‘Slackening demand for power a concern’

Sujoy Ghosh, Country Head, First Solar India and part of world’s leading solar module supplier First Solar Inc with a capacity of over 3 giga watt, believes the country’s solar sector is poised for rapid growth. “The issue of slackening demand for power seems to be a concern for new capacity addition. The recent tariffs show developers are happy with single digit internal rate of return. One will have to watch how this works out,” he said. Ghosh takes through various issues relating to the solar power sector in the country. Excerpts:

The renewable energy sector is passing through interesting times with tariffs finding new lows. At about ?2.44 per unit from recent bids at Bhadla, is it viable and sustainable?

These tariffs are achieved in solar parks in a state with one of the best solar insolations and we must compliment the government for mitigating the development risks for the investor. The reduction in risk profile of the projects is clearly reflected in the tariffs.

Despite the de-risking, the equity returns at these tariffs are in single digits based on our assessment of the current and near term projected capital costs and cost of debt.

If there is a class of investors that are willing to continuously deploy capital at these hurdle rates for utility scale solar in India, then it would clearly disrupt the overall utility sector, and incentivise the consumer to increase the mix of solar in the overall portfolio.

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