Solar power price slump casts shadow on India's green future

New Delhi : Solar power prices in India have hit rock bottom, but it is not all good news for the electricity-starved country as the phenomenon has hit investor confidence and threatens the country's effort to push its green credentials.

Cut-throat competition has driven prices down to unsustainable levels, undermining the booming sector's viability, according to experts.

After the United States withdrew from the Paris climate deal last week, India said it would stick to its huge renewable energy programme.

India is the headquarters of an international solar energy alliance and Prime Minister Narendra Modi is keen to reinforce the notoriously polluted country's green credentials. 

But the price slump could hinder India's efforts to meet its solar energy goals and limit temperature-raising emissions.

Delays in generating more electricity also mean that nearly 250 million Indians without power will remain in darkness, analysts said.

Indian authorities hold regular auctions for power supply companies and the most recent, in May, saw a bid of 2.44 rupees -- less than four US cents -- per kilowatt hour.

That was a record low for India at a fifth of the price at the start of the decade and energy minister Piyush Goyal called it a step to a "green future".

The price is cheaper than for coal-powered electricity, which overwhelmingly dominates the power grid.

However, the effect of the falling cost of solar modules, cheaper financing, aggressive competition and a surplus power supply in some states has been to unleash chaos, with companies and state governments clamouring for suppliers to match the new, low prices.

"Prices have come down too much, too soon and that doesn't bode well for the overall health of the sector," said Vinay Rustagi, managing director of renewable energy consultancy Bridge to India.