Solar Power Tariffs in India: Tracking Trends and Changing Patterns

Solar Power Capacity in India – The Current Scenario and Highlights in Key Indian States

With an upbeat scenario across the globe for renewables, in particular for solar, in India too solar is gaining its lost sheen. As a matter of fact, the country seems optimistic to make the entire renewable portfolio solar driven. The massive targeted capacity of 100GW, which the government of India has aimed to be achieved by 2022, bears a testimony to the fact. With an estimated share of 57%, it could be safe to assume that solar energy in India is poised to play a role reversal in the renewable mix and that too, soon. In what could be termed as remarkable fillip for solar in India, the huge planned investment to the tune of USD 100 Billion is definitely going to make the country amongst the most desirous economies to invest in for the global majors. It is significant to note that of this total planned investment, nearly USD 70 Billion is most likely to be sourced from private channels. Not only this, many international players as well have announced their investment plans for the Indian solar segment. It is pertinent to note that an enormous tune of investment of USD 80 Billion is projected to route in from USA & Japan by 2022. The pace of sector activity has picked up tremendously in the last two years because of strong government support and increasing price competitiveness of solar power. India is expected to become the world’s third biggest solar market from next year onwards after China and the US.

Presently, India boasts solar power capacity of close to 9GW as on October 2016 of which states such as Tamil Nadu , Rajasthan , Andhra Pradesh , Gujarat , Telangana , Madhya Pradesh and Punjab are the highest contributors. It is pertinent to note that these states contribute nearly 80% of the total solar installed capacity in the country. It can be observed from Exhibit 01 that with 1555.5 MW of installed capacity, Tamil Nadu is the state with highest solar  installations in 2016 followed by Rajasthan and Gujarat with 1301 MW and 1138 MW of capacity respectively. The state (Tamil Nadu) has taken a big leap  from 142.5 MW in Mar’2015 to 1555.5 MW in Oct’2016, marking a capacity addition growth of 1412.8 MW during the period.  It can further be observed that Andhra and Telangana are also not much behind in the league and are likely to cross the 1000MW of capacity benchmark soon.

installed-capacity-in-mw-of-grid-connected-solar-power-projects-under-jnnsm-for-states-having-maximum-installations-status-as-on-november-2016Solar Power Tariff in India- Edging Towards Grid Parity

Solar power tariff in India has witnessed a remarkable fall over the last six years. It is pertinent to note that solar tariffs in particular have fallen in nominal terms from INR 15 / Kwh in 2009 to INR 5 / Kwh in 2015 with fall in module prices and improvements in capacity utilization factor. A further dip to a level of INR 4.34 /Kwh was witnessed in 2016 for a project in Rajasthan. This recent fall came in during the online bidding for a 750 MW solar power park being set up at Badhla near Jodhpur with viability gap funding from Solar energy corporation of India Limited. However, the ever-declining solar power tariffs has encouraged good investments into the sector but have raised concerns over the long –term sustainability of the projects. The solar tariffs are further expected to witness a dip to INR 3.50/Kwh in coming 3-4 years down the line.

exhibit-02-movements-in-the-solar-power-tariff-levelized-tariffs-in-india-trends-from-2008-to-2013

Variation in Solar Tariff Post 2014

With the advent  of 2014, the solar tariff in January 2014 showed a dip of close to INR.1/kWh from the last bid project in August 2013. The trend of falling tariffs continued  and a dip further of INR. 1.11/KWh was observed in the span of only 9 months of time in October 2014.

Though, after the dip of nearly INR. 2/kWh from December 2013 to October 2014 it showed a north bound trend with a jump in November 2014 by a quantum in excess of INR.1/kWh. Further, it jumped by another 50 paise/kWh in February 2015 witnessing a fall in June 2015 by again INR.1/kWh . Interestingly the rise and fall in the tariffs was in particular due to the variation in the region the project belonged to coupled with the model it followed being FiT or  VGF based projects.

Solar Power Tariff Trend in the Post 2014 in India – Southern Region

The southern states of Andhra Pradesh, Karnataka and Telangana have been in lead in terms of awarding solar projects through bids. In the month of October & November 2014 the solar tariff was hovering around INR. 7/KWh which nearly 10 months later was down by INR.1.30/KWh to INR 5.70/KWh. Interestingly with Telangana joining the fray in terms of bids for solar projects the tariffs witnessed a nosedive to achieve parity with thermal power at INR. 4.63/KWh.

exhibit-03-southern-region-solar-tariffs-as-per-bid-results-from-jan-2014-to-nov-2016To read more related articles and in get in touch with the author and read more related articles  here

*The views expressed in this article are solely those of enincon perspectives and do not necessarily represent those of Enincon LLP.

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