India’s solar ambitions face the risk of a bubble

In the FT’s Big Read, South Asia correspondent Kiran Stacey explores the risks of a bubble developing in India’s solar sector.


The recent auction to build the 500-megawatt Bhadla solar park in Rajasthan was one of the lowest prices for solar power ever seen anywhere in the world – at just Rs2.44 ($0.04) for every unit of electricity sold.

“But despite ambitious targets and blue-chip backing, some in the industry itself are now starting to ask whether projects can really be built at such low costs,” writes Stacey.

Problems include air pollution sapping solar power generation by a quarter and the cost of solar panels now rising as countries such as the US and India consider putting duties on Chinese-made panels.

“Already, concerns over the runaway Indian solar power industry have started to slow its growth,” says Stacey.

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“The pace of new tender announcements has slowed 68% in the past year…and since May, no company has come close to bidding Rs2.44 for a new project.”

“The growing confidence in the solar sector around the world would take a heavy blow if Indian projects were to become financially distressed or even collapse,” Stacey concludes.

There is also a related news article in the FT as the boss of the company that won the Bhadla auction now says he regrets the cheap deal, “fuelling fears that the country’s fast-falling solar energy prices may be unsustainable”.

“When we made our bid, we factored in a price for every solar panel of 30 cents per watt of power, but since then it has risen to around 35c. Our bid works at 30c,” said Manoj Kumar Upadhyay.

If he was bidding again, “the price would be closer to Rs3”, he added.

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