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Safeguard duty, rupee decline to push up solar capital costs by 20-25%, says ICRA

Decline in prices of photovoltaic modules

‘Decline in prices of photovoltaic modules by about 20% cushioning the impact’

The imposition of safeguard duty by the government on imported photovoltaic modules and rupee depreciation are estimated to increase the capital cost of solar power projects by 20-25%, according to ICRA.

In a report on the wind and solar sectors, ICRA said while bidding activity has remained strong, several key concerns remain, including rising interest rates.

Bidding sizeable

“The bidding activity in the renewable energy sector has remained sizeable with central nodal agencies like the Solar Energy Corporation of India (SECI) and NTPC Limited as well as state distribution utilities issuing bids for wind and solar power capacities of about 10 GW and 15 GW respectively during CY2017 and CY2018 (YTD),” the report said. “While this augurs well for the sector, several key concerns remain.” “The imposition of safeguard duty on imported PV modules and the recent rupee depreciation against dollar are estimated to increase the capital cost of solar power projects by 20-25%, though the impact of this is partly moderated by the decline in the PV module prices by about 20% since June 2018,” Sabyasachi Majumdar, Group Head – Corporate Ratings at ICRA said. “Further, the rising interest rates are putting pressure on the bid tariffs as well as on the viability of the wind and solar projects having tariffs less than ₹3 per unit.

Another challenge faced by the renewable energy sector is that winning developers in recent bids are having trouble in securing connectivity and open access to inter-state transmission network. This has resulted in cancellation or capacity downsizing of some of the bids by SECI, he said.

 

Source: The Hindu

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