India will soon generate cheaper electricity from solar photovoltaics (PV)-based projects than those based on coal imported from Indonesia and Australia, says a report released by Institute for Energy Economics and Financial Analysis (IEEFA).
This will become a possibility largely due to expansion of renewables by 175 gigawatts (GW) and increase in production of domestic coal by 2021-22, allowing the country to end its reliance on coal imports.
“The target to install 175 GW of renewable by 2021-22 looked ridiculously ambitious when first announced. But it seems all too achievable with both major domestic and global firms increasingly endorsing these plans, including Softbank, Foxconn and Bharti’s US $20-billion announcements for 20 GW of new solar capacities,” says Tim Buckley, co-author of the report and director of energy finance studies for Australasia at IEEFA.
“Commitments to major new projects in India over the last month alone from firms such as ENGIE, Trina Solar, Hanwha Q Cells, First Solar, SkyPower and SunEdison read like a who’s who of the largest and most successful renewable firms in the world,” he adds.
Earlier this year, India had announced it would install 175 GW of renewable energy by 2022, with solar having a majority share of 100 GW, wind 60 GW and biomass and small hydro targets of 10 GW and 5 GW respectively.
The proposed energy mix is based on Prime Minister Modi’s reference to the mythological “seven horses of energy”—coal, hydro, nuclear, gas as well as wind, solar and biomass.
have shown that solar power can be generated with levelised cost of Rs 5-5.50 per unit of electricity. These tariffs are around Re 1 lower than per unit cost of electricity from imported thermal coal.
“India is replicating Germany’s and China’s systematic electricity sector transformation, with the added advantage that the cost effectiveness of this is accentuated by the fact that the price of solar electricity has dropped by 80 per cent in five years,” Buckley is quoted as saying in a press release.
Reducing T&D losses
According to IEEFA’s estimate, India’s power demand will rise by almost 60 per cent in 2022. In absolute terms, the demand will rise by around 50 billion units and touch 1,318 billion units per annum by 2022.
If India aims to reduce the aggregate technical and commercial losses even by 1 per cent per annum, it can reduce the required power generation by 75 billion units, or 15 per cent of the total required by 2022.
“Combined with a major grid and energy efficiency drive, the doubling of domestic coal production and fivefold lift in renewable will see India exit this decade with not only a zero reliance on thermal coal imports, but also significant excess supply of domestic coal,” says Buckley.
The report estimates that India requires $250 billion for renewable energy transformation and improvement in grid transmission and distribution. Assuming a debt component of 70 per cent, the total amounts to $175 billion. Since domestic finance in India is limited and usually unavailable, there would be high reliance on international money to finance this magnitude of investment in the country.