India: Capital cost for solar energy production hits new low

According to the January 2012 Edition of the India Solar Compass, the latest issue of BRIDGE TO INDIA’s (New Delhi) quarterly Indian solar market analysis report, the latest round of reverse bidding under India’s National Solar Mission (NSM) Phase I Batch II has shown that capital costs for solar power production have fallen to record lows.

According to newly released research by BRIDGE TO INDIA, further lows are expected in the coming months.

350MW of solar PV projects allotted in December 2011

Solar photovoltaic (PV) projects have been selected by the NVVN (the apex authority for the NSM) for batch two of phase one of the NSM and were announced in Delhi on December2nd, 2011. Cumulatively, 350 MW of solar PV projects were allotted by a process of reverse bidding with 27 projects getting selected on the basis of offering maximum discount to the set feed-in-tariff of INR15.39/kWh ($0.385/kWh).

Average tariff bid decreased by 27.5%

Solar expert, Mohit Anand from BRIDGE TO INDIA was part of the team present at the event. The lowest tariff bid was INR7.49 ($0.188) per kWh offered by Solairedirect of France for a 5MW project in Rajasthan. The highest successful bid was INR9.39 ($0.235) per kWh by GreenInfra Solar from India for a 20MW project in Rajasthan.

The average tariff bid was INR8.7 ($0.218) per kWh, a decrease of 27.5% as compared to the average tariff of batch one.

Downward trend in capital costs for solar power projects

“One reason for the fall in tariffs is that capital costs for solar power projects are seeing a downward trend,“ says Mr. Anand. BRIDGE TO INDIA estimates that the capital costs have dropped to a new low of INR 90m per MW ($2.25m per MW) as compared to last year’s estimate of INR 120m per MW ($3m per MW) depending on factors detailed in the January Edition of the India Solar Compass.

Failure to meet deadlines will result in reduced Feed-in-Tariffs (FiTs) for developers will face starting January 28th, 2012

According to the January Edition of the India Solar Compass, under the Gujarat Solar Policy, developers will face reduced Feed-in-Tariffs (FiTs) starting January 28th, 2012 because of failure to meet deadlines. This would be significantly lower than the current tariff of INR 15 ($0.375) per kWh.

According to Mr. Anand, “contrary to the wide-spread concerns of developers facing significant delays, a lower feed-in-tariff will not affect project IRRs as capital costs have decreased by approximately 20% already this year“.

As part of their extensive research on the Indian solar market, BRIDGE TO INDIA produces a quarterly market analysis report, The India Solar Compass, which provides key insight and analyses on the latest developments in the market. Subscribers include leading international component manufacturers, EPCs, project developers, investors, banks, insurance companies as well as public sector players and international organizations.