Will future Indian solar bids see 5+ rates

India has seen large capacity of solar bids (both in numbers and volumes) happening in quick succession recently.(till January 1, tenders have been prepared to add 15,177 MW of solar capacity in 2016-17. By the end of the current fiscal, tenders for another 4,431 MW of projects will also be ready).

It was indeed nice to see the tariff coming down so drastically from Rs 6+ to Rs 4.34

However, there always was an apprehension whether these bids were sustainable & whether all the factors were taken into consideration while calculating the bid rate.

Well, the starting was good---the scale of capacity was great (50Mw plus projects), large organisations, big names, talk of foreign investments flood gates opening etc.

Indian Government was going Gaga over the low tariffs and making statements as to how solar has attained grid parity.

But when one looked very closely on to the organisations who were abstaining from the bids, one started wondering whether it was the herd mentality or the roulette mentality which saw such low bids.

• Why were so many reputed business houses abstaining from the bids?
• Are they better informed?
• Or are they just being prudent or conservative?

Then comes news of SunEdison on the verge of bankruptcy.

Suddenly it looks like the party is over, all sort of doubts starts erupting all over the place.

News of many bidders looking for invisible investors starts floating around.

News starts going around about efforts on bid acquisitions, failure to obtain financial closures, talks of allotted projects not being able to attain commissioning.

One wonder as to what went wrong.

Were the following assumptions wrong?

1. Module prices reduction trend continuing.
2. BOS cost reduction of 10% from earlier years.
3. Availability of cheap finances (landed cost in India being at par at international rates)

Some Facts

The module manufacturing community seems to be mainly concentrated on getting higher efficiency than lowering costs. Chinese mass manufacturing has hit a road block not able to continue the subsidy regime and many Chinese manufacturers are going belly-up. May be a major breakthrough will come up which will solve the problem. However even if such a breakthrough is attained by somebody, it will take time for production capacity ramp-up  to meet the demand.

If one wants to see substantial reduction in BOS cost, may be one will have to do away with the module mounting structures (on the lighter side).

The world market (other than India) has to hit such a recession that the funding agencies will think that Indian solar market is a god given gift and will flock to India with such fantastically low rates.

Are the above wishful thinking, time will say.

Till then, I think that the business community is going to be cautious and we will see bid rates hovering around 5 to 5.5.

Or it will be plain hara-kiri.