Low prices affect the long-term viability of solar energy projects, say experts

Our Bureau New Delhi | Updated on October 04, 2018

Tariffs from renewable energy projects need to remain at moderately lower levels for assuring wider adoption.

Speaking at a session titled ‘Bankers’ Perspective on Renewables’, at the 2nd RE-Invest India summit, Chairman and Managing Director of Indian Renewable Energy Development Agency Ltd (IREDA), KS Popli, said: “If we need to increase the generation capacity of solar, the costs have to remain at manageable levels. The point is, returns have been coming at ₹2.44 a unit the same tariffs are coming after the imposition of the safeguard duty. The prices in China have been adjusted accordingly.”

“The logic that the centre has is if one company can bid at ₹2.44 a unit, then why should we accept ₹2.77 a unit,” he added. Popli was responding to a question on whether the centre’s move to cap tariffs is agreeable to the bankers. He, however avoided a comment conflicting the centre’s position.

But experts in the panel discussion said they feel these low prices would affect the long-term viability of solar energy projects.

Two parameters

Managing Director and Global Head of Environmental Finance and Sustainability, Citigroup, Michael Eckhart, said: “To ensure the long-term viability of solar energy projects, in Argentina, Mexico, and everywhere else, including India, I recommend two parameters for procurement of solar energy — the lowest cost, and a debt-service ratio, a measure of how financially viable is a project, at that price (of solar energy). What I fear is with all these low- price bid procurements of solar energy, five to ten years from now, we will have a wave of project refinances.”

Bankers also said they are evaluating the opportunities in the renewable energy sector from a longer- term perspective. “We are trying to look at solar energy projects from the angle of their long-term viability. As there are very few entry barriers in the solar business, everyone has entered and promoters try to move out in a few years. This sometimes creates difficulty in assessing the viability of projects,” Chinmoy Gangopadhyay, Director (Projects), Power Finance Corporation said.

“There are also issues regarding the quality of solar panels. There is no benchmark to assess the quality of solar panels. Suppliers who are tier-I today, fall out of that position later, and there is difficulty in ascertaining quality,” Gangopadhyay added.

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Published on October 04, 2018
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