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India’s grand designs for solar energy as a key contributor for the country’s electricity definitely requires that the government provide hefty incentives and subsidies – this much was fairly well known even when the National Solar Mission was announced.

How much would the subsidy be? The latest I heard was Rs 82000 crores, for achieving 200 GW by 2050 (20 GW by 2020, 100 GW by 2030). This assumes that This assumes that the cost of generation from solar technologies will reduce roughly 9% every year going from Rs 16.50 per KWh to Rs 2.5 KWh in 20 years.

I think this is a clear overestimation of technological possibilities and thus an underestimate of costs. Even with similar ambitious assumptions, let’s look at some scenarios and see what happens to the subsidies: 1 MW of solar energy currently costs about $6 million capex. So let me assume it will be $ 6 million for 5% of the goal, $ 5 million for 10%, 4 million for 20%, 3 million for 20% and 1 million for the rest. This will mean a total investment of $430 billion. Assume the govt gives a 10% subsidy, that alone will be $ 43 billion, or over Rs 150,000 crores at current exchange rates. The subsidy will likely be more than 10%.

So Rs 82,000 crores is really unrealistic. But well, 200 GW by 2050 from practically nothing today will sound equally unrealistic as well for folks who know how our good government works and implements visions!

Anyway, there are folks who think the whole solar energy subsidy business needs a rethink, even at Rs 82000 crores.

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