Even as the issue of safeguard continues to linger the GOI plans to put solar power tariff cap on developers’ head. The plan is to cap the solar tariff at INR 2.50 and 2.68 with and without safeguard duty respectively.
Competitive bidding in India has crashed the solar power tariffs considerably since 2015. Tariffs touched the lowest of INR 2.44 in the middle of 2017 but then spiked up in the aftermath of GST and Safeguard.
In 2018 most DISCOMs are signing PPAs with solar developers at rates below INR 3. Uttar Pradesh 1000 MW tender stands annulled because tariffs were more than INR 3.
But that doesn’t mean either that all solar developers are ready to toe their line with the government. In a SECI bid of 3000 MW, the central agency cancelled 2400 MW. ACME solar had won 600 MW quoting, reaching and repeating the lowest solar tariff of INR 2.44. Other developers failed to match their tariffs with ACME. Their tariffs were between INR 2.64-2.71.
A cap on solar tariff should be at least INR 0.14 per unit higher than what the government is proposing.
SolarDae analysed the L1 solar tariff of latest bids excluding the one annulled in Uttar Pradesh.
1. Including ACME Solar bid of 600 MW that it won at INR 2.44
- A total of 5 solar auctions equivalent to 7950 MW was bid out. Capacities of 2125 MW was won at L1 tariffs. ACME recently won the bids of 600 MW quoting solar tariff of INR 2.44 which is lowest in India since May 2017.
- The weighted average L1 solar tariff for the entire capacity is INR 2.51. For the capacities won at L1, it is INR 2.53. These numbers are close to the capping plans of GOI.
2. Excluding ACME Solar bid since no developer is even close to the lowest solar tariff
- Total bids are 3 equivalent to 2950 MW and those won at L1 tariff are 925 MW.
- In this case, the weighted average L1 solar tariff for entire capacity is INR 2.63. For the capacities won at L1, it is INR 2.64
A previous analysis shows that even the lowest solar tariff of INR 2.44 will land around INR 2.89 with 25% safeguard duty.
Obviously, after factoring in a safeguard duty a solar tariff of INR 2.68 won’t be feasible for most solar developers. A depreciating INR against the USD will further compound the problem. Even though the cost of solar panels is declining the INR/$ impact will put a spanner in the works.