Note recall likely to make solar energy cheaper

Note recall likely to make solar energy cheaper
07/12/2016 , by , in ALLIED

Solar industry trackers see demonetisation leading to cheaper solar power in medium to long run although project delays have hit developers in short term. “Demonetisation, though chaotic, is turning out to be an overall positive event for the renewable sector in the long run,” said Raj Prabhu, CEO at Mercom Capital Group. “Combined with rapid decline in solar component costs, it will make a lot of projects that quoted low tariffs, feasible.

A spokesperson for Hindustan Power Projects, a leading energy player in the country, said demonetisation has led to a situation where the banking system in India will be able to bring down the cost of interest, thereby making the renewable energy target of 175 GW by 2022 a reality. “The solar sector, in particular, could benefit immensely from the initiative in mid term,” this person said. An industry executive said solar projects attract bank interest rate of around 11%.

“Projects that quote tariffs below Rs 4.5 per unit, tend to become unviable and do not find favour with bankers. If rates decline and come down below 10%, these projects would find it easier to procure bank finance and power prices would dip,” he said.

Priyadarshini Sanjay, managing director at Mercom Capital Group, said discoms are expecting substantial inflow of payments till December 31 after which old high-value notes will become invalid. For cash-strapped discoms, this is unexpected good news. But some experts say the drive has slowed down development of solar projects.

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