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Solar cheaper in India than imported Australian coal

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The results of India’s latest solar auction are in, and it is bad news for developers of Australian coal projects – solar PV is cheaper for Indian users than the electricity price needed to pay for imports of coal from Australia.

A tender for 500MW of solar capacity in the sunny, south-eastern state of Andhra Pradesh, resulted in First Solar submitting the cheapest bids in an auction that was oversubscribed by more than double – 63 bids, totalling 1291MW in proposed solar developments.

First Solar submitted bids of just over 8 cents US per kilowatt-hour – $0.086/kW/h for 40MW and $US0.087/kWh for another 40MW. In local currency terms the bids came in at INR5.25/kWh and INR5.35. That is significant, because it is below the price required to make coal imports economically viable.

solar-india-power-report-solar-thermal-magazine

All other bids – developers had to bid the tariff rate for power generated for the first year of the proposed plants operation – ranged from $SU0.092 to $US0.132, with projects ranging in size from 3MW to the upper limit of 100MW.

These remarkably low bids illustrate how quickly large-scale solar is coming down the cost curve in India – in February last year, a Rajasthani solar auction produced a lowest bid equivalent to A11.6c/kWh.

They also confirm that generating power from a large-scale solar plant is now cheaper, in India, than power from new-build coal, particularly those that rely on imported coal.

According to a research note from the Institute of Energy Economics and Financial Analysis (IEEFA), a PPA of between A10c/kWh and A11c/kWh would be required to build a new coal-fired generation plant using imported coal.

“We estimate that a PPA of Rs5.4-5.70/kWh would be required, plus price indexation of 4%pa to justify the construction of … a US$4bn coal-fired power project,” IEEFA says.

“This is double the last reported average sales price of electricity across India of Rs3/kWh and treble the domestic coal-fired power PPA signed over recent years.

Basically, says IEEFA, the required wholesale power price for imported coal is prohibitive relative to domestic coal or renewable energy.

“Wind, solar and hydro facilities can be built faster and / or at lower PPAs. Additionally, the use of renewable energy incorporates a zero fuel cost, such that there is an inbuilt deflationary driver – i.e. zero indexation.

“Given the recent drive by the Reserve Bank of India (RBI) to prioritise the sustained reduction in inflation, renewables support a series of GoI / RBI targets. Importing thermal coal achieves none of these goals, and more likely contradicts them.”

IEEFA analyst Tim Buckley said that, while the imported coal price may come down, lowering the generation price to around 9c/kWh, there was no way developers could bank on prices staying that low, considering the uncertainty surrounding thermal coal.

“(India’s) proposed new coal generation plan is showing signs of significant financial stress and is likely to deliver far lower than expected levels of new supply over the next five years.”

This is not great news for Australia, or more particularly Queensland, which is betting on India’s appetite for imported coal to fund the development of the state’s massive Carmichael coal deposit and the related expansion of the nearby Abbot Point coal port.

The increasingly shaky state of this Queensland coal export plan has been exposed more and more lately, with major international banks officially distancing themselves from the development projects, and signalling they would not back them financially, due to the attached risks – both financial and environmental.

India, meanwhile, is increasingly turning to solar, with government plans to foster development of some of the world’s largest solar PV parks across the country, totalling as much as 20 gigawatts of capacity*, about 10 times what India has built to date.

The Indian government also revealed details this month of an auction of 1GW of solar projects in Andhra Pradesh that will form the first part of a national 15GW roll out of PV between now and 2019. In March, the Solar Energy Corporation of India (SEIC) announced plans to build a 1GW solar factory in Andhra Pradesh.

*An earlier version of this article said the solar parks planned by India would be 20GW each. This is incorrect. They have been tipped to amount to 20GW as a combined total.

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  • barrie harrop

    This is not good news for Aust PM for a coal led recovery.

    • Glen S

      Absolutely not, I love reading news like this. Now we just need to get a government in who aren’t going to destroy the economy by tying it to the sinking ship of fossil fuels.

    • Amak4u

      Coal still has a future, albeit significantly reduced due to high prices in Australia. Australia should focus more on gas but ensure it doesn’t allow industry to set ridiculously high prices else it will again be priced out. With abundant land and sunshine wonder why Australia doesn’t go solar too.

      • john clayton

        Because of entrenchment and corruption/vested intrests somewhere, its the only possible reason with such a perfect climate for solar to thrive.Politicians are vermin.

  • john

    This outcome just follows Texas of all places where a large scale solar won a bid to supply power admittedly for daytime only but beat every other option

    • Peter Thomson

      Indeed the sun doesn’t shine at night, and wind turbines don’t turn when the wind isn’t blowing. To build a true all-renewable grid needs significant investment in grid storage as well as in the energy harvesting. Storage has to be sufficient to cover demand periods from seconds (grid stability) to weeks, and perhaps also seasonal; E.G.; store surplus solar in summer to use in winter.
      Developers have so far focussed on renewables harvesting, relying on incumbent fossil fuel grids to provide the overall stability; but in countries like India where the grid in places is limited or non-existent, we should be encouraging them to develop/use energy storage instead of fossil fuel backup.

      • Bob_Wallace

        You’re getting a little carried away with your storage stuff when you get out into the weeks and seasons zone. That probably means that you aren’t including all potential renewable inputs and/or making your harvest area too small.

        And don’t forget, in some cases it will make sense to do a lot more overbuilding of capacity than to try to store for low input times.

        • Peter Thomson

          It’s a really interesting question, and there hasn’t been much work done on it so far – what mix of renewable harvesting technologies, how much harvesting overcapacity, how much storage over what time frames, and what grid interconnector capacity will yield the lowest-cost solution that can guarantee grid security? And with the least environmental impact?

          The optimal mix of harvesting technologies and storage technologies varies widely from region to region, depending on the climate,
          geology, population, environment, etc. It may well be the case that seasonal storage makes good economic sense for some areas.

          • Bob_Wallace

            Seasonable storage might make financial sense in some areas or if more affordable bulk storage is available.

            For example were a region to rely heavily on pump-up hydro storage then using larger reservoirs might work out. Or if vanadium redox flow batteries pan out it might be feasible to store large quantities of medium in tanks.

            But I suspect it would be cheaper to produce electricity where possible and transport it in via HVDC and UHVDC transmission lines. If, for example, Germany suffers from low renewable inputs during the winter months then purchasing wind from the Atlantic or solar from southern Europe/North Africa might be considerably less expensive than storing power for weeks/months.

            It’s time for someone to put together an all-Europe record of wind/solar over multiple years. And another version which adds in North Africa and western Asia. That would let us see if there really are long periods with little renewable potential or whether the reports of long windless stretches are small area events.

            That’s been done for a four year period for the laargest wholesale grid in the US. There was no need for seasonal storage. A combination of overbuilding and storage along with a tiny bit of NG met the actual recorded demand.

          • Peter Thomson

            Bob, Do you have a link to the US study by any chance? I would be very interested to read it. Yes, seasonal storage may not prove to be cost-effective or necessary, but it doesn’t seem to have been well studied.
            There is an interesting study by Jacobson and Delucchi in Energy Policy, 2010. They look at the feasibility of building a 100% renewable energy supply for all global uses (electric power, transportation heating/cooling,etc) by 2050, and estimate the number of each type of harvesting facility needed to meet demand. It is an interesting study, though in my opinion they have underestimated future energy demand.

          • Bob_Wallace

            Sure –

            https://docs.google.com/file/d/1NrBZJejkUTRYJv5YE__kBFuecdDL2pDTvKLyBjfCPr_8yR7eCTDhLGm8oEPo/edit

            As you read that realize that their cost figures for wind and solar were generated in 2008 or so and are badly out of date. I think either wind or solar (can’t remember which right now) has already reached what they expected in 2030. And it looks like storage will be a lot less expensive than what they used in their model. But, if you keep those factors in mind, it’s a very good study that deals with four years of real world data.

            BTW, Jacobson and Delucchi recently updated their Scientific American study. The 2009 paper is available here (SA put their copy behind their paywall)

            http://web.stanford.edu/group/efmh/jacobson/Articles/I/sad1109Jaco5p.indd.pdf

            And here’s a description of the Mark & Mark 2014 paper. Unfortunately it’s on a pay to see journal site.

            http://news.stanford.edu/news/2011/january/jacobson-world-energy-012611.html

          • Peter Thomson

            Cheers Bob, I’ll see if I can get into Mark & Mark through RMIT.

      • VK Sharma

        I fail to understand why we are still living with an obsolete and out of sync classical concept of judging the economics of likely candidate for the energy security of future. The much touted model of ultra large scale concentrated power production units for reasons of economy and subsequent hassles and additional costs of transmission and distribution are neither necessary nor required for at least 50% of the power requirements of our globe. These unnecessary and redundant costs attached to every Kilowatt usage of power in standalone applications, majorly daytime requirements, micro and mini grids in small clusters of houses, remote and difficult terrain locations etc

      • Marcus Hicks

        Actually, Peter, back-ups for solar & wind need not be very expensive at all. Molten Salt & Thermo-chemical storage are cheap & easy ways to store days worth of solar thermal power. Vanadium Redox, Compressed Air & Pumped Storage are also cheap & reliable ways of storing large quantities of excess wind & photovoltaic power. Not that wind & solar are the only games in town. Run of the river hydro power, bio-gas power (from farm waste, forestry waste, landfill sites & sewerage plants), geothermal power, tidal power &-most recently-osmotic power, are all ways of creating renewable energy 24/7.

  • Henry WA

    Unfortunately in the short term, it is simpler to rapidly increase annual production in GWh with coal fired generators than with either solar or wind and India still remains committed to significantly increasing its coal fired capacity. Its local coal production cannot meet even current demand and is expected to reduce further. Therefore it is forecast that thermal coal imports will increase by about a third to 200 million tons annually over the next few years.

    http://www.powerengineeringint.com/articles/2014/08/indian-pm-dedicates-new-power-plants-despite-ongoing-coal-shortage.html
    http://www.reuters.com/article/2014/10/10/india-coal-powerstation-idUSL3N0S51UO20141010

    The developed world needs to provide India with every support and inducement not to follow China (ie China’s coal fired capacity added between 2003 and 2013) and instead for India to limit its new coal generation to those in the pipeline and in its place to substantially increase wind and solar capacity over even its current quite ambitious targets. Cheap finance or loan guarantees for wind and solar projects and transmission upgrades would probably be the most effective inducement.

  • Rob G

    Coal just keeps getting pounded, beaten on price, major divestments, uncertainty, looming carbon taxes etc etc. The KO is close. Meanwhile, solar is doing what big coal thought it does (but does’t), it brings power to poorer parts of the world and has potential to lift those regions out of poverty.

  • Sandy

    Great news. The second leg of the Indian solar revolution – rooftop solar – is also about to get underway, with Delhi being the first State across India, announcing the launch of its policy just 3 weeks ago, to allow households to connect their rooftop solar systems using net-metering to the grid. As the saying goes, what Delhi does, India does, so we expect more States to follow through shortly. With spare solar power sellable at Rs 4.14 per unit in Delhi now, it is common sense that the discoms [distribution companies – equivalent to AGL, Integral, EA, etc] will rather assist households more solar than buy coal at set price of Rs 5.50 a unit. To absolutely usher in solar in the cities what we need is the finance sector coming to the party like we saw ANZ taking lead in Aus/NSW

  • Amak4u

    Its not just falling prices of solar cells thats the reason for the lower unit pricing, its also greater transparency bereft of corruption. Earlier money used to be dispensed to facilitate tender deals at the cost to the exchequer and consumer. No more with the Modi led BJP government.

  • Doug Cutler

    Suck it, Black Dragon! The Green Dragon is eating your lunch and growing stronger every day.

    (Sorry. But nerds can be fans of cleantech too.)

  • Peter Wilson

    How much was the bid for power for delivery at night?

    Or do Indians only need to run their lights and fridges during the daytime?

    • Bob_Wallace

      Oh, Peter. Why do you waste time posting something like that?

    • Jacob

      Look to solar thermal which does provide 24×7 power.

  • Ryan Y.

    Glad to see how big solar is getting, hope it shines as bright over in the U.S.

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