However, there is nervousness among investors in the segment and the supply chain. Experts say leading project developers are putting aggressive bids for 50-200 Mw projects, to be relevant in the market. The likes of ReNew Power, Hero Future Energies, Azure Power and ACME are bidding close to Rs 5 a unit bid for small projects but not winning.
"Global investors are baffled. The way the tariffs (rates) are falling in the Indian solar market is giving a confusing signal. There are no big projects coming up and no big-ticket investment announced for solar is coming to life," said a renewable energy analyst with a leading global investment monitoring company. Rates have fallen with each tender in past year but the project capacities bid for have not increased.
Except for the tender issued for a 500 Mw solar park in Andhra Pradesh, which US-based SunEdison won by quoting Rs 4.63 a unit. The sale of power, however, is through bundling with conventional power by NTPC at an average rate of Rs 3.5 a unit. Two months earlier, a Malaysian company, SkyPower, quoted Rs 5.17 and Rs 5.05 a unit to win two projects of only 50 Mw each in Telangana and Madhya Pradesh, respectively.
"Evacuation and sale of power is one issue which continues to nag developers. The return on investment in solar worsens if my project is commissioned on time but the grid cannot handle the capacity. Either the bid or the capacity bid for would reflect the caution of the project developer," said Sumant Sinha, founder-chairman, ReNew Power.
The ambitious 'Green Corridors' projects aimed at building alternate transmission infrastructure for renewable power is again in the draft stage, with targets and expenditure being revised. The progress has been slow since 2010, when it was first drafted. According to the industry, proposals are approved for three or four states but there is only a tepid pace of ground work.
A solar power project ideally takes eight months to a year for commissioning. Transmission takes a minimum 18 months to come up. Solar power might end where conventional power is now, with much generation but strained supply, said the analyst quoted above. "The risk around sale and evacuation were significantly reduced due to involvement of NTPC in the Andhra solar park bid. Policy support and land availability further helped in tariffs going down," Pashupathy Gopalan, president and managing director, SunEdison Asia-Pacific, told Business Standard. However, the sustainability of such low rates is being debated.
"A lot of developers and investors will admit that they are probably better off watching such bids from the sidelines than participating in these. It is not viable for them to take up projects at these levels," said Jasmeet Khurana at Bridge to India, a Delhi-based consultancy, monitoring investment in the segment.
Another worry is around the manufacturing of solar power cells. "This winner-takes-all self-fulfiling prophecy is leading to margin pressures across the value chain, and will impact the growth and sustainability of equipment and service providers to the solar industry," said Rupesh Agarwal, partner, BDO India.
Domestic solar cell makers and the modules industry are struggling to survive against the influx of cheaper imports from the US, China and other countries. Against the projected demand of 5,000 Mw of solar cells annually, operating capacity of indigenous makers is 250 Mw.
n Rs 34,000 cr capital outlay
n Award of contract under progress for 2 states
n Proposals under review for 5 states
n Rs 36,500 crore estimated planned outlay
n In project planning stage, locations & agencies being identified
* For solar parks only
**Rs /unit +Mw