India Solar, Wind, Biomass, Biofuels – EAI

Why Solar for Captive Power

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Increasing demand from industrial consumers, who are suffering from inadequate power supply and high tariff rate charged by State Electricity Boards (SEBs), find captive generation as the best alternative for meeting their demand. As a result, Captive Power Plant (CPP) capacity grew at a CAGR of 5% during the period FY04-FY08. Currently, coal-based generation dominates captive power generation followed by diesel and gas.

While coal based captive power is less expensive, with advancement in solar technology we are growing closer to putting the use of coal behind us once and for all. The usage of coal is not without its own problems. One, within India, the opening up of newer coal mines is facing stiff opposition from environmentalists and tribal groups. India's biggest import partner Indonesia has also announced a policy to reduce and gradually stop all exports of coal, to preserve its own resources for their captive use in the future. Second, coal-based power plants are highly-polluting and the international agreements on environment will result in the government levying more penalties on such power plants. All of these factors could only escalate the cost of power for the end consumer.

Estimates show that use of diesel based power plants for energy was the highest in textiles (32.4%), automobiles (19.7%), cement (19.5%), food products (18.9%), chemicals (15.8%) and engineering industries (15.5%). When compared to diesel, solar power is cheaper on a life cycle cost basis. Diesel pumps are typically characterized by a lower first cost but a very high operation and maintenance cost. Solar PV is the opposite, with a higher first cost but very low ongoing operation and maintenance costs. In addition, unlike diesel solar prices will continue decreasing. While our focus in this report is about solar PV, mention should also be made about solar thermal plants that show good potential for captive power supply by integrating with the steam turbines already in place at cogeneration facilities.

Some of the bottlenecks present in the solar PV power generation can be taken care of through the use of solar PV hybrid systems, especially the solar PV-diesel systems which are indeed emerging as the best alternative for CPPs.

Above all, the solar power requires a high one-time capital investment, with relatively small operating costs for the life of the plant of over 25 years.

Solar PV based captive power generation does have its drawbacks. The most important drawback is the high cost of solar power, which is currently much higher than the price of grid power. Solar PV based power is available only during the day unless battery storage is used, which further increases the cost of the system. Thirdly, solar PV systems require much more area for generating the same amount of electricity when compared to the area required for diesel gensets.

Some of the drawbacks will be minimized over a period of time – for instance, the high costs of solar based power will decrease significantly with the sharp drop in the prices of solar panels. But even with these drawbacks, solar PV based captive power production is likely to provide significant benefits when compared to diesel based power, especially backup power.

It can thus be said that the future of captive generation using solar PV is bright as industrial demand will continue increasing, and activities like trading through private exchanges will make it easier for captive power generators to sell the surplus for monetization.


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