Almost half of the solar energy facilities in India, worth Rs. 28 billion, face a viability risk due to the continued depreciation of the rupee against the dollar, according to a report by the rating agency CRISIL.
According to the report, the fall of the rupee has made the imported solar modules more expensive, which is why the cost of installing solar plants has also increased. What is at risk are the 5.5 GW capacity projects tendered in the last nine months at very low rates of Rs 2.75 per unit or less.
“Solar modules represent between 55% and 60% of the cost of a solar plant project, which is normally 5 million rupees per MW”, explained Subodh Rai, senior director of the CRISIL rating agency.
Currently, more than 90% of solar panels are imported in India. “For every 10 percent of the rupee’s fall, the cost of setting a solar power plant increases by Rs 30 lakh per MW, assuming that other factors remain unchanged,” said the senior director of the CRISIL agency.
Developers do not usually cover the exchange rate risk before ordering modules. The value of the rupee has fallen by 12% against the dollar this year and has eliminated the gains from the dropped prices of the modules.
In addition, the imposition of safeguard rights on imported solar energy will pose another risk for future projects. In this situation, “project costs would skyrocket by up to 20%,” said Manish Gupta, director of CRISIL Ratings.
The energy challenge of India
According to the World Bank, India has become a leader in the global fight against climate change thanks to its broad commitment to solar energy, innovative solutions and energy efficiency initiatives to supply electricity 24 hours a day and seven days a week to its inhabitants no later than 2030.
India, where about 300 clear days are registered annually, is among the countries with the best conditions in the world to harness and use solar energy. The Government of India has set ambitious goals that include the generation of 160 GW of wind and solar energy by 2022.