Infrastructure costs are getting higher.
While developers remain bullish about the market prospects, there have been widespread concerns that the falling tariffs are unsustainable, according to Bridge to India, even though some of these concerns have been mitigated post-facto because of sharp decline in module prices (fall of 26% in 2016 alone, way ahead of the 5-7% annual decline projection by most industry experts).
"What is driving the movement and variation in tariffs? How are project developers pricing risk? Can they raise capital to implement the projects? We have seen in other sectors, most notably thermal power and roads, that many projects have either not been implemented because of viability concerns or have been implemented
but have ended up subsequently in financial distress," it said in the research.
About 24 percent of selected projects in the research are proposed to be constructed in government-provided solar parks.
Such tenders usually see greater bidding interest from international developers and PE backed IPPs as land and transmission infrastructure is provided to them on a plug-and-play basis. But the cost of using these solar parks is substantially higher than respective costs for developers arranging such infrastructure on their own.
Hence, there are opposing forces at work as the infrastructure costs are higher but more competition results in slightly lower tariffs.
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