 "Vandana Gombar: Solar trends for 2016")
India crossed the 5-gigawatt-solar-installations mark in mid-January but there was a bigger development a few days later: Solar tariffs touched a new record low of Rs 4.34 per unit ($0.06) at an auction in Rajasthan.
Finnish company Fortum Finnsurya submitted the winning bid for a 70-megawatt plant to be built at National Thermal Power Corporation's solar park in the state. This was not an outlier bid: the other winners quoted tariffs of Rs 4.35 and Rs 4.36 per unit. "Solar rates now seem to have reached grid parity," B K Dosi, managing director of Rajasthan Renewable Energy Corporation told Bloomberg News after the bid results were announced.
Just two months ago, the lowest tariff "discovered" through a reverse auction for a 500-megawatt project in Andhra Pradesh was Rs 4.63 per unit, which was bid by SunEdison. In December, S B G Cleantech, a joint venture of SoftBank, Bharti and Foxconn bagged another 350-megawatt project at the same park, sparking off concerns about irrational bids, optimistic assumptions and unviable projects.
Competitive tariffs for solar have been declining globally, driving record installations of 57 Gw in 2015, according to Bloomberg New Energy Finance numbers, whereas 64 Gw of wind was commissioned. Solar and wind accounted for more than 80 per cent of global clean energy investment last year, which reached a record $329 billion. We expect solar PV installations of around 67 Mw this year, surpassing wind farm capacity added.
Here are four trends we are likely to see evolve in 2016 in India, and globally:
Further lowering of solar tariffs: With the panels being built more cheaply, and lower financing costs, tariffs in India could reach or breach the Rs 4 per unit mark. The power minister has already indicated that the government was targeting that number. Tariffs are sliding in the rest of the world too. China, the world's largest clean energy investor, reduced solar feed-in tariffs from January 1.
Competitive bidding picks up pace: The move towards competitive markets and competitive tariffs will intensify in markets where this is not already the case. Germany held its first solar auction last year. This market-led mechanism would extend to technologies that have been kept out of the bidding arena so far, for example, wind projects in India. Some markets in Europe, such as Finland, offer a feed-in premium to renewable energy generators on top of the wholesale power price to meet a pre-decided target price per unit of power.
Pollution concerns mount, so does action: At a time when there is more oil, gas and coal to burn per unit of currency, concerns about poison-air will continue to rise. China is working on a national carbon market while India is moving to Bharat VI (Euro VI) fuel standards by 2020, ahead of the original target. Both the countries are also talking about electric vehicles. Iran could join the list of countries imposing emergency measures to control particulate matter in the air: Schools had to be shut in the country last month as pollution levels surged due to a combination of vehicle exhaust and weather conditions. Some cities in India could move to a permanent odd-even scheme.
New markets, new states and new countries opt for renewables: Many states in India are yet to tap their renewables potential: The commissioned solar capacity of Uttar Pradesh is a mere 140 Mw, while the target is to achieve over 10,000 Mw by 2022. Countries such as South Africa, Morocco, Chile, Pakistan, Philippines and Kenya are ramping up clean energy investments. Bangladesh - the world's largest market for solar home systems which typically include home lights and a charger - will soon boast its first set of megawatt-scale plants.
The author is Editor, Global Policy for Bloomberg New Energy Finance; vgombar@bloomberg.net
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
