Solar power tariff witnesses historical low

Solar power tariff witnesses historical low

The recently concluded solar auction by the Solar Energy Corporation of India (SECI), saw over 5,000 MW of bids being received for the 1,070 MW solar tender that was issued by them. In recent times, this is perhaps the most encouraging response that the firm, which was set up by the Ministry of New and Renewable Energy to catalyse the implementation of the National Solar Mission, has received. The heartening number of responses that the tender attracted essentially means that solar tariffs may record a historical low in the country now, with the price dropping to as much as Rs 2.36 per kWh.

The aggressive bidding that was witnessed presents a stark contrast to the early solar auction years spanning between 2015 and 2017, where a gross oversubscription of the tenders resulted in the exit of many developers from the market. This oversubscription was, in large, attributed to the tremendous mismatch that existed between demand and supply at the time. Earmarking of significant pools of global capital in subsequent times has made matters significantly better for this sector. Experts say that the low bids can be primarily attributed to the exemption of the basic customs duty for solar projects combined with the tentative non-applicability of Approved List of Models and Manufacturers (ALMM). Further, it is also believed that solar module prices, in general, will continue to witness a steep fall, thus dragging the prices of the forward contracts on these modules even lower in the process. Additionally, the demand depression scripted by the onslaught of the Covid virus has resulted in a dramatic reduction in the costs of solar equipment.

Among the companies that emerged victorious in securing these projects, six of them were foreign-based with Renew Power being the only local firm among the victors. Eager to capitalize on this trend, more and more developers these days are aiming to rope in any one of the new solar projects to make the most of this opportunity. All in all, even though the move might have stemmed out of desperation on account of the recession triggered by the ongoing pandemic, it perhaps stands to consolidate the narrative of renewable energy resources in the longer run.

This development is a testament to the International Monetary Fund’s continued reiterations of the fact that rising global investments in renewable energy capacities across the globe, has consequently triggered a fall in their prices and thus made the harnessing of wind and solar energies, hitherto considered uneconomical, much more affordable.

With pollution levels across the globe ringing aloud and the threat of global warming continuing to loom at large, people have grown increasingly conscious over their consumption of energy resources.

Historically, we have always been heavily reliant on reserves of non-renewable sources of energy such as coal and petroleum to power through the significant part of our day. However, a burgeoning rise in the global population has now caused people to actively seek out a new narrative for meeting their daily requirements- renewable energy sources.

Though they abound in benefits, renewable energy resources have also been used with caution primarily because of the financial challenges that they bring with themselves. Recent developments, however, look promising enough to turn the tide positively in their favour.

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