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Rating Agency CARE puts off solar grid parity to 2017 in India

According to reports, in the recent past, there have been various estimates on when electricity produced by solar plants will be sold at the same price as electricity from conventional sources, such as from coal. But most of the estimates saw ‘grid parity’ by 2014 or 2015.

Rating agency CARE today said that it expects grid parity to be achieved only in 2017.

Observing that the cost of solar cells had been rapidly declining in the past due to a glut in the market – thanks to overcapacities in China – CARE said that it expects a slowdown in the price-fall, mainly because the cost of ‘balance of systems’ (the non-panel part of the plant) has been going up.

“Balance of Systems’ accounts for 40 per cent of total project cost, CARE said today, noting that the rising labour and land costs would also “cap cost reduction”.

Consequently, CARE Research expects the cost reductions to occur at 10-11 per cent year-on-year till 2017 compared with 35-40 per cent fall seen in the last few years.

CARE’s Managing Director and CEO, Mr D.R. Dogra, has observed in a press release that banks and financial institutions are shying away from funding the solar projects because “there is not enough operating performance precedence for solar projects” and “aggressive bidding implying lower return on equity for the project developers”.

He adds that banks and financial institutions prefer tariff-based projects of various States (as opposed to tariffs arrived at by a competitive bidding process) “as these projects offer comparatively higher tariffs.”

However, the fact that grid parity might be a farther than earlier believed is not likely to upset the Indian solar story, says Mr Vineeth Vijayaraghavan, Founder-Editor, Panchabuta, a renewable industry newsletter.

“Though grid parity might be a few years away, for the 30,000 MW of power being generated today from liquid fuel (diesel/fuel oil) solar already provides a financially attractive alternative,” Mr Vijayaraghavan told Business Line today. “The diesel supplementation market will be keen to adopt solar,” he said.

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