2017 could be a record year for solar

It is estimated that the cost of solar panels will decline another 20 per cent this year

The last solar auction of May 2017 will be remembered for a discovered tariff of Rs 2.44 per unit, which decisively breached the price line for coal power in India (see “NTPC’s average coal-based power cost”). The fact that solar power is clean, cheap and quicker to build than coal power is yet to be digested by the policymakers, though.

The 500 megawatts (Mw) of capacity will likely be online in late 2018 or early 2019. Acme Solar will build 200 megawatts for a tariff of Rs 2.44 per unit,  while SBG Cleantech One (SoftBank) will build 300 megawatts for a marginally higher tariff of Rs 2.45.

At about the time this bid was being finalised, Power Minister Piyush Goyal said he was pleased to announce that the proposed 4,000 Mw Cheyyur Ultra Mega Power Project will rely on domestic coal from mines in Odisha instead of imported coal. The new bid documents for a project that has been in the pipeline for a few years will be issued shortly. Assuming a construction time of four years, the earliest the project can be online is 2022-2023. 

Will the price of solar be even lower then? 

The solar manufacturing industry continues to expand capacity with an aim to lower costs further. Bloomberg New Energy Finance is estimating another 20 per cent decline in the cost of solar panels this year. That would explain why it would be another record year for installations — as much as 81 gigawatts (Gw) of power plants could be built globally this year, according to the optimistic forecast of BNEF, against 75 Gw installed last year. Over 10 per cent of the installations would be in India, making it the largest market after China and the US.

There are some countries attempting to revive their coal power industry, such as the US. There are, however, headwinds to encounter from sheer play of market forces. “Attempting to revive coal or nuclear is like defibrillating a corpse: it will jump but it won’t revive. The economic fundamentals are bleak,” Amory Lovins, founder, chief scientist and chairman emeritus of the Colorado-based Rocky Mountain Institute, said in an interview.

Lovins, whose institute is working with Niti Aayog on “transformative mobility solutions”, talks about using the storage capacity in electric vehicle batteries for grid balancing (vehicle-to-grid), and refers to coal projects in the pipeline as “pre-stranded” assets.

There may not be a clear case for setting up a new coal plant, but there is certainly a compelling case for making existing coal power plants cleaner. The tightened emissions norms, however, for particulate matter, sulphur dioxide and others (SOX/NOX) announced by the Ministry of Environment, Forest and Climate Change for power plants are likely to be deferred from the original deadline of December 2017. There is also the open question of what is the realistic level of emissions control that can be achieved with Indian coal. Adding the cost of air clean-up to coal plants would likely take the cost of coal power closer to Rs 4 a unit, further widening the gap between solar power and coal power. 

The author is editor, Global Policy, for Bloomberg New Energy Finance; vgombar@bloomberg.net