The domestic rating agency, ICRA in its latest report has said that rising prices of imported photovoltaic (PV) module is likely to adversely affect viability of the solar projects that were recently awarded, especially the ones where bid tariff is below Rs 3.50 a unit. It also noted that the imported PV module price level has shown an upward trend over the last three to four-months, up by about 15 percent, to about 35-37 cents per watt in August, from about 30-32 cents in May.
According to the report, this rise is due to factors such as advancement of module sourcing from China by the US companies in anticipation of imposition of anti-dumping duty on Chinese modules by December 2017. It also pointed out that another factor is the extension of feed-in tariff regime for solar power projects in China till September 2017, thereby increasing the domestic demand in the country. Further, ICRA also flagged risk of delays along with cost overruns due to disruption in delivery schedule and dishonouring of price terms agreed earlier by Chinese original equipment manufacturers (OEMs) to Indian independent power producers (IPPs).
For a solar power project with tariff of Rs 2.5 per unit, the Rating agency estimates that a 6 percent watt jump in PV module price may result in an increase of about 11 percent in capital cost and decline in project internal rate of return (IRR). Therefore, it noted that the viability of solar power projects with tariffs below Rs 3.5 per unit remains critically dependent upon ability to source modules within budgeted cost along with availability of long tenure debt at cost competitive rate.