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India energy minister says solar power now cheaper than coal

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The latest auction of solar energy capacity in India has achieved a new record low price of 4.34 rupees/kWh, prompting the country’s energy minister Piyush Goyal to say that solar tariffs are now cheaper than coal-fired generation.

The results of a reverse auction tender of 420MW of solar capacity conducted by the Rajasthan government revealed this week that Finnish group Fortum Energy bid the lowest price of 4.34 rupees/kWh for a 70MW solar PV plant.

It is the lowest price obtained so far in India, which aims to install more than 100GW of solar by 2022, and was hailed by Goyal as a sign that solar power is now cheaper than coal power.

gopal tweet

 

“Through transparent auctions with a ready provision of land, transmission and the like, solar tariffs have come down below thermal power cost,” Goyal said in a tweet.

In a later tweet, Goyal said: “We are moving rapidly towards realising the clean energy vision of Prime Minister Narendra Modi.”

In a week in which it was revealed that China’s coal consumption for electricity had slumped 3.5 per cent last year, it is a further bad sign for Australia’s coal exporters.

The Fortum bid betters the previous low of 4.63 rupees/kWh made by the US-based SunEdison, the world’s biggest developer of renewable energy power plants, for a 500MW plant in Andra Pradesh last November.

Like many such auction results, the Sun-Edison bid was dismissed as irrational. But it was matched a month later in a different auction in December by SkyPower.

Fortum’s offer was also no outlier. The bid was nearly matched by Rising Sun Energy (which bid 4.35 rupees for two blocks), France’s Solairedirect (also two blocks for 4.35 rupees a unit) and Yarrow Infrastructure ( a 70MW plant for 4.36 rupees).

“This (Rs 4.34 a unit) is the lowest solar tariff so far in India. This has happened because of confidence in the balance sheet of NTPC and solar parks that come with all clearances and confidence in the market,” new and renewable energy joint secretary Tarun Kapoor said.

The bids are also not subject to price indexation. Tim Buckley, from the Institute for Energy Economics and Financial Analysis (IEEFA) wrote last month that this means a potential 5 per cent annual real price decline is contractually in place for the next 25 years, a significant long tail advantage of renewable energy.

Fossil fuels by comparison offer prohibitive price variability and currency devaluation risks.

“India currently has over 4.4GW of installed utility solar capacity, and solar consultancy Bridge to India estimates another 16GW of tenders have been allocated or are in the process of tendering, much which we expect to be operational by 2017 at the latest. Rooftop solar is also on a steep upward trajectory in 2016,” Buckley wrote.

“After only 1GW of solar installs in each of 2013/14 and 2014/15, IEEFA estimates 2015/16 installs will more than double to 2.5GW, double again in 2016/17 to 5-6GW and then 9GW by 2017/18. By 2021/22, we forecast cumulative installs of solar to exceed 80GW – close to the Indian Government’s target of 100GW set one year ago.”

 

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  • Reality Bites

    That is great, however, according to my calculations that is still AUD100 MWh, whereas in Australia the average NEM wholesale price is around AUD40 MWh. Also does not provide detail of what subsidies are being allowed such as land grants, accelerated depreciation etc, these could be from multiple levels of government. I forecast that in another few years, when the price gets down to 50% of the current contracts, the non indexed 25 year contract will not be looking that flash.

    • David Osmond

      These solar tariffs may be higher than Australia’s wholesale price, but the good news is that they seem to be highly competitive with recent Indian coal generation pricing. According to IEEFA:

      “The latest domestic coal-fired power tariffs, from June 2015, ranged from Rs4.27-4.98/kWh in Andhra Pradesh, while 2013 domestic coal tariffs of Rs5.41/kWh in Rajasthan and Rs5.66/kWh in Tamil Nadu. The numbers illustrate that the bids of Rs1-3/kWh seen in 2008-2011 were unsustainable and unrealistic. IEEFA estimates imported coal-fired power in India requires Rs6/kWh, plus the standard coal requirement of an annual inflation link, making coal imports the least financially viable fuel source by 2016-2018”

      http://ieefa.org/wp-content/uploads/2015/08/IEEFA-Indian-Electricity-Sector-Transformation-August-2015.pdf

      • adam

        Thanks, good link.

        Interesting they’re proposing a big solar capacity build over wind pre-2020. The report makes no reference to why.

        Could guess at some reasons, but doesn’t mean they’re good ones.

    • Barri Mundee

      Its claimed to be cheaper than coal! Relying on the accuracy of that claim but if so your comment is wrong as well as irrelevant.

    • Garth S

      The reality is that coal is finished as a major source of power generation.

    • Jens Stubbe

      The NEM wholesale average price is factoring in direct and indirect subsidies and is not selectively for new power capacity (try arguing that investors would be prepared to build a new coal power plant in Australia that is obliged to sign a binding PPA contract for 25 years locked to the current NEM average). Solar produces more valuable power than coal because it inherently match peak demand better. Solar power plants will outlast the PPA period whereafter it will deliver power at a much lower price point and throughout the PPA period solar will remain 100% stable whereas coal is a very risky commodity with wild price fluctuations. Solar have the ability to produce without using scarce water resources and without polluting the air and without disrupting the global climate system and without health damages to miners and without dependence upon importing a price fluctuating commodity.

    • sukumar

      I think u missed the point, it is zero subsidy . only purchase is guranteed by a financially sound company and land is assured in a planned solar park. In levelised cost it may even be much lower than local coal.

    • Calamity_Jean

      “…in another few years, when the price gets down to 50% of the current contracts, the non indexed 25 year contract will not be looking that flash.”

      If it’s cheaper than coal, that price will look good until the last coal plant grinds to a halt.

  • Rob G

    India getting smarter on their energy is promising. This will have the added bonus that solar doesn’t need vast amounts of water that both coal and nuclear need. This counts for double as India is largely an agricultural economy.

    Australia on the other hand will be playing catchup soon. One wonders what Malcolm T has in mind – thus far he has been a puppet to the LNP right powerbrokers, but the talk of ‘replacing’ a lot of right wing deadwoods with more centre/left conservatives (I know sounds like a contradiction!) looks to me like MT is aligning the stars for change!? While I will never vote for him, it does give me some hope should this mob return to power.

    • david_fta

      I think what our Federal politicians have in mind is the precipitous drop in most Australians’ superannuation accounts when the carbon bubble pops – let alone Future Fund losses under Peter Costello’s stewardship.

  • Ken Dyer

    India, unlike Australia, seems to be putting their money where their mouth is, not only about coal but also the environment.

    http://www.thehindu.com/business/Industry/coal-auction-put-off-due-to-poor-response/article8045888.ece

    And Adani is right in the firing line. Greg Hunt, take note!

    http://www.thehindu.com/news/national/other-states/ngt-lambasts-adani-group-for-environment-damage-in-hazira/article8114329.ece

  • ryant14

    And India can rely on solar energy during winter. It’s really cool. :)

  • onesecond

    Is there written anywhere how much that would be in cents? Or are we all supposed to be familiar with the Indian currency?

    • sukumar

      Simple buddy,it is less than 7 cents, google usd to inr. One shall get familiar with the currency of 8.2 trillion dollar (ppp) economy.

      • onesecond

        Just pointing out that the article could have done that instead of expecting its readers to do it. After all, that is what articles are there for, providing information.

        • Martin Andreas Kruse

          The place at where the auction was, and at that specific time that place, the amount was what the article said. Converting it to dollars or another currency would only distort the real cost/kWh as currencies fluctuate constantly.

          • onesecond

            So we just pretend a globalized market and exchange rates are not real? Of course it would have been the exchange rate at that time. I don’t understand what the point of your comment is.

    • Motorshack

      One rupee is about 1.47 US cents, so 4.34 Rs comes to about 6.38 cents.

      Similarly, a US dollar is about 1.42 Australian dollars, so the price works out to slightly over nine cents Australian per kwh, if that helps.

  • Sanjay Bhagat

    This is good for India, and thanks to government because if they achive their target every year it will be no scam in coal auction, and India can save its minerals. As rajasthan did fantastic job and other states also doing well, and their is a big hand of state as well as central government.

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