The steep fall in prices of solar panels over the last few years probably seems best reflected in the trend of bidding in competitive auctions in India. The sharp fall in panel prices, accompanied by aggressive policy decisions and falling lending rates have brought solar power prices in India to the edge of grid parity.
A total of 6,781 MW solar power capacity has been allocated through competitive auctions for feed-in tariffs in India between December 2010 and September 2015. The Indian government has also auctioned projects on the basis of subsidy in capital investment at fixed feed-in tariffs.
The first auction in December 2010 under the central government policy of National Solar Mission saw developers bidding between Rs 10.95/kWh and Rs 12.76/kWh. A total of 150 MW solar PV capacity was auctioned with a weighted average bid of Rs 12.16/kWh. The auction saw participation mostly from Indian companies that did not have much experience in installation of solar PV projects.
The next auction came a year later in December 2011 and saw a sharp decline in bids. A total of 350 MW solar PV capacity was auctioned under the National Solar Mission policy. The range of the bids was between Rs 7.49/kWh and Rs 9.39/kWh with a weighted average bid of Rs 8.79/kWh.
Four auctions were held in 2012, all under state solar power policies. A total of 235 MW capacity was auctioned in these auctions with weighted average bids ranging between Rs 8.05/kWh and Rs 8.36/kWh. The lowest bid in these auctions was Rs 7.00/kWh.
By the start of 2013, auctions had started seeing participation from foreign and more serious Indian developers. A total of 6 auctions were held, again all under the state solar power policies, allocating 981 MW capacity. These auctions saw levels of Rs 7.00/kWh being comprehensively broken through with lowest bids falling to as low as Rs 5.50/kWh. Some states, however, witnessed higher bids of more than Rs 8.00/kWh. These states (Uttar Pradesh and Punjab) had organized their first auctions, and both being agricultural states, had costlier land rates compared to other states like Andhra Pradesh, Tamil Nadu, and Rajasthan, which had seen a steeper fall in bids.
2014 saw fewer but larger auctions, with a total of 1,600 MW capacity auctioned by states. Weighted average bids remained stable at just under Rs 7.00/kWh.
In 2015, 8 auctions were organized up to September with a total of 3,465 MW on offer. Bids in these auctions dropped through the Rs 6.00/kWh rate. The lowest bid of Rs 5.05/kWh was placed in the 300 MW auction under Madhya Pradesh solar power policy. Punjab, which had seen comparatively higher bids between June 2013 and early 2015 also saw sharp correction in the 500 MW auction held in September 2015. Bids in Punjab had ranged between Rs 6.88/kWh and Rs 8.75/kWh in the 3 auctions held between 2013 and early 2015 but the September 2015 auction saw weighted average bids falling to Rs 5.65/kWh.
The recent fall in the bids is a result of a combination of factors like improved regulatory outlook, more aggressive intent shown by the government to expand renewable energy infrastructure, revival in economic activity, and fall in lending rates.
The new government has set an ambitious target of 100 GW installed solar power capacity by 2022 and had also urged state governments to adopt and implement solar power policies at an increased pace.