After oil, gas and coal, solar module prices are on the rise

A global rally in the prices of conventional fuels such as crude oil, gas and coal has spread to the solar space, with module prices peaking at 28 cents per kilowatt hour (kWh) for Indian projects, the highest since 2019, two people familiar with the developments said.

The rise is due to the worst electricity shortage ever in China, with factories operating on limited days. With modules accounting for almost 60% of the total cost of a solar power project, any price increase will impact the internal rate of return (IRR) of these projects, many of which have already signed purchase agreements. electricity (PPA). Additionally, as India has strict go live timelines, failure to meet these timelines will result in penalties for developers.

Solar panel companies have supplies on hold of around 5 gigawatts (GW) to Indian developers until March 31, 2022. mint earlier reported on Chinese solar equipment makers such as Trina Solar Ltd, a major solar equipment maker, serving force majeure notices to its Indian customers, citing their inability to deliver equipment according to agreed schedules.

“The increase in the prices of solar modules will have an impact on the economics of projects already tendered. Not only the supplies are impacted, but also the prices at which these modules will be made available is a big question mark, “said one of the two people, on condition of anonymity.

Supplies of solar equipment to India from China have already been affected due to disruptions in shipping lines, high freight rates and a severe shortage of containers. Meanwhile, India will apply a basic tariff on imported solar cells, modules and inverters from April 1 next year, making these imports more expensive.

“It’s a red flag, I guess. The rates were set to perfection, with no margin for error or contingency. It just shows how the returns in risk-free rates go up in smoke when the tide turns and the music stops. Solar power continues to be a great place to invest, but it is time for reality to prove itself, ”said Sanjay Aggarwal, President of Fortum India Pvt. Ltd and responsible for the activities of the Finnish electricity company Fortum Oyj in India.

India has also been hit by the rebound in global oil prices, with gasoline and diesel prices reaching record highs. The price of imported Indonesian coal also fell from $ 60 per tonne in March to $ 200 per tonne in September and October, leading to lower output from India’s import-dependent thermal power projects.

Questions emailed to Chinese solar equipment makers Trina Solar Ltd, Jinko Solar, ET Solar, Chint Solar and GCL-Poly Energy Holdings Ltd on Thursday went unanswered. Questions emailed to a spokesperson for India’s New and Renewable Energy Ministry on Thursday also went unanswered until the time of publication.

Despite running the world’s largest green energy program, India has a local manufacturing capacity of just 3 GW for solar cells and 15 GW for solar modules. India’s imports of solar cells and modules fell to $ 571.65 million in FY21, from $ 1.68 billion and $ 2.16 billion in FY20 and exercise 19, respectively.

China alone accounted for $ 494.87 million of Indian imports in the last fiscal year, followed by Thailand with $ 18.76 million.

India’s dependence on imports is expected to decrease with an expected increase in local production. Reliance Industries Ltd, Adani Group and US-based First Solar are among 19 bidders looking to set up solar power manufacturing units under government ??Production Incentive Program (PLI) of 4,500 crore. The program is expected to add 10 GW of capacity to integrated solar PV manufacturing plants and provide a direct investment of approximately ??17,200 crores.

“The significant evolution of global prices for solar modules and logistics costs has indeed created uncertainty about the viability of certain projects whose commissioning is expected in the next 12 to 18 months. This will have an impact on India’s renewable capacity addition program. Hopefully the significant domestic manufacturing capacity planned under the PLI program should help close the gap and the targets, ”said Sanjeev Aggarwal, Founder and Managing Director of Amplus Energy Solutions Pvt. Ltd, owned by Petroliam Nasional Bhd.

Chinese manufacturers of solar power modules had previously raised prices at regular intervals and even reneged on contracts to supply already contracted equipment, even at the cost of cashing in their bank guarantees, as reported. mint.

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