India has advanced the target date for selling solar power at the same rate as conventional electricity by five years to 2017 as tariffs have fallen significantly in the latest projects on offer and the trend is likely to continue, government officials said.
Companies have bid tariffs as low at 7.49 per unit for solar plants this year, encouraging the renewable energy ministry to say that target of achieving “grid parity”, or selling solar electricity at the same rate as power from other sources, would be achieved much faster than earlier envisaged.
“The prices will come down further next year and will continue to fall,” said Tarun Kapoor, Joint Secretary, ministry of new and renewable energy.
“Earlier, our aim was that solar will achieve grid-parity by 2022, but looking at the upbeat response from the industry, we have now reduced our target to 2017,” he added. Tariff from existing coal projects is around 5.50/unit to 6/unit, propped up by the shortage of domestic supply of coal and greater dependence on costly imports.
The average tariff offered in the current round of bidding under the National Solar Mission was 8.78 per unit. The lowest bid was 7.49 per unit for a 5-megawatt project by SolaireDirect, a French company.
For the current round, the maximum capacity was set as 50 megawatt (mw) per bidding company with 3 projects allotted to each. Among the 28 provisionally sanctioned projects, 8 are of 20-mw, another 10 are of 10 mw. Four projects are of 15 mw and 6 projects of 5-mw.
Inderpreet Wadhwa, CEO of Azure Power, one of the companies which has bagged projects to set up 35 megawatts, said that majority of the peak demand will be met by solar power by 2017. “Solar has the same potential as personal computers had in 1970′s. Technology innovations and improvements in manufacturing would drive down costs further,” Wadhwa added. The company quoted a price of 17.91 per unit for the first plant it had set up in 2009. During the current round of bids, the company quoted bid price of 8.21, a drastic fall of 50 %.
“Some big names from India have proved that a large investment will soon be possible in solar, as huge as 2000 megawatt,” said Kapoor.
Even the foreign players are encouraged by steps taken by India in the solar energy domain. “The only reason is that India is an emerging market and one of the few countries where solar energy is encouraged at such a massive level,” he added.
A senior director from renewable energy ministry said last month the Central electricity regulation committee (CERC) reduced the capital costs on solar cells, which is the major reason for falling tariffs. “The tariff will decline because the costs will be curtailed in order to achieve grid-parity as soon as possible,” he added.
The cost of setting up a solar power plant per megawatt is set to fall from current 14 crore to 10 crore in 2012-13.
“There are other reasons as well. Internationally, the price of solar cells has come down. With improved technology, the cost of operation as a whole has come down, thereby increasing the efficiency,” added Kapoor.
“The extent of price reduction since 2008 has been very sharp. Although solar prices will continue to drop, but the fall in future may not be so sharp,” said Sanjay Chakrabarti, Partner & National cleantech Leader, Ernst & Young. He, however, said that solar power would compete with coal in future.
The renewable energy ministry, however, believes that solar energy can never be a replacement to coal, “But it very much can be a worthy supplement in the coming years,” said Kapoor.
The bidders list had some big names this time, including Mahindra Solar, Welspun Solar and GAIL and foreign players SolaireDirect and Fonoroche Energie of France. The 3,500-crore projects would add 350 megawatts to the grid by 2013.