Understanding the Surge in Solar PV Module & Cell Prices

Published by firstgreen on

Solar energy has become an increasingly popular choice for power generation due to its clean and renewable nature. However, recent trends in the solar industry have revealed a significant increase in the prices of solar photovoltaic (PV) modules and cells. Over the past 18 months, these prices have surged by more than 40%, driven primarily by the rise in polysilicon prices, a critical component in module production.

The Factors Behind the Price Surge

One of the main contributors to the surge in solar PV module and cell prices is the disruption in operations across the value chain of module manufacturing in China. China has been a key player in the global solar industry, and any disruptions in its manufacturing processes can have a substantial impact on the market. Additionally, the cost of polysilicon, a vital raw material for module production, has experienced a significant spike, further exacerbating the price increase.

Implications for Solar Power Developers

The rising prices of solar PV modules and cells have significant implications for solar power developers. The increased cost poses a substantial challenge, especially for projects that were awarded over the past 18 months and have tariffs below Rs. 2.2 per unit. Approximately 12% of the projects under implementation, amounting to 4.4 GW, are affected by this cost pressure.

Impact of Rising Interest Rates

In addition to the surge in module and cell prices, solar independent power producers (IPPs) also face headwinds in the form of rising interest rates. According to estimates by ICRA, a 150 basis points increase in interest rates can result in up to a 20-paise increase in the bid tariff. This rise in borrowing costs further adds to the financial burden faced by solar IPPs.

Mitigating Strategies for Solar Power Developers

Despite the challenges posed by the increase in module and cell prices, solar power developers can adopt certain strategies to mitigate the impact and maintain their returns. It is crucial to closely monitor the pricing trends for polysilicon and wafers/cells internationally, as they directly influence the procurement costs for solar PV modules.

Under the Approved List of Models and Manufacturers (ALMM) notification, modules need to be sourced from domestic original equipment manufacturers (OEMs) for projects awarded after April 2021. However, most domestic OEMs do not have backward integration beyond cells, which means that the reliance on wafer and cell imports is expected to continue in the medium term.

The Role of Bid Tariffs

Considering the procurement of modules from domestic manufacturers and the use of imported cells, even a 1 cent increase in cell prices would necessitate a 5-6 paise per unit rise in bid tariffs to maintain the same level of returns. This highlights the delicate balance solar power developers must maintain to navigate the changing cost dynamics and ensure the viability of their projects.

Outlook for Solar Power Developers in India

The surge in solar PV module and cell prices, coupled with the imposition of basic customs duty (BCD) on imported cells and modules, presents a challenging landscape for solar power developers in India. While bid tariffs have witnessed a slight increase from the lows of Rs. 1.99 per unit in December 2020 to Rs. 2.2-2.5 per unit, the extent of this increase remains lower than what is necessary to offset the rising module prices.

To secure long-term success in the solar industry, it is crucial for solar power developers to stay abreast of the evolving market conditions, including changes in module and cell prices, interest rates, and government policies. By employing proactive strategies and maintaining a thorough understanding of the industry landscape, developers can navigate the challenges and maximize their returns.

Categories: Uncategorized