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Analysing the falling solar and wind tariffs: evidence from India

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  • Kanika Chawla
  • Manu Aggarwal
  • Arjun Dutt

Abstract

India needs to accelerate its solar and wind energy capacity addition in order to meet its renewable energy (RE) targets. Besides policy commitments, the cost-competitiveness of RE tariffs facilitates the uptake of renewable power. This paper focuses on the major determinants of RE tariffs, disaggregating the impact of equipment-related factors and financing costs (costs of debt and equity). The paper finds that financing costs account for the largest component – over 50% of RE tariffs. Further, equipment-related factors have been the major drivers of tariff reduction historically, accounting for 73% of the solar tariff reduction between January 2016 and May 2017. However, the paper demonstrates that there could be a role reversal – changes in financing costs could drive future declines in both solar and wind tariffs. This necessitates the de-risking of these sectors through suitable policy- and market-led interventions in order to lower financing costs.

Suggested Citation

  • Kanika Chawla & Manu Aggarwal & Arjun Dutt, 2020. "Analysing the falling solar and wind tariffs: evidence from India," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 10(2), pages 171-190, April.
    • Handle: RePEc:taf:jsustf:v:10:y:2020:i:2:p:171-190
    DOI: 10.1080/20430795.2019.1706313
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    Cited by:

    1. Jain, Sourabh & Shrimali, Gireesh, 2022. "Impact of renewable electricity on utility finances: Assessing merit order effect for an Indian utility," Energy Policy, Elsevier, vol. 168(C).

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