The continuous inflation of silicon, an upstream solar material, has resulted in an increase of 40% in solar cells and panels in India for the past 18 months, which creates substantial cost pressure for the solar plants who had successfully won and signed for 4.4GW of capacity during this period.
India issued 4.4GW of solar development licenses over the past 18 months, and solar plants mentioned above all had a tender tariff of lower than INR 2.2/kWh (US$0.028/kWh), where developers are now subject to risks of low rate of return under rising solar cost. As Indian independent and professional investment information and credit rating agency ICRA commented, Indian solar developers will be unable to escape from the pressure of cost even though mitigation is starting to be seen from the supply chain.
Mono-Si PERC modules had risen by more than 40% over the past 18 months, and have now arrived at US$0.27-0.28/W, primarily due to the scission of China’s solar value chain and the drastic surge of multi polysilicon cost. In addition, the elevation of solar product prices, as well as India’s Basic Custom Duty (BCD) on solar and modules, have also induced extra pressure for solar projects that were awarded over the past 12-18 months.
Despite tender tariff having climbed from INR 1.99/kWh in December 2020 to INR 2.2-2.5/kWh, the degree of increment has yet to catch up to that of the cost. Girishkumar Kadam, Senior VP of ICRA, commented that the accumulated 4.4GW of projects over the past 18 months are now highly prone to risks of slow rate of return, of which many power plants are sitting at a tariff of below INR 2.2/kWh.
Power plants that were awarded after April 2021 have to abide by the ALMM (Approved List of Models and Manufacturers) policy that was issued back in 2019, though most existing Indian manufacturers are not vertically integrated, and have to rely on imported wafers and solar cells for the short and medium term.
Vikram V, VP ICRA, pointed out that despite the predicament, solar power remains relatively competitive compared to the marginal cost of thermal power plants that are currently sitting at the lowest power dispatch level of 25%, which resulted in more than INR 3.0/kWh for the variable cost of procurement for coal-fired power plants in each major state of India.
(Cover photo source: pixabay)