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The price of solar in India could fall below that of coal within 5 years

By Dr Anthony Horton

According to a KPMG report published this month, the price of solar power has declined more than that expected by many analysts since January this year. In India currently, the price of solar is within 15% of coal process on a levelised basis. In the report titled “The Rising Sun-Disruption of the horizon”, KPMG contends that while the current price of solar doesn’t include grid integration costs, even after taking them into consideration, solar would still be competitive with coal. By 2020, they forecast that the price of solar power could be approximately 10% less than that of coal.

By 2020, KPMG forecasts a generation price of INR 4.2/kWh and INR 3.59 kWh by 2025 (at today’s prices), and that wind and solar generation could constitute 20% of India’s energy supply mix by 2025. The biggest potential factor in solar power pricing in India could be rooftop solar, especially if it is supported by the continuing evolution of storage technologies. KPMG predicts that rooftop solar could provide 10 GW within 5 years and 49 GW within 10 years, and could mitigate as much as 275 million tonnes of carbon emissions in 2025. Thus it would make a sizeable contribution to India’s INDC which included a 33-35% reduction in emissions intensity of its GDP by 2030 from 2005 levels.

In addition to price forecasts, the KPMG report pointed to the need for stakeholders to understand the possible extent of the impact of falling solar prices on the coal industry, and to the need to face it. A new planning paradigm that takes into account a significant renewable energy input scenario (including storage and smart grids) going forward was needed in India, and the report also suggested that the Government focus on bolstering planning policy, institutions, resources and protocols. Appropriate incentives for investment in the integration of solar into the grid and balancing services should be implemented early, and consideration should be given to storage technologies being promoted in a similar fashion to the way solar power was encouraged through the National Solar Mission in 2009.

In flagging the significant competition utilities are likely to face from distributed rooftop solar, KPMG suggests they get into rooftop solar themselves and develop new revenue models based on the relationships they have with existing customers. If they don’t confront the competition, they could face losing customers and may need to rely on subsidies to remain solvent. They will also need to examine their power procurement portfolio and look at how they contract incremental capacities. The cost structures of new capacities should be scrutinised closely prior to committing.

On the basis that solar power in India would be at a sufficient scale from 2022, the coal sector would come under pressure. To meet that challenge, the sector should focus on cost efficiency and flexibility, according to KPMG. Imported coal prices could be influenced by a number of factors including slowing growth in China, energy efficiency (on the demand side) and a fall in the commodities cycle. KPMG further recommended that Coal India Limited conduct a study of long run costs and add flexibility to its operations so it can adjust to different demand and price scenarios as they arise.

A framework for encouraging private investment in ancillary services needs to be urgently addressed, according to KPMGs report. The solar sector represents significant investment opportunities, including storage solutions, demand response and grid balancing, however the significant ramp up needs are such that the availability of sufficient domestic capital may represent a challenge. International funds and domestic bond markets should be investigated by investors, according to KPMG. Given that solar is approximately four times as capital intensive as coal on a per kWh basis, a global economic recession could have a potentially significant impact-not just in terms of the availability of capital but also in terms of falling fossil fuel prices which would make solar potentially less attractive. If shale gas or clean coal technologies become more prominent they could also pose a threat.

In KPMGs opinion, solar power has the potential to be a significant part of India’s energy mix in the next decade. Solar is clean and will reduce coal consumption over time, which will help India’s fight against climate change. Rooftop solar can take the pressure off distribution grids, which are of lower quality especially in rural areas according to KPMG. The continued evolution of storage technologies could lead to further development of electric vehicles in India, which in turn would reduce oil consumption and could possibly increase energy self-reliance. From a global point of view, reduced oil consumption and storage technologies offer the potential for increased energy security which is critical for every nation.

rWdMeee6_pe About the author: Anthony Horton holds a PhD in Environmental Science, a Bachelor of Environmental Science with Honours and a Diploma of Carbon Management. He has a track record of delivering customised solutions in Academia, Government, the Mining Industry and Consulting based on the latest wisdom and his scientific background and experience in Climate/Atmospheric Science and Air Quality. Anthony’s work has been published in internationally recognised scientific journals and presented at international and national conferences, and he is currently on the Editorial Board of the Journal Nature Environment and Pollution Technology. Anthony also blogs on his own site, The Climate Change Guy.

 

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9 comments

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  1. miriamenglish

    Solar will continue to get cheaper, regardless of government policies. As you note, one of the big problems with solar photovoltaics is the steep initial investment for a household. Governments can certainly help there with subsidies or cheap loans. Companies offering cheap loans for solar in USA seem to have become popular in USA. Incremental expansion of a solar array can be done, but in practise rarely is, due to the cost of related items (inverter and metering equipment in grid-tied systems, or batteries in stand-alone system). I expect ways around this will be found in the near future, making solar even easier to buy.

    My hope is for stand-alone solar PV systems to change radically soon with cheap, non-toxic supercapacitors. You can see a hint of that change coming in the work of Robert Murray-Smith. Once we have extremely cheap storage the entire equation shifts. Suddenly expensive grid-tied systems lose any great attraction for the individual.

    But it is in the long-term interests of government and electricity grid managers to keep as many people tied into the grid as possible. Oddly, they don’t seem to see that. As more and more people defect from the grid the cost of maintaining it will rise for each grid-connected individual, further increasing to attractiveness of detaching from the grid, which is a dangerous situation for a large-scale grid manager.

    In disconnecting from the grid there will be other costs beyond buying energy storage systems. Much will depend on whether people either continue to use inverters for high voltage, or opt for simpler, low-voltage systems. The built-in obsolescence of many household items will mean people will get many opportunities over the years to ask themselves whether they want high-voltage equipment or low-voltage. But for new homes I expect this will gradually cease to be a question. Avoiding a costly inverter and installing only low-voltage appliances will slowly become the obvious choice, I think. At the moment low-voltage fridges, TVs, power-tools, and so on, are more expensive than their high-voltage counterparts, but that’s really only because of scale of manufacturing — they’re made mostly for boats and caravans. As more people choose low-voltage the costs will drop. And a lot of things, for example computers, clocks, radios, music systems, and so on actually run on low voltage internally and might have a further price benefit in not needing expensive power supplies that change the high-voltage supply back down to low voltage. It seems silly jacking up the voltage only to have to drop it down again, with both steps wasting energy and requiring expensive parts.

    There is another problem with grids, beyond simple cost. Reliability. I live in the bush in Queensland where we are subjected to power outages many times a year. Also every time a lightning storm rolls through (which is very often in summer) I have to disconnect all my sensitive equipment from the mains. I’ve gradually put together a separate low voltage system so that I can continue to work during storms, and I look forward to the day when I don’t have to imitate a headless chicken, racing around disconnecting everything when I hear distant thunder. This is a problem in India too. But it is not just storms on Earth that are a problem. When we get the next really massive solar storm event the only people who have electricity will be those who are not connected to the grid. A really big magnetic storm could knock out large grids for months. And, boy, will stand-alone solar systems become attractive then!

  2. Kyran

    At the other end of the energy discussion is the abuse of power pricing, which is both inherent and systemic, in the Australian on-grid electricity supply. Jess Hill did a story on Background Briefing. A link to the audio is;

    http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwjL4Yq59J_JAhXH2KYKHUgeD-UQFggcMAA&url=http%3A%2F%2Fwww.abc.net.au%2Fradionational%2Fprograms%2Fbackgroundbriefing%2Fthe-big-disconnect%2F6915554&usg=AFQjCNFccmq96p6zWxZPjjHDnsGA-BO-Hw

    She wrote an article for the Drum which, whilst less detailed, is equally terrifying;

    http://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwj35v_59p_JAhUBXqYKHYdlBFAQFggcMAA&url=http%3A%2F%2Fwww.abc.net.au%2Fnews%2F2015-11-10%2Fhill-the-great-energy-con-that-is-costing-us-billions%2F6924272&usg=AFQjCNFGE1tlcTG_I5Gg18m13a1cHeV52w

    If India avoids a scam whereby the power companies can charge interest to their customers at 10% whilst obtaining their loans at a far lesser rate, the economic argument (coal is good for humanity ’cause it’s cheap!) goes out the window. Let alone all of the other ‘scams’ unearthed by Ms Hill. Thank you, Dr Horton. (And Ms English). Take care

  3. Wally

    miriamenglish

    Hybrid grid connect systems are the better solution, when the batteries are fully charged and demand is lower than what is being generated the excess can go to the grid. Likewise when the long dark clouds hang around for to long and the battery charge drops they can be topped up using off peak electricity from the grid. Unless off peak power is consumed somehow it is just wasted so this is another way to improve efficiency. http://www.goingsolar.com.au/what-we-do/solar-electricity-hybrid

    Figures I have seen suggest that generating your own electricity costs about 23 cents per kwh using a hybrid system with and acid batteries for storage, cost using lithium batteries is slightly higher. Ceramic Fuel Cells is another method of producing your own power on a 24/7 basis but the initial cost has proven to be prohibitive and of course you are using natural gas but much cleaner than coal.
    http://ecogeneration.com.au/news/bluegen_mini_power_stations_for_the_world/061588/#

    As you stated an improved storage medium is the key to making solar power an effective affordable solution regardless of wether you prefer a stand alone or a hybrid system. Hybrid systems are also useful on a larger scale in remote locations like Bathurst island where they have significantly reduced the operating hours of the diesel generators by providing power for off peak periods.

  4. townsvilleblog

    Solar energy should be the first choice for developing countries, they can have all the benefits of the developed countries without the pollution that burning coal brings, along with associated health problems.

  5. Miriam English

    Wally, it’s true that hybrid systems would be best. Unfortunately power companies seem intent on demonising solar users and using any pretext to hike the prices. If they don’t wake up to the suicidal nature of that strategy it would appear to have only one long-term result: much of society disconnecting and the grid servicing a far smaller number of mostly city clients, with the electricity companies becoming far smaller, less powerful, less profitable organisations, and perhaps becoming nationalised again.

    If they do see the error of their ways we may see them promoting efficiency and hybrid solutions, but given the peculiar ideological blindness of these people I think it’s unlikely.

    I hope I’m wrong.

    townsvilleblog, a friend of mine regularly returns to Zambia, where she grew up. The stories she brings back to me are wonderful. They are leapfrogging many of the centralised and overcomplicated mistakes we have made in the so-called “developed world” and going straight to mobile computing and solar power. It gives me great hope for the world.

  6. Wally

    Miriam English

    Heartening to know that people somewhere in the world benefit from mistakes, our government never seems to learn from mistakes and use the knowledge to improve our society unless it helps the rich get richer. The greed of power companies is the biggest hurdle we face in our quest for clean energy, they oppose investment in renewables from governments and making money is the only priority.

    Safety is an issue with off grid installations, newer solar arrays are connected in series putting out over 300 volts and the short circuit current of the battery banks are tens of thousands of amps. Because the battery banks are connected to deliver 12 – 48 volts many end users are oblivious to the potential danger. I have issued a defect on every off grid solar system I have inspected and these have been installed by so called professionals. Very scary.

  7. Miriam English

    Kyran, thanks for the links to the Background Briefing episode and the article by Jess Hill. Fascinating.

    For those wanting the direct links without going through Google…

    The Background Briefing page. Summary, audio, and transcript are available from:
    http://www.abc.net.au/radionational/programs/backgroundbriefing/the-big-disconnect/6915554

    Direct link to the audio:
    [audio src="https://mpegmedia.abc.net.au/rn/podcast/2015/11/bbg_20151108_0805.mp3" /]

    And the other article by Jess Hill:
    http://www.abc.net.au/news/2015-11-10/hill-the-great-energy-con-that-is-costing-us-billions/6924272

  8. Kyran

    The Background Briefing’s are generally well worth a listen, old school investigative journalism for the most part. There were several points made in that one that were extraordinary. Many of which seem to me to be ‘scams’. The interest rate scam seems to be a good example of how to bolster inefficient businesses with government (all levels) collusion. Also pretty well puts paid to the possibility of any government saying electricity prices will come down! Take care, Ms English

  9. Pingback: price of solar could fall below coal within 5 years | SwordWater WebCrawler

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