Continuous decline in solar power tariffs since the start of the current financial year (FY 2020-21) has been driven by a mix of structural and state-specific factors with the former likely to sustain over medium-term, India Ratings and Research (Ind-Ra) has said.
The tariffs declined to Rs 2.36 per kilowatt hour (kWh) in June and July, and Rs 2 in November. In the latest bidding as well, while the winning bids are at Rs 2 per kilowatt hour (kWh), the highest bid was at Rs 2.43 per kilowatt hour (kWh) which is lower than the earlier tariffs.
The decline in tariffs is being driven by a lower capital cost per megawatt of around Rs 4 crore per megawatt because of advancement in panel designs, enabling a higher capacity utilisation factor (CUF).
Besides, there has been a reduction in panel costs globally while financing costs have lowered. Ind-Ra estimates that a lower funding cost to foreign and domestic developers has resulted in a tariff decline of 10 to 15 paise per kWh.
Additionally, few state-specific factors impacting the tariffs in the latest round include an exemption of Rs