Solar tariffs have declined by 73% in India since 2010

Average solar tariffs in India have fallen by about 73 per cent since 2010, almost in line with Chinese spot module prices, which have fallen by about 80 per cent during the period, according to Mercom Capital Group, a global clean energy communications and consulting firm.

In 2010, the first 150 MW of solar project, under the National Solar Mission (NSM) Batch-I, was tendered at an average tariff of ₹12.16 (~$0.17) per kilowatt hour (kWh).

The recent record low bid of ₹3.30 per kWh (levelised over 25 years) at the Rewa Solar Park by ACME was lower by ₹1.05 and 24 per cent compared to the previous low of ₹4.35 quoted in Rajasthan (by Fortum) in July 2016.

Intense competition in reverse auctions due to a limited supply of projects has pushed companies to bid lower and lower, sacrificing margins in order to gain market share.

Highly competitive reverse auctions, falling module and component prices, the introduction of solar parks, lower borrowing costs, and the entry of large power conglomerates with strong balance sheets and access to cheaper capital have all contributed to the dramatic fall in bids, it said.

While an increase in lending to renewable energy projects has provided developers with cheaper loans, ever falling Chinese cell and module prices due to an expanding global market, scale, supply and demand imbalance is the single most important reason that has enabled project developers in India to aggressively bid and build projects.

Chinese module prices have declined by about 80 per cent since 2010. The module price declines in 2016 (31 percent) is the second largest decline following the 45 per cent price crash in 2011. After huge price declines in 2011-2012, there was some price stabilisation between 2013 and 2015 during which module prices fell by only 11 per cent.

But, the massive price declines in the recent months have more to do with global demand and supply than what has happened in India which has installed 10 GW since 2010. China installed 34 GW just in one year in 2016.

The NDA Govt  just doubled solar park capacity to 40 GW, which is expected to help bring down costs as long as the parks are built and operated efficiently