Indian Solar, Wind Developers May Be Relying Too Heavily on Falling Prices
Too much faith in ever-falling costs may doom some solar and wind developers in India and threaten the nation’s much-touted campaign to shift its power grid from coal toward renewables, Greentech Media reports.
Earlier this year, the country cancelled 13.7 gigawatts of new coal capacity in a single month. Supply auction prices for utility-scale solar generation appeared to be “free-falling,” in the words of Tim Buckley, director of energy finance studies at the Institute for Energy Economics and Financial Analysis, without an end in sight. As it turns out, the end may have been arriving even as some of those auction bids were filed.
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“Solar developers have been happy to submit ever-lower bids in government auctions because they expected panel prices to drop continuously,” the industry news outlet reports, citing Sumant Sinha, founder and CEO of ReNew Power. But those expectations have recently been overturned, and “some bidders who bid aggressive numbers are going to end up having a problem,” he warned.
Indian solar developers have commonly factored “a 15 to 20% annualized fall in the cost of solar modules” into their bids, Greentech quotes Bridge to India, a New Delhi-based renewable energy analyst firm, as observing. “The assumed price decline may have been even higher in some recent auctions.”
But those assumptions have recently been overturned. After breaking through US$0.30 per watt earlier this year, many developers “expected they would go down to the mid-twenties in the next three or four months,” said Sinha. Instead, prices have bounced back into the mid-thirties, and some module suppliers in China are reported to be withdrawing their earlier price quotes. “It’s going to result in some unprofitable projects being done.”
It also has some companies bailing out. Acme Solar Holdings won a 200-megawatt project in Rajasthan in May “with a record-low tender price of $0.038 per kilowatt-hour,” Greentech reports. But the firm put the project up for sale in August, after “rising Chinese solar panel prices hurt the economics.”
The infectious enthusiasm for ever-dropping prices may have extended to wind developers, as well. “India’s wind industry has only just started to move to auctions from a feed-in tariff regime,” reporter Jason Deign observes. “And there, too, some developers may have bid beyond their capabilities.” Deign cites the example of Inox Group, which won a 250-megawatt contract at $0.054 per kilowatt-hour in the country’s first wind auction, only to put it up for sale in August.
If the contagion spreads, Greentech worries, it could threaten India’s hopes for installing 100 gigawatts of solar generation and 60 gigawatts of wind before 2022.