Why India’s solar power tariffs reached an historic low: new record of Rs2 Per kWh

India set a new record low tariff of Rs2/kWh ($0.027/kWh) in the recent Solar Energy Corporation of India (SECI) auction on 23 November 2020. The tariff based bidding was conducted for selection of solar power developers to set up 1,070 megawatts (MW) of grid-connected solar PV projects on a “build-own-operate” (BOO) basis in Rajasthan (Tranche-III). With 14 developers participating, the tender was oversubscribed by 3,280MW, attracting a total of 4,350MW of bids. This new briefing note discuss the key factors behind the Rs2/kWh ($0.027/kWh) tariff. These include access to low-cost financing at 7-7.5% for government entities like NTPC and for international developers able to arbitrage multi-decade, record-low OECD interest rates (even adjusting for a significant combined currency and country risk premium for India). And expectation that mono PERC module prices will fall 10-15% to reach USc19-20/Wp (watt peak) by 2022 (excluding duties and taxes).