After making the lowest bid on an auction for building a solar power park, the bidder deeply regretted his decision for being a cheap deal. This brings in the fear that the country’s fast-falling solar energy prices may be unsustainable.
In May, 2017, Acme Solar agreed to build a 200-megawatt facility in Bhadla, Rajasthan for a meager price of INR 2.44 per unit of electricity that it will eventually produce from the plant. The price was the lowest ever quoted in India and it even brought the price of solar energy way below that of energy from coal and other fossil fuels. Additionally, it brought a spark in the eyes of green energy companies and activists. Some believe that it is the beginning of the India’s new morning in the renewable energy sector.
Whereas Manoj Kumar Upadhyay, chairman of the company, said that he would never make the same sort of bid again. He added, “The prices had since then only increased because of a worldwide rise in the prices of the panels and new taxation scheme by the Indian Government.”
“When we made the bid, we considered the price for every solar panel of 30 cents per watt of power, but ever since the price has risen to 35 cents. Our bid only works at 30 cents,” said Mr. Upadhyay.
The new goods and services tax has been observed this year, while the tax on solar panels remain 5% but the other materials used like copper and steel inverters is 18%, says Upadhyay. He added “my quote would be close to INR 3, if I was to bid again.”
India has seen a massive and rapid growth in the solar energy sector because of Chinese solar panels which has brought the costs lower. The bid made by Acme in May was the lowest in India and one of the cheapest in the World.
Looking at the rapid rise and high rate at which installations are taking place, achieving the target set by Narendra Modi of 100 Gigawatts of solar capacity by the year 2022 seems achievable now. Thought many experts have recently regarded the goal as impossible.
The bids made for new solar companies have gone down by 50%. Industry observers warn that some companies are offering extremely low prices that may make the project infeasible in future.The warning seems to become truer when the cost of solar panels has begun to rise, thanks to the threat by the Indian and US Governments of anti-dumping measures against cheap Chinese-made products.
“People are making aggressive assumptions, and not all these new parks will be built at the tariffs being offered,” said Sumant Sinha, who also bid for Bhadla but was unable to meet the winning bids.Mr. Upadhyay insists that his company would complete its part of the Bhadla project, but added that the eventual price might have to rise.“The contracts have a clause to say we can get compensation if a change in law pushes our costs up,” he said. “That would apply to GST or to Anti-Dumping measures.”