Indian solar power cheap, but much higher than the Middle East, shows report
Although India's solar tariff rates are amongst the lowest in the world, they might not be able to compete with those of the Gulf countries which boast of some the cheapest projects in the world, said the Institute for Energy Economics and Financial Analysis (IEEFA).
Tariffs in the Gulf, which has strong solar radiation and lower costs are less than a rupee per unit, making them much lower than India.
“The economic, tax and financial makeup of each country play a direct role in determining tariffs, " said Vibhuti Garg, energy economist at IEEFA. "It would be extremely difficult for the Indian market to replicate the combination of factors leading to low solar tariffs in the Gulf region, " she added.
The Gulf region has achieved tariffs in the range of $1.35-1.80 cents/kWh, or Rs. 0.99 per unit. In comparison, India's lowest bid was achieved in July earlier this year at Rs. 2.36 a unit.
Factors in UAE and Saudi Arabia such as long-dated loans at low-interest rates, lack of corporate taxes, negligible duties on equipment, low or negligible land costs for solar projects, and lower return on equity (ROE) expectations are responsible for the record low rates, a report by IEEFA and JMK research said.Garg, who was one of the authors of the report, said that if the government continues with its proposal of levying a permanent basic customs duty on solar imports from China, the tariff differential for Indian projects will widen further.
“Indian policy makers want developers to achieve tariffs on a par with those discovered in the Gulf bids, but such low tariffs are neither achievable nor sustainable in India under the current conditions, " she said.
However, IEEFA predicts the rates in India to fall between 5 to 10% on average over the coming decade due to technological advances and economies of scale.
Earlier this week, Portugal signed the cheapest tariff anywhere in the world, with $1.32 cents per kWh for a 700 MW project.
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