India’s Solar Power Tariffs May Fall After US’ Paris Accord Exit
Most of the solar power developers in India source material from China as they are cheaper.
India’s solar power tariffs may decline further as a result of US’s recent withdrawal from the Paris climate deal done by President Donald Trump.
Several manufacturers, developers and analysts are of the view that Chinese manufacturers may further cut their solar module prices to drive the Indian sales as they may not have a significant market in the US anymore, as LiveMint reported.
Of a solar power project’s total cost, modules account for 60 per cent and their prices have fallen by 26 percent in 2016 alone.
China’s estimated solar module manufacturing capacity is estimated to be around 70 gigawatts (GW) and its major markets are US, India and China itself.
With an expectation of a slowdown in green energy in the US, China’s solar equipment makers may adopt competitive pricing for driving demand.
“In order to support demand, China stepped in and launched a major programme in 2014-15 due to which it added a record 35 GW of capacity. This is expected to come down this year. There will be a huge capacity that Chinese manufacturers will have to deal with this year. It will further drive down prices with solar power tariffs in India expected to go below the Rs 2 per unit mark,” said the chief executive of a solar power firm which participated in the recent solar auction rounds in India.
In case of successful exit from the accord, we may see Chinese manufacturers play a major role in the global solar industry which may not be good for India’s energy security.Gyanesh Chaudhary, MD and CEO, Vikram Solar Pvt Ltd to Livemint
Most of the solar power developers in India source material from China as they are cheaper. India’s solar power generation capacity has risen over fourfold to 12.2 GW from 2.6 GW in 2014.
However, some are of the view that an immediate impact won’t be there.
Nobody had predicted a tariff of Rs 2.4 per unit six months back. But realistically speaking, Rs 2.4 per unit is really challenging and for another one year I don’t see much reduction in tariff. Also, because of GST (goods and services tax), overall the capex cost will increase and due to which there will be a 20-30 paise rise in price also.Sunil Rathi, Director, Waaree Energies Ltd to Livemint
India’s lowest recorded solar power tariff was in May at Rs 2.44.
US demand for solar is not expected to change significantly as key US states have declared openly to continue their support to renewable energy. However, reduction in Chinese module prices is expected to continue till the manufacturers are able to stretch their margins.Kulamani Biswal, Director of Finance, NTPC Ltd to Livemint
China’s major module manufacturers include Jink Solar, JA Solar Holdings, ET Solar, Hanwha Group, Chint Solar, GCL-Poly Energy Holdings Ltd and Trina Solar Ltd.
A more competitive module market will emerge for India following US’ changed green energy stance, as experts opine.
India’s actions on renewable energy are independent of the US; it is market-driven and private sector led. In fact, it improves the scenario for India as availability of funds and technology increases, prices are expected to fall further.Sambitosh Mohapatra, Partner, Power and Utilities, PwC India to Livemint
“With a lower global demand of solar capacity, cheaper capital and equipment will flow to the Indian renewable energy sector,” added Debasish Mishra, partner, Deloitte Touche Tohmatsu India Llp.
Domestic manufactures approaching the government over Chinese module dumping could get impacted.
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