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India continues to see lower solar prices due to high competition and risky bids by companies

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The Indian solar market continues to surprise observers with newer lower prices every day conducted in numerous reverse auction solar bids by state government, as well as central government owned agencies. While the power minister seems extremely happy by the low prices discovered in transparent and unbiased auctions, many analysts are concerned that this competition in quite unhealthy for the industry over the long term. The reason is that the prices are so low that it is difficult to compute decent returns for developers, given the current capital costs of solar equipment. It is being assumed that the developers are pricing in aggressive assumptions of capital cost declines in the next 6-12 months, along with low interest rates. They are also probably penciling in aggressive return estimates which cannot be in the double figures. Given Indian bond yields of around 8%, this means the returns for the developers would be paltry, given the risks faced in Indian infrastructure project execution.

Also read about Booming Solar Investments in India.

Uttar Pradesh which is India’s largest state saw a small 100 MW auction, in which two Indian developers won the 50 MW projects at price of INR 4.78/kWh. Though higher than the INR 4.34 /kWh price in the Rajasthan auction, one needs to remember that Uttar Pradesh is not known as the best governed state. The developers would be responsible for getting their own land and solar radiation in UP is also quite low compared to Rajasthan. Given these facts INR 4.78 looks very aggressive. Note Indian developers won this auction compared to foreign developers, who had recently won the Andhra and Rajasthan tenders. It is very difficult for foreign developers to manage the Indian political environment as well as land acquisition issues, compared to local powerful business groups. Though Azure is not in the powerful category, Adani Group is one of the biggest industrial groups in the country. It is also interesting to note that solar projects have been distributed across different developers with no one developer being dominant. The initial winners Sky Power, SunEdison and Softbank have disappeared from the scene after bidding and winning aggressively. Now these companies are coming out with higher bid prices. They had probably bid low in earlier tenders to get into the action, but are now realizing that it is not viable to bid and win at such prices.

Coming back to my original point, a recent research by Bridge to India blog shows that almost half of Indian projects in tenders are delayed. There are numerous problems in India such as land, electricity evacuation and local political pressures. Managing these is not easy and time overruns are quite common. Given the low prices being bid, it remains to be seen if these projects can remain profitable in face of these risks.

Adani Power and Azure Power have won the latest auction for solar energy projects with bids of Rs 4.78 per unit, higher than the record low of Rs 4.34 set this month. The smaller size of these projects in Uttar Pradesh and the lower level of solar radiation in the state compared with Rajasthan, where the new low was set in the last round, led to the higher price, analysts said.

In the last three auctions, winners had quoted lower tariffs. Two of them were for projects offered in Rajasthan and Andhra Pradesh, while the other was for a project offered by Solar Energy Corporation of India in Maharashtra. The lowest bid in Rajasthan was Rs 4.34 per kWh, a record, while that in Maharashtra was Rs 4.41 and Andhra Pradesh, Rs 4.63.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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