Drop in solar power tariffs, equipment manufacturers to gain

The Indian solar power sector, which had been growing at snail’s pace so far, has come into the limelight after a French company, Solairedirect, emerged as the lowest tariff bidder for its 5 MW solar power capacity. The tariff offered by Solairedirect (Rs 7.49/Unit) is at a 50% discount to the feed in the tariff as mentioned in the National Tariff Policy (Rs 15/Unit). We, at DSIJ, have undertaken an analysis of the solar power sector, to help our readers understanding its future outlook.

Due the rise in the thermal generation plants in the country, thermal coal prices will continue heading north. The govt. is aware of this, and has thus planned a massive expansion of solar power generation capabilities under the name Jawaharlal Nehru National Solar Mission (JNNSM).  Under the JNNSM, the govt. wishes to increase the solar power capacity to 20000 MW by the year 2022 in 3 phases, as outlined in the following table:
                                                                            Table 1: Jawaharlal Nehru National Solar Mission

Unlike thermal power, where the main costs are those related with construction, production and maintenance, solar power only involves construction costst. These construction costs, however, are fairly high. More specifically, a solar plant of 1 MW would cost about Rs 14 cr, whereas a thermal power plant of the same capacity would cost about Rs 4 cr.

The govt. wishes to encourage rapid and large-scale capital investments in the solar energy arena to curb carbon emissions as well as to decrease the dependence on consumption-based generation.

Listed companies like Mosarbaer, BHEL, Jain Irrigation, and Tata Power (through its subsidy Tata BP Solar) are already in the market of solar equipments. Siemens also wishes to enter this market. We see a good market opportunity of about Rs 15400 cr created due to the first phase of the JNNSM. We also expect five-fold growth in the market to over Rs 40000 cr in next 5 years' time due to the government's boost.

In the recent auction for solar projects, when only 350 MW of power capacity was up for bidding, companies actually filed requests for  the selection of a total of 218 solar PV projects with a capacity of over 2500 MW. This needs to be seen as a future indicator of where solar power is heading. Now, when a tariff of Rs 7.49 a unit is being offered, the difference between the prices of thermal generation and solar generation works out to be Rs 4/unit. This has helped to bring solar power closer to the reach of the common person, and will make a huge and positive difference in the future, as we saw in the case of mobile technology.

Table 2: Tariff Rates In JNNSM