Innovate or die..: Thats the only strategy will keep you floating in the new era solar business

The falling solar tariffs always pose a question on the solar pandits, that is this tariff economical viable.. Every time we come across the new bid result, we start this debate and those who are the winners, claim that the winning tariffs are economically viable, and those who leave the race in the reverse bid, believe that the winners have exposed themselves against huge risk to make the proposed tariff viable.

In my view the answer comes from the bid capacity and commissioned capacity. Presently SECI has over 50GW of tendered solar capacity, though accurately data are not available, but, considering 2 years gestation period, about half of the tendered capacity has not been commissioned by the successful bidders during the last two years, and SECI is likely to forefeet the bank guarantees of the bidders. There are two major aspects of successful bidding, first is the financial engineering, and the second aspect is the technological innovations. In most of the recent bids, at the proposed tariffs, it may not be possible to achieve financial closure from Indian banks and financial institutions, as their risk assessment and project evaluation does not qualify most of the solar projects economically viable. It is the PE players who infuse the funds in these projects and then take it forward with an interest rate of about 5-6%. The second aspect which most of the bider consider is the increase in the CUF by adding the single axis trackers, and increasing the DC/AC ratio to maximise the energy yield from the project. Majority of bidders forecast the PV module price for next two years, which is the key in implementation of the project. We should be note the fact that Indian solar tariffs are not the lowest in the world. The solar tariffs have come down as low as Cents/kWh in Gulf countries. The majority of factors of such a low tariffs in Gulf region are the low ROE expectation of 6-7%; High CUF of about 25-28%; Low hedging cost of US dollar debt; and the negligible land price.

This means that in the race to succeed or survive you need to be more innovative than your competitive in terms of technology and finance. Once you win the bid, the developers explore the new ideas to match the winning bid in their implementation strategy. As per the available data of commissioned capacity, about 50% of the bidders succeed in the implementation of their winning strategy, and about 50% are not able to sail through. If you are able to successfully implement your winning strategy, you get the confidence to innovate further. The important aspect is the internal innovations, rather than the external innovations.  10 years ago, this was a daunting task to do a solar project with just 4 km of DC cables, but now it is possible, The O&M price has come down to close to Rs.1Lac/MW due to use of automatic robotic cleaning systems, the CUF has increased from typical 16% to 25%.. All this is because of innovations. With constantly changing business dynamics, and technology, it is hard to keep a constant pace with the changing policies and external parameters. Some of the new entrants are taking the reward prudent risk strategy. They believe that if you want to succeed quickly that your competitors, you better be ready to get fail faster than your competitors.