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Solar tariffs correcting but fall in rupee may make them edgy
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After a lull in tender activities of solar energy in Q-3 & Q-4 of last fiscal, at least 3 tenders called in a quick succession in Q-1 of FY 19, suggest that these activities have been catching up again. NTPC, MSEDCL and now SECI have recently concluded their tenders. Interestingly these tenders have reversed the acceleration of solar tariffs towards INR 3! In the NTPC tender, the lowest tariff was INR 3.72 won by Sprng Energy. In the MSEDCL tender, the lowest solar energy tariff was INR 2.71 whereas, in the SECI tender, it was INR 2.81.

 

  • Strong demand has lead to low solar tariffs

  • Solar developers will have to hedge the risk against depreciating INR

After the GOI cleared its stand on import duties, it restored some sort of certainty in the market. As a result, NTPC tender attracted huge response from the solar energy developers. The tariff was down from around INR 2.91 in Karnataka to INR 2.72 in Andhra Pradesh. Usually, central government’s auctions attract lower solar tariffs than a state government auction but in the MSEDCL solar auction, the tariffs are lower than NTPC and SECI. Solar developers may have picked the price signal from NTPC and matched it in the MSEDCL solar energy auction. The latest SECI auction saw only two bidders participating: SB Energy & Tata Power Renewable Energy. Thus, the solar tariffs in this auction were relatively higher.

Solar tariffs correcting but fall in rupee may make them edgy
Source: SolarDae

But even as the solar tariffs decline, steep depreciation of Indian rupee will spell trouble for the solar developers. To avoid the complexity every developer will have to adopt a hedging strategy. Rock bottom solar tariffs in India is a result of these developers having access to cheap finances across the globe. Naturally, their project economics will deviate unless they have a hedge strategy. According to Ind-Ra an increase of Re one in dollar/rupee exchange rate leads to a 2 paisa/unit increase in developer’s solar tariffs. (Read)

A financial model analysis by Team SolarDae shows that the impact on solar tariffs could be as high as 4 paise/unit! 

(Feature Image Credit: Flickr)

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Post Author: Ankur Kumar Jha

Founder SolarDae || MBA Power Management || B.E (Mechanical)

Ankur analyses mainstream media coverage of renewable energy in general and solar in particular; he tracks the ongoing development of regulations and policies and incorporates them in his opinion. He can be reached at +91-8860726731 for any assistance in rooftop solar and utility-scale projects.

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