Driven by volume production, solar power generation costs could break the viability barrier.
According to latest estimates firmed up by the Ministry of New and Renewable Energy, the capital cost of solar power projects could come down to around Rs 6-8 crore a MW in five years, down from around Rs 14-17 crore currently.
The new cost estimates for solar, which could compare favourably with the capital costs for hydro and nuclear power, is being attributed by the Government to global research and development efforts, expanded utilisation of solar photovoltaic modules for various applications and volume production with new players including Bharat Heavy Electricals Ltd, Bharat Electronics Ltd, Reliance Industries Ltd, AES Solar, Astonfield-Areva and Lanco Infratech joining existing firms such as Tata-BP Solar and Moser Baer India Ltd.
According to Ministry data, during the last five years, the cost of solar PV modules has reduced globally from $4,200 a kW (or Rs 18.90 crore a MW) to $2,700 a kW (or Rs 12.15 crore a MW), a reduction of 56 per cent. In India, the costs came down from around Rs 18 crore a MW to Rs 14.5-17 crore during the period.
But for the next five years, the Ministry projects that capital costs could come down to Rs 6-8 crore in India, while globally the reduction could be even higher to $1000-1,500 a kW (or to Rs 4.5-6.75 crore a MW).
The comparative capital cost of thermal stations works out to Rs 4.5-5 crore a MW, hydro (Rs 5-6 crore) and nuclear (Rs 5-7.5 crore).
Now, I am not entirely certain where the government has got all their data from. Reliable data sources (such as the NREL and some others) still maintain that solar PV costs about $5 million per MW (20 – 25 crores) in capex, and the government claims it is 14 crores. It is quite possible that with the use of thin film technologies the capex could be brought down to that level, but thin film tech has just 50% of the efficiency of crystalline cells, so the payback period will still remain the same.