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Can Indian Discoms Afford Solar?


In all the din of 100 GW, one crucial question does not get asked.

Who is gonna pay for solar?

Now, this is a somewhat tricky answer. And that’s perhaps why it doesn’t get asked or answered too many times.

Let us look at the picture a bit more closely.

The 100 GW, or whatever % of this comes through, is going to be through three main avenues:

  • Sale to Utility – First, and most likely the largest, government-tender based large scale ground mounted projects where power is sold to the state discoms
  • Sale to/consumption by Third Party – Second, to a much smaller extent on the ground mounted, sale to private third parties or consumption by a private party.
  • Rooftop Solar – Third, rooftop solar power projects.

In the first, the state discom pays. In the second, it is a private party that pays (or saves). In the third, it is again a private party that saves money.

Looks like the answers are fairly straight.

Don’t be so sure.

Look at it a bit more closely, and you will see utilities paying (a price at least) in each of the three.

How is the utility paying anything at all for Second and Third?

It is like this.

Today, most state utilities are swimming in losses. The only bright spots for them are industrial and commercial sectors who pay them high rate.

Now, when many of these private firms start generating their own solar captive power either from rooftops or solar farms, or these start purchasing solar power from other private party solar farms, the utilities are losing some of their premium customers.

And they will be left more and more with residential customers who will continue to be subsidised in some form.

Thus, the state utilities need to pay rates higher than Average Power Purchase Cost for solar power procured by them (a loss) and once again lose premiums by losing premium customers.

A triple whammy.

For these entities already in deep red, can they afford this triple whammy?

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Narasimhan Santhanam

Thank you for reading this post – hope it was helpful. You can connect with me at narsi@solarmango.com . My detailed profile here and my LinkedIn profile here

Posted in: Policies and Regulations, Solar Energy, Solar Photovoltaic

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