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Solar Module Price Decline Propels India's Solar Project Boom: CRISIL

According to Crisil, this decline in module prices will accelerate the implementation of solar capacity to an unprecedented annual pace of 16 GW in the current fiscal year.

November 22, 2023. By News Bureau

A sustained drop in solar module prices since October 2022 is set to drive a boost in the internal rate of return (IRR) for a 45 gigawatts utility-scale solar project pipeline awarded since fiscal 2021, as reported by Crisil, a leading rating agency.

According to Crisil, this decline in module prices will accelerate the implementation of solar capacity to an unprecedented annual pace of 16 GW in the current fiscal year.

The ratings agency attributes the recent slowdown in implementation during FY22 and FY23 to disruptions caused by the COVID-19 pandemic and challenges related to the protection of the Great Indian Bustard bird.

The reversal of the trend in falling module prices, which started in the last quarter of fiscal 2021 due to rising costs of key raw materials like polysilicon and aluminium, had impacted the returns of approximately 20 GW of projects auctioned in fiscals 2021 and 2022.

Developers had initially factored in falling module prices when bidding for capacities, and the increase in costs during the installation period led to challenges. The average IRR of these projects, which could have fallen to as low as 5 percent, was temporarily alleviated by pandemic-linked extensions in the commissioning dates, allowing developers to defer module purchases.

The International Energy Agency's (IEA) World Energy Outlook 2023 predicts that India is on track to surpass its 2030 target of having half of its electricity capacity from non-fossil sources well before the end of the decade.

The report suggests that with the full online operation of new solar PV module manufacturing capacity under the PLI program by 2026, India's solar capacity will exceed the required capacity by the end of the decade.

With module prices softening by approximately 30 percent as of September 2023 compared to the average of the last fiscal year, project IRRs are expected to improve by 300-500 basis points, averaging around 9 percent. This positive trend will also benefit 25 GW of capacities bid during and since fiscal 2023.

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International Energy Agency