India’s Luck With Falling RE Costs Could Run Out, And We Need to Be Prepared

September saw some very interesting points to ponder over, as far as Renewable costs go. While we are all aware of the falling RE costs, especially in solar that have led to solar beating almost every estimate of capacity addition repeatedly, the situation has been very positive on the storage front as well. Yes, storage because the next phase of green energy expansion depends on storage like nothing else, starting with the largest green energy markets, and eventually, in India as well.

Thus, SECI’s 1GW/2 GWh standalone battery storage tender that achieved a tariff of Rs 3.81 lacs/MW/month was a huge milestone. It was less than a year back when the same organisation, for its first 500 MW / 1000 MWh Battery Energy Storage System (BESS) discovered a price of Rs. 10.83 lac /MW/month translating into about Rs. 10.18 / kWh. A 65% drop in less than a year is something even solar never delivered in the past decade. While the bids last year were followed by a government announcement of viability gap funding for 4000 MWh of storage, the latest bids indicate that this funding will be used for a much larger storage base.

While credit is due to SECI for the consistently lower tariffs it manages thanks to a strong payments record and professional corps of employees, it is important that other states like Gujarat, Rajasthan, Maharashtra, Madhya Pradesh, Uttar Pradesh, and of course, the early pioneers like Karnataka and Tamil Nadu also start attracting bids that are closer to what SECI manages.

As future tenders combine a storage component more and more regularly, the focus needs to shift to the financial well being and professionalism in discoms to ensure  that the momentum to add green capacity is not lost due to grid related issues. For we can be certain that by 2030, strengthening the grid will be priority number 1 yet again for the next phase of renewables additions.

In all this, it is also important to remember that our obsession with lower and lower rates has a downside too. We have heard about this bid in Gujarat where an EPC from South India bid at an L1 tariff that was considered unviable by most, including the authority managing the bids. Eventually, they have allowed the bidder to go ahead and try and deliver, even while allowing L2 bidders to move ahead too at a higher rate.

And then there is this incredible news from Rajasthan, where unsupported (non-subsidy) Component A of PMKUSUM has seen a derived benchmark cost of Rs. 2.09 Cr.+ GST as per the tariff petition filed by JVVNL at RERC. At a pre-fixed levelized of Rs. 3.04/KWh for the next 1000 MW of projects under PM KUSUM-A in Rajasthan. On the face of it, and after checking with multiple players over the past week, we have to say, this number is simply borderline unviable, and all it will achieve is another round of poor responses to bids under Component A. Even with non-DCR modules, this project cost seems unviable, unless it involves practices that are simply unconducive to the promised 25 year life of the project.  The fact that it made it to RERC indicates just how single minded, without due application of mind to consequences, this rush for lower costs can be. It’s an obsession we have seen regularly in the government, and one thought the mood had changed as CUF standards were raised post 2020. Alas, not enough, it seems.

Imagine a situation(more likely than it seems right now) when wafer prices in China rise say 20% in early 2026. The cascading effect it would have on cell and module prices in India is a given, and with the protection we have for domestic manufacturers of the latter, could easily take bid prices to Rs 3 per unit for solar again. That simply should not lead to the kind of resistance we saw from discoms to enter into power purchase agreements, that delayed so many projects in the 2021-23 period. Especially the manufacturing linked SECI tenders. as we saw.

This obsession with costs over quality sometimes, and even more importantly with value, where we seem to completely ignore the environmental costs and impact of these projects, needs to change. The sooner the better.