Aggressive bidding and a rapid fall in tariff prices in solar power auctions have the potential to jeopardise the economic feasibility of project pipeline, presenting a downside risk to bullish solar power forecasts for the country, BMI Research said today.
It further said that the SunEdison was one such company that bid very aggressively in India's renewables auctions, and as a result has build up a significant portfolio of planned solar projects in the country.
However, considering SunEdison's current financial distress, the prospects for the company's vast project pipeline-reportedly over 1GW- is relatively uncertain and will undergo divestment, it said.
Last week, SunEdison filed for bankruptcy protection in the Bankruptcy Court for the Southern District of New York.
"We have previously highlighted a number of positive fundamentals that underpin the growth potential in India's solar market, primarily the government's unyielding commitment to the sector, the conducive regulatory framework...And the improved funding availability for project developers from both the Indian government and multilateral organisations," it said.
"With these conditions in place, India has become one of the key global bright spots for renewable energy investment and the project pipeline has strengthened notably, in line with the growing investor interest in the market," it said.
"In light of these factors, we expect strong growth in non-hydropower renewables capacity over our 10-year forecast period to 2025, particularly in solar power; we forecast installed solar power capacity to grow by an annual average of 28.4 per cent between 2015 and 2025, totalling over 52GW by 2025," it said.
"That said, we also believe that the strong willingness of investors to enter the market can represent a risk to the development of the Indian solar sector," it added.
Indeed, the strong competition during the auction process and the resultant aggressive bidding from prospective developers has the potential to drive down tariff prices to unfeasibly low levels; this means that some of the projects contracted could actually not be realised-a dynamic that creates a downside risk to our bullish renewables capacity forecasts for India, it added.
