Module Price Hike To Affect 4.4GW Of Solar Projects in India
Jul 07, 2022
A recent ICRA report shows that prices of solar cells and modules in India have risen by more than 40% in the last 18 months, driven by polysilicon prices. In addition, due to the recent continued rise in silicon and cell prices, India is expected to face the risk of declining margins on all 4.4GW of approved projects at bid tariffs below Rs 2.2 ($0.028) per kWh.
The price of solar modules in India has risen to US$0.27 to US$0.28 per watt over the past 18 months, mainly due to chain-wide price increases triggered by the soaring cost of polysilicon in China, with the impact of higher cell and module prices being more critical, and the Basic Custom Duty (BCD) imposed on imported cells and modules in India over the past 12 to 18 months further increasing the cost of solar projects.
According to GirishkumarKadam, senior vice president of ICRA, although the BCD has increased to Rs 2.2-2.5/kWh from a low of Rs 1.99/kWh in December 2020, this figure is still expected to be lower than the increase in module prices. For this reason, for the 4.4GW of projects tendered in the last 18 months, the risk of a decline in project margins is very high when the tendered tariff is below Rs 2.2/kWh.
India highly dependent on imports of silicon wafers, cells
According to the reporter, due to the ALMM policy introduced by the Indian government, solar projects approved from 2021 onwards must use components from local Indian manufacturers, and most local Indian manufacturers still do not currently have production capacity such as silicon wafers and cells, so in the medium term they will continue to rely on imports for their silicon wafer and cell needs, and international pricing of polysilicon and silicon wafers/cells is still sensitive to their solar project profitability.
ICRA said that given ALMM's requirement to source components from local manufacturers who use commonly imported cells, a US$0.01 increase in cell prices would require an additional 5 to 6 paisa per kWh to be added to the bid tariff in order to ensure a profitable return for the project.
The upward trend in import rates continues to be a challenge for developers given the fixed and overall tariffs stipulated in the power purchase agreements for solar power projects. This will put additional pressure on bid tariffs. ICRA Vice President and Head of Industry VikramV estimates that a 150 basis point increase in interest rates could lead to a 20 paisa increase in bid tariffs if other factors remain unchanged.
For the time being, prices in the Chinese solar chain continue to rise, with wafer, cell and module prices also continuing to increase recently against the backdrop of rising upstream polysilicon prices, which for India has undoubtedly further increased the pressure on Indian solar projects.
