The substantial drop in solar power tariff in recent times is unlikely to impact viability of the projects as the project and finance costs too have declined, says Hero Future Energies Pvt. Ltd. CEO Sunil Jain.
“People have concerns whether lower tariffs are viable or not. I believe these tariffs are viable as the project and finance costs also have fallen substantially,” he said in an interaction with journalists at a CII conference on rooftop solar programme in Hyderabad on Tuesday.
Anticipating the fall in solar tariff to continue — below the ₹3.15 per unit at which the Rewa project in Madhya Pradesh was awarded, he expected a new benchmark to emerge at the Bhadla Solar Park. For 750 MW capacity, the project in Rajasthan has already got bids for 8,000 MW. In a few years, the solar tariff would stabilise between ₹2.70 and ₹2.90, he added.
Investors, he added, were also working on a lower internal rate of return on the equity. The IRR has come down from 16% to 15%, said the head of Hero Future Energies, a company that has completed 600 MW renewable energy projects and raised, earlier this year, $125 million PE from World Bank arm IFC.
Noting that wind and solar segments in India were doing well, especially “standing on their feet without subsidies,” Mr. Jain pointed out that the hindrance to the power sector, however, was by way of the overall demand remaining low.
“Growth in the demand is not happening the way it is envisaged,” he said, adding that the services sector that was powering the GDP was not a big consumer. The actual power demand growth came from the manufacturing sector, he said, adding the drop in the demand was also on account of improvement in energy efficiencies and reduction in system losses.
He expected a big push in the demand next year with the government’s emphasis on uninterrupted power supply. Also, making a difference will be the growing shift of State governments from free power supply to supply power to the people at a price that is affordable and not free of cost. Such a move was also bound to reflect on the health of the discoms, he added.
On Hero Future Energies’ plans, he said it was on course to becoming a gigawatt firm by August 1 with wind and solar projects contributing in equal measure to its portfolio. The plan is to make it a 2,000 MW company by 2021.
