Solar tariff trends in the past have been very aggressive in India, reaching an all-time low of Rs. 1.99/unit in December 2020. However, since then, there has been an upward trend in tariffs. For instance, in the months of July and August, six auctions were concluded, adding up to a total of 3.7 GW of allotted projects. For plain vanilla solar tenders, the lowest tariff is Rs. 2.14/unit for the RUMSL 500 MW at Neemuch, and for wind-solar hybrid, the lowest tariff was set at Rs. 2.34/unit for SECI 1200 MW Wind-Solar hybrid tranche-IV.

With the intent to understand the ongoing as well as anticipated developments in this sector, JMK Research had organized a webinar on “Understanding Recent Solar Tariff Trends in India” on August 26, 2021. The eminent panelists for this session were:

  • Mr. Sai Charan Kupilli, Technical Director, Jinko Solar
  • Ms. Tanya Singhal, Founder and Director, Solar Arise
  • Mr. Mudit Jain, Head Research, Tata Cleantech
  • Mr. Rama Lingeswara Prasad, Head-Proposal, Renewables BU, L&T Construction
  • Mr. Vikas Bansal, COO, Gamechange Solar

Mr. Sai Charan from Jinko Solar began by mapping out the emergence of bifacial modules on a global scale. Bifacial propositions were made for the first time in early 2018, however this interest in the initial stage did not translate to MW-scale installations. At that time, the 156.75 mm (M2) wafer sized-poly crystalline modules were the norm. 2019 saw a dramatic shift to 158.75 mm (M2.5) mono-PERC modules. This, however, was limited to the mono-facial modules. The emergence of bifacial panels was in Q3-2019, with the introduction of M2.5 bifacial modules. He added that there is an increasing interest around the 530 Wp+ power class, which are available in 192 mm (M9) or 210 mm (M12) wafer sizes. In the current scenario, M9 sized modules are the go-to modules due to its higher specific energy density which translates to lower LCOE. However, M12 wafer size modules are expected to play a bigger role in the next eight quarters. The other modules that the global players are looking at are 163.75 mm modules with a 430-475 Wp rating, due to its reduced cell-spacing and higher density. All these offerings are available in mono-facial as well as bi-facial modules, with bi-facials having an upper hand as it allows generation from direct as well as diffused radiations, translating to lower LCOEs. He further added that the smallest wafer size to exist in the market are the 163.75 mm modules with a marginal 20 Wp rating, and that the M2.5 modules are becoming obsolete. While addressing the bifacial trends specific to India, Mr. Kupilli added that initially when Jinko Solar showcased its offerings in Q3-2019, mono-facial panels were still preferred due to lower costs. However, in 2020, out of the 1.25 GW of modules delivered to Indian clients, bifacial modules accounted almost 20% of them, and in 2021, bifacial modules are expected to account for over 40% of shipments in India. On the effects of Approved List of Modules and Manufacturers (ALMM) and the Basic Custom Duty (BCD), he expressed that while Jinko Solar have already submitted their application for its inclusion in the ALMM, high BCD poses as a major barrier. He further explained that the COVID pandemic has stalled the factory-level inspection formalities which are done under the ALMM process, and has hit all foreign manufacturers alike. Mr. Kupilli concluded by acknowledging the volatility of the module prices presently, also voicing his expectation of a delta of 2-3 cents/Wp on the current base price for the next three quarters.

Mr. Mudit Jain from Tata Cleantech described the changes that have occurred in Indian market post the Rs. 1.99-2 per unit tariffs in December 2020. He highlighted that all the changes that have taken place work against lower tariff realization in the future due to the increasing commodity prices leading to higher module and module mounting structure prices. He further elaborated that recently tendered projects will have to follow the guidelines enforced under the ALMM and the BCD on imported modules which will further increase the prices. Earlier, when the tariffs were at the record-low of Rs. 1.99/kWh, module prices were in the range of 17-18 cents/MW, which is no longer the case. Mr. Jain emphasized that while increased Plant Load Factor (PLF) by way of using improved technology can also aid to lowering of costs to an extent. However, the only parameter that will be able to push down the tariff rates will be the availability of long-term funds at lower fixed costs. Solar and wind projects are almost solely dependent on the capital cost on a year-on-year basis. Bringing this cost down is the only means of making these projects financially viable. He added that another flipside in the market currently is that Bank Guarantees have fallen to Rs. 8 lakhs/MW. However, industry players believe that they will be able to raise low-cost capital funds for longer durations (10 years+). If this can be achieved, this would become the sole factor to push the tariffs down.

Ms. Tanya Singhal from Arise Solar described that there have been three major factors that have contributed to lower tariffs. First, while the tariffs have been on a falling trend over the years, the nature of questions regarding the projects’ viability hasn’t changed. What has changed is that the solar market is now recognized as a growing market with the scale of financing increasing from a few crores to now at a scale of billion dollars. The biggest change, however, is that the investments made are no longer from a CSR perspective, these investments are made with the expectations of making returns, which in the mid- teens range (approximately 13-18%). Secondly, as far as the risks and growth of the market are concerned, the solar sector is no longer treated as a niche market and the focus has shifted from short-term to a more long-term classification. Thirdly, from a developers’ perspective, there has been a shift in mindset from minimizing CAPEX costs to now maximizing the return on investments even if it entails higher CAPEX costs since increased investments translates to increase in generation. Ms. Singhal added that a major risk going forward will be the availability of locally manufactured modules to achieve the scale which the market is expected to achieve, given the present ALMM landscape. She added that the developers’ who have won bids recently will not be able to take advantage of the duty free window since these projects will most likely be commissioned after 2023, given that PPAs are yet to be signed. Ms. Singhal believes that technology will have a major role to play in the sense that present plant components need to be coupled with new technologies such as data science to maximize the output. She concluded by expressing her perspective on future of the solar market, mentioning that solar energy could revolutionize the way we generate and use power.

Mr. Vikas Bansal from Gamechange Solar pointed out that while global projects which have lower LCOEs have made use of new technologies such as trackers and/or bifacial panels, the same trend has not been observed in India as installers have been sticking to the traditional setup. Mr. Bansal affirmed that current site level challenges can be mitigated only by adopting new technology. He also gave an example of Gamechange Solar’s 394 MW project for Tata Group in Gujarat which would have not been viable without the use of trackers, given the conditions of that particular site. All major players who have been able to sustain their businesses in this sector have taken calculated bets on technologies to become and remain relevant. He further elaborated that going ahead, plant components need to shift from being static to being dynamic in nature. This can be done by implementing and integrating new-age technologies such as artificial intelligence and machine learning to facilitate real-time optimization to maximize generation. Mr. Bansal concluded by remarking that the closer the project is located to the equator, better is the economic sense behind the use of bifacial panels and trackers, and that bifacial module-equipped plants become viable at and below module prices of around Rs. 21-22 cents/Wp.

Mr. Rama Lingeswara Prasad from L&T presented the key drivers and challenges that are present in the current scenario, and highlighted that the share of PSUs and foreign Independent Power Producer (IPP) participation in the renewable energy segment has gone up from 2% and 28% in FY2020 to 13% and 58% in FY2021 respectively. The key reasons for increasing share foreign players/investors are full project ownership, long term PPAs, high market growth, etc. He concurred with the views of the earlier panelists while talking about the reasons for the rise in tariffs in recent times and explained the evolution of project components from 2014 to the present. Mr. Prasad further presented L&T’s role and experience in the solar energy space and noted that going forward, LCOE optimization will play a key role in determining tariffs.

Click here of the webinar recording