Situation of Falling Solar Prices in India

Solar energy prices have fallen by more than half in India over the last 2 years causing a serious case of buyer’s remorse. Think you had bought a house for INR 1 crore and after 2 years it falls in value by 50%. This is similar to what is happening across the Indian electricity sector. In 2015, a large number of Indian state utility buyers had signed contracts between INR 6-8/kWh which were based on the equipment prices and interest rates at that point of time. Today the price has come down almost INR 3/kWh. The buyers are left saddled with paying very high price for solar energy, which is almost double of what the price is right now!

What is even more problematic for these buyers is that they will have to pay higher prices for 12-25 years, depending on the duration of the PPA. The same case had happened in Gujarat a couple of years ago and the utility had gone to the regulator to lower the prices. However, the courts refused to change the sanctity of the contract and the prices prevailed.

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Uttar Pradesh which is the largest state in India is trying to renegotiate the PPA prices to a lower value by talking to the winners of the bids  (Rays, Essel Group and others). The UP power sector is undergoing a major change with the new government lowering the price of power by trying to get out of high priced PPAs. It has already set in motion to cancel the PPA for a 90 MW power project that had a price of more than INR 7/kWh and was signed due to emergency needs.

The solar power developers are crying hoarse as they would have bid for these power projects using certain assumptions and values at that point of time. Also, it is incorrect for a utility to change the contract as that would not allow the developer to raise prices in case he is running a loss. The Adani and Tata massive thermal power plants are running at huge losses, but the courts have refused to allow them to increase prices as the contract does not change the price.

Source: ET

It remains to be seen whether the developers will go to courts or get their arm twisted by the state government into lowering their prices and profits.

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