Solar tariff bottoms out, may not drop beyond all-time low of Rs 2.44/unit

Solar power tariff fall seems to have bottomed out and may not drop beyond an all-time low of Rs 2.44 per unit in absence of well-structured bids and rising solar panel prices on demand pressure.

The solar power tariff fell to an all-time low of Rs 2.44 per unit in May last year during an auction for 500 MW capacities at Bhadla (IV) in Rajasthan. It had the viability gap funding component, as per the Ministry of New and Renewable Energy data.

According to data, the solar tariff rose to Rs 3.47 per unit for 1,500 MW capacities in Tamil Nadu under a state scheme in July and then dropped again to Rs 2.66 per unit in an auction for 500 MW capacities in Gujarat.

In an auction of state-run power giant NTPC for 250 MW capacity, the tariff was Rs 3.14 per unit. But it dropped again with viability gap funding to Rs 2.47 per unit and Rs 2.48 per unit for 500 MW Bhadla-III and 250 MW Bhadla-IV auctions in December 2017.

"High global demand has pushed up prices of solar modules. Also, the recent bids are not that well structured as previous ones and bidders are factoring that risk in," said Kameswara Rao partner (energy and utilities) PricewaterhouseCoopers said.

Many experts are also of the view that solar tariff has bottomed out and may not fall further.

During 2017, solar power tariff hovered around Rs 2.4 per unit level only in auctions for capacities, where viability gap funding component was there.

Earlier last year in April, the tariff was Rs 3.15 per unit in an auction for 250 MW capacities in Andhra Pradesh.

Similarly, the tariff was Rs 2.97 per unit in an auction for 750 MW capacities in Madhya Pradesh in February last year. But the levelised tariff in the case was Rs 3.30 per unit.

Therefore, the reasonable solar tariff on basis of data available with the ministry was around Rs 3 per unit. It fell sharply only when viability gap funding component was there.