Active Stocks
Fri Mar 01 2024 15:59:51
  1. Tata Steel share price
  2. 150.00 6.46%
  1. State Bank Of India share price
  2. 769.30 2.67%
  1. Tata Motors share price
  2. 977.20 2.78%
  1. ITC share price
  2. 409.50 0.74%
  1. ICICI Bank share price
  2. 1,086.90 3.18%
Business News/ Industry / Energy/  Rising Chinese solar module prices may put solar power projects at risk

Rising Chinese solar module prices may put solar power projects at risk

The trajectory of solar power tariffs, currently at record low levels in India, may change due to higher cost of Chinese solar modules

Solar modules account for nearly 60% of a solar power project’s total cost. Photo: Pradeep Gaur/MintPremium
Solar modules account for nearly 60% of a solar power project’s total cost. Photo: Pradeep Gaur/Mint

New Delhi: Rising prices of Chinese solar modules may arrest the sharp decline in Indian solar power tariffs and also put at risk projects that won licences betting on a continued decline in module prices.

Several developers and analysts Mint spoke to said that the record low tariff of Rs2.44 per per kilowatt hour (kWh) at the auction of 500 megawatts (MW) of capacity at the Bhadla solar park in Rajasthan in May was quoted assuming module prices will fall to around 23 cents per watt.

With the module prices currently around 32 cents and the August delivery quoted at around 34 cents, developers are wary about the future tariff trajectory.

Modules account for nearly 60% of a solar power project’s total cost and their prices fell by about 26% in 2016 alone.

Module prices have, however, firmed up with China extending the feed-in tariff regime, which ensures a fixed price for power producers, for the third quarter and US developers placing advance orders to shore up cell and module supplies amid demands for a cap in prices of cheap imports to the US.

“There is a cause for concern given the aggressive solar power bids in the country," said a project developer who had participated in the Bhadla solar park auction conducted by state-run Solar Energy Corp. of India.

Most solar power developers in India have been sourcing solar modules and equipment from countries such as China, where they are cheaper.

According to consulting firm Bridge to India, the local solar module market is dominated by Trina Solar (25.7% market share), Hanwha (10.5%) and Risen (7.6%), with domestic manufacturers’ accounting for only 10.6% market share.

“In an integrated international demand-supply scenario, bidders have to take cognisance of the situation which can be largely beyond their control. If they assume an optimistic scenario while bidding and if one of the variables goes significantly wrong, then it can lead to complete unviability of the project," said Sanjeev Aggarwal, managing director and chief executive of Amplus Energy Solutions Pvt. Ltd, a solar rooftop project developer.

India plans to generate 175 gigawatts (GW) of renewable energy by 2022. Of this, 100GW is to come from solar projects.

“We feel there is a bit of irrationality in the competition," said Pankaj Sehgal, chief executive officer, SUN Renewables, which is not present in the grid connected ground mounted large solar project space. SUN Renewables sets up distributed generation solar power projects.

“The prices have gone up a bit in the third quarter because in China originally they were to do away with feed-in tariffs and move towards competitive bidding which is the norm in India. They have extended feed-in tariff for the third quarter. Hence, tariffs have tipped up rather than come down which has been the case," said Sehgal.

Of China’s solar module manufacturing capacity, estimated to be around 70GW per year, the major markets are the US, India and China itself. However some believe this is a temporary phenomenon.“It is a temporary phenomenon for the next three months," said Sunil Jain, chief executive officer at Hero Future Energies Pvt. Ltd.

“The prices developers have quoted are for projects that will be commissioned 12-18 month down the line. This present increase in prices of solar modules is not a long-term trend. It’s a trend that will be reversed in a quarter or two, after which prices will again come down. For developers, it is always a concern that modules prices may not fall as much as they estimated at the time of bidding. Timing has a lot of role to play," said Jasmeet Khurana, associate director at consulting firm Bridge to India.

Major Chinese solar module manufacturers include Jinko Solar, JA Solar Holdings, ET Solar, Hanwha Group, Chint Solar, GCL-Poly Energy Holdings Ltd and Trina Solar Ltd.

“The prices in the past have come on that trajectory, but obviously they can’t continue in that trajectory; otherwise, they will virtually become zero. So, there is not a significant technological breakthrough that has happened that will support that kind of assumption going forward. It has been largely based on the supply-demand imbalance. There is always incremental improvements but not to justify that steep decline in the cost curve," said SUN Renewables’ Sehgal.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Industry News, Banking News and Updates on Live Mint. Check all the latest action on Budget 2024 here. Download The Mint News App to get Daily Market Updates.
More Less
Published: 19 Jul 2017, 12:32 AM IST
Next Story footLogo
Recommended For You
Energy Stocks
Switch to the Mint app for fast and personalized news - Get App