The price paid for solar power in India at auction is set to fall below last year’s record lows for the South Asia nation, driven by plummeting panel prices, falling interest rates and competition among developers seeking a slice of the country’s renewables market.
Prices could dip lower than the 4.34 rupees (6 cents) a kilowatt-hour offered in auctions held in the state of Rajasthan a year ago, according to at least one developer of solar projects in India.
“This year we will see prices fall below 4 rupees a kilowatt-hour for sure and it will be viable,” said Rahul Munjal, chairman and managing director of Hero Future Energies Pvt, the clean-energy arm of Hero Group, one of India’s largest automakers.
In 2016, countries from Chile to the United Arab Emirates broke records with deals to generate electricity from sunshine for less than 3 cents a kilowatt-hour, half the average global cost of coal power. With China and Japan joining the competitive-bidding bandwagon, as much as 25 gigawatts of solar capacity could be awarded through auctions this year globally, according to Bloomberg New Energy Finance.
“We feel interest rates will go down and the cost of solar panels will fall, so these will have a great effect on breaching the 4 rupees a unit-mark,” said Hero Future’s Munjal, adding that he’s looking at a 50 basis-point decline in domestic interest rates.
Hero Future Energies, backed by the International Financial Corp., operates 360 megawatts of wind and solar capacity and has another 1.4 gigawatts of projects in the pipeline. The company plans to participate in some of the upcoming auctions.
India adopted auctions in 2010 and is now racing to achieve Prime Minister Narendra Modi’s solar target of 100 gigawatts of capacity by 2022, a goal that’s second only to China.
Of the 25 gigawatts to be awarded through auctions, BNEF’s Chase expects 8.5 gigawatts of that to be in India.
India will soon award 1 gigawatt of capacity through wind auctions for the first time in a couple of months.