Update, Sep 2012: Please note that this blog post was originally written way back in the dark ages – in Jul 2009 – though a few points were added later on. The data, assumptions and a lot many other inputs would hence be very different for those reading it 2012 and beyond. Just for comparison, the levelized cost of producing power from solar was less than Rs 9/kWh for utility scale solar PV power plants, and slightly higher for rooftop solar PV power plants, in Sep 2012, as against the 15+ Rs/kWh quoted in the title of the blog post.
By now, anyone who has been reading about renewable energy in India would have heard about India’s National Solar Mission, which “envisages an installed solar generation capacity of 20,000 MW by 2020, 1,00,000 MW by 2030 and of 2,00,000 MW by 2050.”. This is from a current installed capacity of next to nothing! Oh well, and they plan to tax fossil fuels (gasoline and diesel) for this, or so we are told. Though the amount of money generated from such taxation alone might not be enough to fund the massive amounts that will be required for the high feed-in-tariffs expected for solar based power generation.
All these awesome ambitions are fine, but what exactly is the reality with regard to the cost of solar energy in India? It is common knowledge that solar power costs more; what is not well known is that it costs much more than coal-based (or natural gas based) electricity.
All the points today become very relevant as India starts looking at using its rooftops as well large tracts of land to generate solar power.
Levelized Costs for Renewable Power
“Coal-based and natural gas-based power cost anywhere between Rs 2 and 3 per KWh; wind-based power costs slightly more – around Rs 3-3.2. Solar-based power currently costs over Rs 15 per KWh – this is for solar PV. Solar thermal costs about 2 rupees less per kWh. (Now, this number of Rs 15 is going to be contested, I can wager on that! There are folks who would venture as low as Rs 10, but I think it is unlikely it could be lower than Rs 12 at no-subsidy level, as of mid 2009).
All the above mentioned costs are the levelized costs – they take into account all direct and indirect costs, including amortization of capital costs.
Reasons for High Costs
The primary reason for the high cost of solar power is the high capital cost. Currently, it costs about Rs 15 crores per MW of capital cost for a solar PV power plant (MNRE has taken a benchmark capex of Rs 16 crores). About 50% of this cost is owing to the cost of the panels and the rest are for balance of systems (inverters, transformers, monitoring systems, wires and cables etc), the civil support infrastructure and the cost of installation. Among the balance of systems, inverters contribute the highest cost component, at about Rs 2.5 crores per MW.
The good news is, the cost of solar panels are showing dramatic decreases year on year. The bad news is, the balance of systems are not.
So, solar (both PV and thermal) is 3-4 times as costly as wind. That’ll indeed be a bit of a shocker to many. This will make many wonder why the government is so much more aspirational on the solar front, when they should have been at least equally ambitious about wind.
Reasons for the Solar Focus
1. Solar is more predictable than wind
2. It makes more sense to combine both solar and wind in renewables mix because some areas might have significant sunlight while some others have significant wind (but not that as much sunlight)
3. The total potential for wind energy for India is estimated at 45000 MW. This is only about 25% of current total electricity capacity for India. If these estimates are correct, wind alone cannot supply all of India’s renewable electricity (By the way, I don’t subscribe to the 45GW number, I think it is far higher than that…the 45GW potential was estimated in the early 90s when the turbines were of much smaller sizes and at much lower heights).
4. On the other hand, India is blessed significant amounts of land areas having good sunshine for over 300 days a year. If solar (either in the form of PV or thermal) becomes cost effective, the entire country’s electricity needs can be fully met from solar alone!
The costs of solar energy are indeed coming down (from the current capital costs of about Rs 15 crores per MW), but the question is, how long will it take before capital costs come down enough in order to make electricity generation costs competitive to coal, natural gas and wind. (here is some hope – Indian govt is working with IITs to come up with hybrid solutions; and perhaps this work from Tata BP Solar could help too).
Solar Energy Grid Parity
There are some who predict that solar PV will achieve grid parity by latest 2020 in India. Grid parity is a term that describes a situation where the cost of the alternative source of power (in this case solar PV) is the same as that of the grid power derived from traditional fossil sources such as coal and natural gas. Grid parity by 2020 might not be just a hope, because at the current rates of solar panel prices decrease and the expected increases in prices of coal and natural gas based electric power, with one curve going down fast and the other up equally fast, the parity might be achieved sooner than one might be inclined to think. (some interesting articles and insights on solar grid parity here, here, here and here).
Just imagine the day when solar achieves grid parity. It might be far from where we stand today, but a renewable energy source that can supply power at an affordable price could be very interesting indeed. One question that arises in my mind is whether solar could also become a baseload power source once it achieves grid parity. The answer to this might not be a resounding “yes”, because we need efficient and cost-effective energy storage systems in place for solar (be it PV or thermal) to become suitable for baseload supply. Solar can supply energy only for 4-5 hours a day, but we need electricity all through the day (which is today supplied by baseload sources such as coal, natural gas and hydro-power). In order for solar to be able to supply power throughout the day and night, the sun’s energy captured during the day needs to be stored effectively. And energy storage is one area where, despite significant R&D money and a huge list of brilliant minds, disruptive developments have been hard to come by. So, while we might have grid parity for solar within the next 10 years, we may have to wait longer for solar to become the only (or dominant) electricity generator for our homes and offices.
And What about Wind?
At any rate, I feel the government of India should give much higher thrust to wind energy as well – given that it is a far more mature technology, we already have over 10,000 MW installed capacity, and one of the top 5 global wind turbines manufacturers is Indian! In addition, as I have mentioned earlier, the total potential for wind energy in India is expected to be much higher than 45,000 MW because that is an old estimate, done way back in the early nineties! With larger and more efficient turbines that operate at higher altitudes, recent estimates suggest that the potential for wind power could be more than 100,000 MW. And this does not include the potential for offshore wind.
Wind does suffer from a particular disadvantage that afflicts solar – the power is intermittent and it is costly to store it. Which means wind cannot serve as a source of baseload power for the foreseeable future. But, it costs much less, already has over 150 GW of installed capacity worldwide and about 10 GW in India alone and has a reasonably good manufacturing ecosystem in India with one of the world’s top 5 wind turbine manufacturer being India. These alone would merit a closer attention to this sector, wouldn’t you think?
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