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New solar projects may benefit from falling component prices

A sharp fall in solar module prices will help renewable energy producers, who have won solar projects at aggressive tariffs but are yet to procure equipment or start construction, leading to higher margins, according to company executives and analysts.Costs of solar photovoltaic (PV) modules, a key component in setting up of solar plants, have been on a downward trend because of oversupply in China. Modules make up nearly 60% of a solar project’s cost.

Lower costs could mean several of the projects, which were termed unviable for being won at aggressive tariffs, could now see better investor sentiment, said Kartikeya Sharma, head of research and analytics at SunSure Energy, an EPC (engineering, procurement, construction) developer of solar projects.

“Indian solar project developers will be relieved to see (module) prices coming down much more sharply than expected, providing an opportunity to improve returns despite aggressive bidding... The fall in prices comes at a perfect time for Indian solar market as Q1 2017 is expected to be the biggest quarter for new capacity addition till date,” Bridge to India said.For a 10 megawatt (MW) scale plant, for example, prices of tier-1 modules have come down to 42 cents per watt in July 2016 from 55 cents per watt in January 2015—a drop of 23.6%, SunSure’s Sharma said. He expects module prices to fall another 10% in the months to come.