The current solar tariffs in India, which are between Rs 2.50-2.87 per kilowatt hour (kWh), have stabilised at rates 20-30 per cent below the cost of existing thermal power in India and up to half the price of new coal-fired power, according to a latest study.
It added that these prices would provide enormous opportunities to invest in the solar industry.
According to Vibhuti Garg, co-author of the study by IEEFA and JMK Research & Analytics and energy economist at IEEFA, as per current market conditions, tariffs below Rs 2.50 per kWh are financially not viable in India’s solar sector.
“Developers have already reduced their return expectations from 14 per cent to 12 per cent, with tariffs being achieved as low as Rs 2.5 per kWh,” she said.
Garg added that while this rate is very competitive compared to thermal plant tariffs, and lucrative for power distribution companies entering long-term power purchase agreements, this was a floor for developers if they want to make money.
SECI and NTPC played a key role in building international investor interest, according to the report titled ‘Developers and Global Investors Snap Up India’s Solar Power Tenders – Decoding Tariffs vs Returns for Solar Projects in India’.
It added that contractual certainty was in place with counterparty and payment risk assurance from these central government agencies.
According to Jyoti Gulia of JMK Research and co-author of the study, conditions in India are very different to other energy markets.