Low Indian solar tariffs begin to backfire

Facebook
Twitter
LinkedIn
Reddit
Email
Consistent naysayers have predicted that the strategy of presuming module prices would continue to fall would backfire. Credit: Renew Power

After two years of tumbling solar tariffs hitting the headlines, the Indian industry is feeling the consequences of its risk-taking for the first time, with a series of reversing market conditions and contract renegotiations sparking serious concern.

Following multiple local reports, an executive from a prominent Indian PV developer confirmed to PV Tech, under condition of anonymity, that almost all major Chinese module suppliers have been backing out or reneging on module supply contracts in India, with Trina Solar as the only exception.

This article requires Premium SubscriptionBasic (FREE) Subscription

Unlock unlimited access for 12 whole months of distinctive global analysis

Photovoltaics International is now included.

  • Regular insight and analysis of the industry’s biggest developments
  • In-depth interviews with the industry’s leading figures
  • Unlimited digital access to the PV Tech Power journal catalogue
  • Unlimited digital access to the Photovoltaics International journal catalogue
  • Access to more than 1,000 technical papers
  • Discounts on Solar Media’s portfolio of events, in-person and virtual

Or continue reading this article for free

A number of factors have led to this situation, including the ravenous appetite that China has for downstream deployment this year, and a lack of polysilicon supply. China’s installations – well above targets – have raised the price of solar equipment for all other markets relying on Chinese supply. India happens to be hugely reliant on Chinese module imports.

Ever since tariffs started tumbling, there have been consistent naysayers predicting that the strategy of presuming module prices would continue to fall would backfire. Consultancy firm Bridge to India, in its latest market insight, said that Indian firms have tended to factor in a 15-20% annual cost reduction or even higher when bidding for projects, so the recent price increases have come as “a shock to the sector”. Indeed expectations of US$0.28/Wp prices this quarter are being quoted at about US$0.34/Wp, said the consultancy – not to mention the 5% addition of the Goods and Services Tax (GST).

Bridge to India added that up to 1GW of projects due to be completed this year could face delays – before even considering the looming threat of anti-dumping duties. An investigation into Chinese, Taiwanese and Malaysian imports is currently under way with the possibility of a provisional anti-dumping duty as early as September 2017. However, the consultancy noted that an oversupply situation for multi-crystalline modules could return for India since the driving force of China’s next additions – the Top Runner programme – will focus on high efficiency mono modules.

Separate Discom threat

In an altogether different issue, Global analysis firm Crisil Research has also noted that the aggressive low bids have caused a “recoiling” in the industry at large, as the country’s distribution companies (discoms) call for renegotiation of power purchase agreements (PPAs) they have signed at higher tariffs.

With this in mind, Bridge to India’s analysis that Indian developers are “caught between a rock and a hard place” seems apt.

Discoms – even some of the financially strongest – have openly noted reservations about honouring letters of Intent for PPAs for as much as 3GW of projects, said Crisil, including Andhra Pradesh (~1.1GW), Gujarat (~250MW), Karnataka (~900MW) and Tamil Nadu (500MW).

Analysing the difference between PPA tariffs and average power purchase cost (APPC) in a state, Prasad Koparkar, senior director, Crisil Research, said: “In all, around 7GW of solar projects tendered or awarded at tariffs of INR5-8/unit over fiscal 2015-2017 could be at risk. PPAs or letters of intent for these capacities, in Uttar Pradesh, Andhra Pradesh, Karnataka, Telangana and Punjab, were inked at tariffs 12-66% higher than the APPC of these states.”

Including solar and wind energy, Crisil Research believes investments worth INR480 billion (US$7.5 bilion) are currently at risk. It also listed a number of potential knock-on effects including multiple court cases and banks becoming more cautious about lending to renewable energy projects.

Crisil did however note a “glimmer of hope” given their analysis of standard PPAs in major states indicating that contract termination is not legally allowed if there is no delay in project commissioning.

23 April 2025
Dallas, Texas USA
To bring buyers and sellers of power together, the Renewable Energy Revenues Summit USA will cover strategies to optimize renewable energy trading, procurement, and offtake structures across U.S. markets.

Read Next

Premium
November 28, 2024
Speakers at LSSCEE 2024 discussed key topics for the Eastern European solar sector, including storage, private investment and risk management.
November 28, 2024
India installed around 13.2GW of new utility-scale solar capacity from January through September this year, a roughly 161% increase.
November 27, 2024
Developers in Europe signed 29 power purchase agreement deals totalling 1,277MW in October, according to Swiss analyst, Pexapark.
Premium
November 27, 2024
PV Talk: Despite the gloomy headlines emanating from the recent COP29 climate negotiations, Global Solar Council CEO Sonia Dunlop tells Tom Kenning how for solar PV the picture was brighter, with progress made on grids, storage and the cost of capital.
November 27, 2024
Shanghai Electric has won the engineering, procurement and construction (EPC) contract to build the 2GW Al-Sadawi PV project in Saudi Arabia.
November 26, 2024
Structures such as CfDs could be a complement to the nascent PPA market in Eastern European solar, according to speakers at LSSCEE.

Subscribe to Newsletter

Upcoming Events

Solar Media Events, Upcoming Webinars
December 3, 2024
8.30am GMT / 9.30am CET
Solar Media Events, Upcoming Webinars
December 12, 2024
9am GMT / 10am CET
Solar Media Events
February 4, 2025
London, UK
Solar Media Events
February 17, 2025
London, UK