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Finance cost is the key to lowering tariffs: First Solar

According to reports, solar power developers need to wait for reduction in project finance costs to cut tariffs and compete with conventional sources of energy.

The US-based equipment manufacturer First Solar expects the slide in solar photovoltaic (PV) module prices to end and stability in equipment rates.

“Solar PV module costs have come down very sharply over the last few years. But we believe they have largely stabilised and the slide further would be much slower,” Raffi Garabedian, Global Chief Technology Officer, First Solar told BusinessLine.

Garabedian said solar power developers in India will need to wait for relief on finance charges to reduce the project development costs.

Modules account for roughly half of the total project cost of a solar power plant.

“In the US, solar competes with all other forms of energy on the grid. Despite solar projects being developed here at ₹ 6.5 crore per megawatt in India compared with ₹ 8.5-9 crore per megawatt in the US, the cost of energy is cheaper there.

The difference is primarily because the cost of funds is high here,” added Sujoy Ghosh, Country Head – India at First Solar.

However, First Solar’s research and development is working to increase efficiency of its modules to bring down the overall system costs.

The company’s global spend on R&D is around $200 million annually.

“With our rate of efficiency improvements, we would expect a dramatic reduction in the overall costs of systems that we are developing,” said Garabedian. First Solar’s R&D work over the last four years has seen its module efficiency increase to 16 per cent from 11 per cent earlier.

It expects to reach 19 per cent efficiency by the end of the next five years.

“Efficiency is the strongest factor affecting system cost for a solar power plant because it drives down both the module and variable cost.

“The structures and wires are all improved as you get more watts per panel which brings down the overall cost of the project and helps bring down tariffs,” said Garabedian.

He said despite the improvement in efficiency, the cost of First Solar’s products is not increasing as they are not adding materials, labour or complexity to achieve the desired results.

The company is also looking at working with local partners who develop structures for solar power plants.

“The structures we build in the US are for minimising labour costs at the expense of material costs.

“Here it’s the opposite, so there is good opportunity to work with local partners on this aspect,” said Garabedian.

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