Even though the current environment of lower interest rates, expectations of further decline in solar panel prices and having an assured buyer have been attributed to solar tariffs falling to the record low level of Rs 2/unit in the latest SECI auction, experts warn that solar developers quoting such low rates are walking a tightrope. The equity internal rates of return (IRRs) for the projects could slip significantly to single digits if cost assumptions do not hold true, they opine.
“Access to debt at rates 200-250 bps lower and a $0.03-0.04 per wattpeak (wp) drop in module pricing would enable maintenance of equity IRRs of 12-13% at the new tariff of Rs 2/unit,” Hetal Gandhi, director — industry research at Crisil, told FE.
