India’s Solar-Power Bid Prices Sink to Record, Consultant Says
India drew record-low prices for solar power in an auction today of permits to build about $700 million of plants as a supply glut in the industry drives down equipment costs.
Solairedirect SA, France’s second-largest solar power producer, bid to sell electricity from a photovoltaic plant at 7.49 rupees (15 U.S. cents) a kilowatt-hour to the government, Chief Executive Officer Thierry Lepercq said by telephone. That was the lowest bid, said Mohit Anand, senior consultant at Bridge to India Pvt., who was present at the closed-door session in New Delhi where the results were revealed.
“Manufacturers are keen to offer discounts because things are so competitive right now,” Anand said. “Costs are going down and that’s really reflected in these bids.”
The biggest contracts were won by Indian developers, including Welspun Group, Kiran Energy Solar Power Pvt., Azure Power, and the solar unit of Mahindra & Mahindra Ltd. (MM), Anand said. A phone call to the office of G.B. Pradhan, secretary at the Ministry of New and Renewable Energy, went unanswered.
The winners are required to buy solar cells domestically. India’s three largest traded makers of the cells used in solar panels are Indosolar Ltd. (ISLR), Moser Baer India Ltd. (MBI) and Websol Energy Systems Ltd. (WESL) Overseas manufacturers such as First Solar Inc. (FSLR) andSharp Corp. may also benefit because their thin-film technology is exempt from the local sourcing rules.
Under the auction rules, the government proposed to buy solar power at 15.39 rupees a kilowatt-hour from the projects auctioned. Companies bid to sell power at a discount to that price in a process known as a reverse auction. Those offering the lowest rates win and are awarded the rights to build plants with capacities of as much as 20 megawatts each.
Solairedirect’s price came in at less than half the government’s proposed rate. The spot price of solar panels fell about 40 percent this year as manufacturers, especially in China, ramped up production. Its offer is also 38 percent below the average bid in India’s first solar auction a year ago.
If prices continue to fall at the rate seen in India over the past 12 months, solar power may equal the cost of electricity generated by fossil fuels that’s sold to commercial businesses earlier than expected, Anand said. KPMG LLP predicted solar power would be as cheap as coal by 2017 in a May report.
India’s Solar Mission
The auction was the second under India’s national Solar Mission program that’s positioning the country to become one of the world’s fastest-growing solar markets by installing 20,000 megawatts, equivalent to about 18 nuclear plants, of sun-powered capacity by 2022.
The latest round awarded 350 megawatts of capacity that will require roughly $700 million of investment, according to Bharat Bhushan, a New Delhi-based analyst for Bloomberg New Energy Finance.
Winners will have seven months to arrange financing and 13 months to complete the plants, according to government guidelines on the website of NTPC Vidyut Vyapar Nigam Ltd., the state-run power trader overseeing the process.