Solar prices hit a new bottom, almost competitive with coal

Solar prices hit a new bottom, almost competitive with coal

Summary: With peak power shortage at 11 percent, the country's gas reserves stagnant, and more reliance on imported coal, increasingly cheaper solar may be the only hope that India has.


Even as long as five years ago, Indian power industry experts would scoff about solar being a feasible source of power that could compete, price-wise, against fossil fuels, never mind issues about capacity utilization.

Solar India
India's solar projects are now almost competitive with coal-priced ones.

They would be more than a little irritated to learn that a few days ago, the state of Madhya Pradesh accepted the bid presented by HimgiriEnergy Ventures to supply solar power to the state grid at a rock bottom price of Rs 6.5 ($0.106) a unit, according to this article. Apparently, the price was 13 percent lower than the lowest price recorded to date in India, and a staggering 61 percent fall over the past three years. The most significant detail, of course, is that this price is just 14 percent above the thermal power pricing per unit of Rs 5.71 ($0.093).

This would be a tremendous development by itself, but when you consider the dire state of affairs within India's energy landscape, it becomes even more monumental. Today, India's energy consumption is only a fourth of the global average, so you can imagine what's going to happen when 60 percent of Indians finally climb out of poverty and the rest of urban India ramps up its consumption. Tack on a major push towards manufacturing, which this largely service economy will need to do to increase per capita income, and you've got a massive increase in projected power demand — and a serious shortfall.

By 2035, the BP Energy Outlook suggests that India will outstrip China as the largest source of energy demand growth in the world — a whopping 132 percent versus China's 71 percent, and double the aggregate of non-OECD countries — while its energy import bill in all likelihood will be around $300 billion.

Coal Plants
India's reliance on foreign coal has increased, pumping up electricity prices.

Now, India can theoretically power itself with the large and abundant reserves of coal available. After all, at 293 billion tonnes, it has the fourth largest coal reserves in the world, and 10 percent of global deposits.

However, much of that coal is of poor quality or unmined, resulting in imports of over $15 billion, with the country still desperate for more. The country also has abundant gas reserves in the Krishna Godavari basin, but so far, Reliance Industries, having being commissioned to extract it, has spent the majority of its time arguing with the government about the price of gas it should be allowed to charge, rather than delivering it.

Meanwhile, state utilities are going bankrupt thanks to expensive coal imported from places like Indonesia and South Africa. All in all, India registered a peak power deficit of 11 percent, having lost 15.1 billion units of electricity due to a coal shortage. In other words, India is increasingly going to get import dependent without a significant change in its strategy. What it clearly needs is a "basket" of solutions, rather than just this or that.

So, it's easy to see why everyone was especially focused on the second round of the National Solar Mission, whose end goal is the building of 22,000MW of solar capacity by 2022. The last round saw bids that were three times the advertised requirement. Apparently, the increase in capacity is being fuelled by the new tariff, set at Rs 5.5 ($0.0901) per unit, with some assistance from the government in the form of "viability gap funding".

Feeding solar power to the national grid is all well and good, but the real revolution in India, as this article explains, is bringing light for the first time to rural parts of India that have been conveniently ignored since independence. Today, companies like Naturetech Infra's micro grids — of 150 watts (powering 20 households) to 5 kilo watt (40 households and commercial use like water pumps) — in backward villages in India's largest state of Uttar Pradesh gives families seven hours of power, enough to run two bulbs, one fan, and a mobile charging point for Rs 120, a bargain, considering the kind of impact it could have on their lives.

Of course, the caveat to all this solar euphoria is in monitoring whether these solar projects deliver in terms of the basic terms of agreement that were signed. Both parties have been flagrant defaulters in the past in India. State governments have reneged on the per unit price agreed upon before thanks to rapidly falling solar components, while there's been lots of talk that companies have and do underbid in order to snag contracts that they can re-jigger later.

For solar to have credibility as a reliable source of power in India, it needs to graduate to an accumulation of productive, stable projects that have replaced other forms of power. When that happens — and, who knows, it could in 10 or 20 years — with cheaper components and better capacity utilisation, solar may just become the only economically feasible option we have.

Topic: India

Rajiv Rao

About Rajiv Rao

Rajiv is a journalist and filmmaker based out of New Delhi who is interested in how new technologies, innovation, and disruptive business forces are shaking things up in India.

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  • India doesn't have the land to spare for

    solar power. Their future lies with Thorium nuclear reactors.
  • They do have a rather sizable desert...(Thar Desert)

    And that could be used.
  • Stanford plan for 100% Wind, Water and Solar by 2050

    100% Wind, Water and Solar for all global energy needs (electricity, heating, cooling, transportation, industrial processes) by 2030-2050!
  • If, then this happens, else, that happens, or,

    nothing happens.

    That's the way the article above reads.

    However, the article contradicts the hopeful headline with the last paragraph...

    "For solar to have credibility as a reliable source of power in India it needs to graduate to an accumulation of productive, stable projects that have replaced other forms of power. When that happens—and who knows, it could in ten or twenty years—with cheaper components and better capacity utilization, solar may just become the only economically feasible option we have."
    • Re: If, then this happens, else, that happens, or,

      I'm not sure where you got that idea from....Except for the last two paragraphs, the entire article lists the many energy problems that India is confronted with and the increasing allure of solar.....there is no hypothetical scenarios with several different outcomes which is what you mention by saying 'If then this, else that'.

      And as far as the last two paras are concerned -- any article that explores a topic with a point of view and applauds a technology or solution would be remiss if it didn't explore hurdles. It's called objective journalism.
      Rajiv Rao
      • Tha "allure of solar"?

        Well, that there is the problem. With solar, there are a lot of uncertainties, and thus, the reason for all the "ifs" and questions and the doubts within the article.

        I'm getting my interpretations from the article itself. The article tries to paint a rosy picture for India and its hopes for solar, but, the whole thing reads like a question mark, rather than a hopeful scenario. Thus, my 'If then this, else that' characterization of the article. In fact, the article is not a good friend to the whole solar initiative, especially when it comes to India's hopes for solar.
        • The headline simply states that solar is nearly competitive with coal.

          Then he goes on to talk about the benefits and the obstacles of expanding solar power in India. Your interpretation about what the point of the article is and whether it contradicts itself is coming from your own head, not the article that I just read.
  • Land?

    Too much emphasis on big lump of power station controlled by big business and needing huge grid infrastructure.

    Every home has a roof and potential cheap access to power. Any sensible builder should consider orientation and solar gain without being told to. Power can be generated close to use and negate the vast costs of national grids.

    When digital imaging arrived in the west companies like Kodak thought that they could off load old technology on the developing world, same with telecommunications. They leapfrogged the west and went for new tech faster than many in the west, where is Kodak now?

    Need some bluesy thinking which ironically is where vast quantities of energy come from constantly...
    dumb blonde