In the recent Solar Energy Corporation of India (SECI) auction which was concluded on November 23, 2020, India set a new record low tariff for solar projects at Rs 2/kWh. And in its new analysis, the Institute of Energy Economics and Financial Analysis (IEEFA) takes a look at the key factors behind the record low solar tariff.
The tariff-based bidding was conducted for the selection of solar power developers to set up 1,070 megawatts (MW) of grid-connected solar PV projects on a “build-own-operate” (BOO) basis in Rajasthan (Tranche-III). With 14 developers participating, the tender was oversubscribed by 3,280 MW, attracting a total of 4,350 MW of bids. Saudi Arabia-based Aljomaih Energy and Water Co. and Sembcorp Energy’s India arm Green Infra Wind Energy Ltd. were the lowest (L1) bidders with a tariff of Rs2/kWh for 200 MW and 400 MW capacities respectively. State-owned NTPC Ltd won the contract for the remaining 470 MW capacity with the second-lowest (L2) bid of Rs 2.01/kWh.
According to IEEFA, the key factors include access to low-cost financing at 7-7.5 percent for government entities like NTPC and for international developers able to arbitrage multi-decade, record-low OECD interest rates (even adjusting for a significant combined currency and country risk premium for India). And the expectation that mono PERC module prices will fall 10-15 percent to reach USc19-20/Wp (watt peak) by 2022 (excluding duties and taxes).