and other parameters, bids in India have not trended down in the last 18 months," Bridge to India, a consultancy, said in a report that analysed price trends across major auctions conducted from July 2015 to December 2016. “Harmonised tariffs have stayed reasonably stable around the average level." 

The average harmonised price has been Rs 4.31 per unit across the 15,900 MW of projects auctioned during this period by NTPC, Solar Corporation of India, renewable energy departments of states and other smaller players. 

Prices at individual auctions have varied, depending on the agency that conducted it, whether the project is in a solar park and radiation availability. It found that "projects tendered by NTPC and located inside solar parks were highly oversubscribed and subsequently had lowest tariffs." 

The lowest bid during the 18 months covered in the study was Rs 4 per unit in an auction conducted by the Solar Energy Corporation of India at Bhadla Solar Park in Rajasthan in November 2016. Since then, an auction at the Rewa Solar Park in Madhya Pradesh saw the tariff drop to Rs 3.3 per unit in February. 

The report said even if solar tariffs have not fallen as much as commonly believed, they are low enough to reduce solar developers' average internal rate of return to 14.2% against a benchmark of 18% in the sector. 
"This is a clear demonstration of aggressive bidding," it said. "The developers are making speculative favourable assumptions on future equipment prices, land sale values, debt refinancing, salvage value, etc., to defend project returns." 

So far, they have been lucky because solar module prices have fallen steadily falling – by 26% in 2016 – but such luck may not continue indefinitely. 


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