Aggressive solar power bids may lead to capex pressure for players

Mumbai: With solar developers bidding aggressively at lower tariffs, they have little financial buffers to face challenges such as cost overrun, increased interest rate and counter-party delays, says India Ratings and Research (Ind-Ra).

According to the rating agency, falling panel prices and increased competition have contributed to aggressive bids.

“An increase in panel conversion efficiency has contributed to a reduction in land required for panels and a fall in the balance of system cost, resulting in lower bids,” Ind-Ra said.

The analysis of the tariff of Rs 2.44 per unit of the Rewa project shows that it could have an equity internal rate of return of 10 per cent, it said.

“Risk allocation in tenders has taken centre stage in bids. Tenders floated consciously address payment security and grid curtailment to attract low bids. The Rewa bid started this trend. Solar Energy Corporation of India and NTPC have witnessed low bids from developers, because of the comfort derived from their credit profiles,” the agency said.

Given the pace of solar capacity auctions, along with an emphasis on compliance with renewable purchase obligations, the utility scale solar capacity additions are likely to be in line with the targets of the Ministry of Power, it said.

However, Ind-Ra noted that the rooftop solar capacity installation is lagging behind ground-mounted installation owing to no concerted efforts to achieve targets.

Ind-Ra further said adverse financial conditions can derail renewable projects.

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