Viability of solar projects in doubt

New Delhi: The continuos fall in rupee value means that nearly half of the solar power capacities under implementation worth around Rs 28,000 crore face viability risk, said rating agency Crisil on Monday.

The ratings agency said continuous fall in the rupee has made imported solar modules costlier and increased the cost of setting up solar plants.

These include 5.5 GW of projects bid out in the past nine months at very low tariffs of Rs 2.75 per unit or less, it said.

Crisil said that these projects are in the early phase of implementation and unlikely to have bought solar modules, orders for which are typically placed 9-12 months after bids are won.

“Solar modules account for 55-60 per cent of the project cost of a solar plant, which is typically around '5 crore per MW,”  said Subodh Rai, senior director, Crisil Ratings.

“Today, over 90 per cent of them are imported. Our analysis shows that for every 10 per cent drop in the rupee, the cost of setting up a solar power plant increases by '30 lakh per MW, assuming other factors remain unchanged,”  said Rai.

Crisil said that developers also typically do not hedge the exchange rate before placing orders for modules.

“What was anticipated for bidding at low tariffs and has also worked for the developers is the fall in module prices. The module prices have fallen by 17 per cent for these projects from 0.30 dollar per watt at the time of their bidding to around 0.25 dollar per watt at present (a benefit of nearly '34 lakhs per MW). But the arithmetic did not countenance a sharp depreciation in the rupee to more than '73 per dollar, which has wiped off the gains from lower module prices,” said Crisil.

The ratings agency said that in turn, will compress the debt servicing cushion available for these solar projects.