India all set to introduce cap on solar power tariffs

• The ministry of new and renewable energy is set to cap India’s solar power tariffs at ₹ 2.5 and ₹ 2.68 per unit for developers using domestic, and imported solar cells and modules, respectively

• If it was found that the safeguard duty on imports was not paid by the bidder, then the bid solar power tariff will be reduced by ₹0.18, and the “pass-through benefits will not be available to the developer”.

• SECI’s future bids should be in lot sizes of 1,200 MW, with no upper cap, and the minimum bid should be for 50MW.

• The suggestions could be a source of worry for solar power developers, given that maximum proposed solar tariffs are far lower than what was achieved through the reverse bidding process conducted by both SECI and state governments.

• For instance, earlier this month, SECI cancelled a 300MW solar tender awarded to Adani Green Energy because the tariffs were relatively high. In July, Uttar Pradesh’s renewable energy department also scrapped tenders for 1,000MW of grid-connected solar projects because the lowest bid was at ₹3.48 a unit. Higher bids also forced SECI to cancel another 950 MW tender in July.

• Solar power tariffs in India plunged to a record low of ₹ 2.44 per unit in July, but the lowest bid in recent times was at ₹ 2.9 a unit.

• On 30 July, the government ordered safeguard duty of 25% on solar panels and modules imported from China and Malaysia to protect domestic manufacturers and to encourage solar project developers to buy units locally. However, faced with mounting pressure from solar power developers, the duty has been temporarily lifted. About 90% of the solar cells and modules used in India are imported from China and Malaysia, according to industry estimates.

• India is the world’s third-largest energy consumer after the US and China. India has set itself an ambitious target of achieving 100GW of solar power by 2022, with the current capacity at about 24GW.

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