Solar energy costs continue to plunge across the world

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Two stunning auction results in India and Chile in the last week have underscored the extraordinary gains that large-scale solar has made against its fossil fuel competitors.

In both countries, solar is now clearly the cheapest option compared to new coal-fired power stations. In Chile, where the auction was open to all technologies, fossil fuel projects did not win a single megawatt of capacity. And the auction produced the lowest ever price for unsubsidised solar – US6.5c/kWh.

In India, US firm SunEdison won the entire 500MW of solar capacity on auction in the state of Andhra Pradesh, quoting a record low tariff for India of INR 4.63/kWh (US7.1c/kWh). Again, this was unsubsidised. And again, it beats new coal generation, particularly generation using imported coal.

These bids follow an auction in the US last month by the Texas city of Austin, which contracted to build 300MW of large-scale solar PV at a price of less than US4c/kWh. Even after backing out a tax credit, this is still less than US6c/kWh, and still beats gas and new coal plants, if anyone was planning to build one.

As Greentech Media reported last month, and we have signalled in the past, that means utilities are choosing large-scale solar over new peaking gas plants. Solar PV is beating gas on fuel costs alone, and is acting as a safe hedge against fuel price volatility.


The significance of the India auction was not just in the price, but in the quality of the bidder. Far from being an unheard of upstart who has bid low in previous auctions, SunEdison is the biggest renewable energy development company in the world.

Other close bidders are also substantial names. Second place went to Japanese firm Softbank, much-touted for its announcement of investing US$20 billion in India’s renewables market, which is thought to have offered INR 4.80/kWh.

Other parties to beat the previous record (of 5.05/kWh) and bid below the 5/kWh mark were Italian giant Enel Green, Reliance Power, the Indian power group that recently announced it was selling its coal mines to focus on solar, and Renew (no relation to this website), along with three others

Such prices were predicted just last week by analysts including from Deutsche Bank, who predicted prices of 4.7/kWh and predicted that the India solar market was “ready to take off.”

Still, the actual bidding results still took some analysts by surprise, with some suggesting that the prices will not allow for significant returns.

The same thing was said about the ground-breaking solar result in Dubai earlier this year, but companies are clearly grabbing territory to develop supply chains that can further reduce costs. It is a story that has been repeated over and over across the world, and underlines the power of the auction system.

And these results certainly have major implications for future energy choices in India, and elsewhere.

Jasmeet Khurana, senior consulting manager at analyst firm Bridge to India, said solar projects are now in the same range of electricity prices as wind projects and even new greenfield coal-fired power projects, which tend to have tariffs ranging between INR 4.50/kWh and INR 5/kWh.

“I think this changes the paradigm, not just for the solar sector, but also for the power sector in India,” he told PV-Tech. Even the Indian government was delighted, with energy minister Piyush Goyal tweeting: Delighted that Solar Tariffs in India have broken Rs 5/kWh level.”

The results were comparable with bids the previous week at an auction in Chile, where renewable energy cleaned up and took all the capacity on offer.

Large-scale solar PV projects won with bids of between US6.5c/kWh and US7.8c/kWh, bettering two winning wind farm bids at US7.9c/kWh.

And it is not just solar PV that is undercutting fossil fuels. Solar tower technology with storage also won a significant amount of capacity after bidding a price of US9.7/kWh ($US97/MWh)

Abengoa is already building one hybrid plant near the city of Calama, combining a 100MW solar PV farm with a 110MW molten salt power tower designed to run 18 hours without sunlight. That will be paid on a tariff of $US115/MWh, with no subsidies, when the whole complex is complete in 2017.

Abengoa has proposals to build a “twin” of this project in another city, as well as a bigger, triple-tower, 315MW project near Copiapó.

SolarReserve, which has built Crescent Dunes in Nevada, the world’s biggest solar thermal power tower project optimized for energy storage which recently delivered power to the grid for the first time, is also building a similar hybrid plant in Chile.

It is proposing, also near Copiapó at the southern end of the Atacama Desert, a plant that would combine a pair of 130MW salt towers with 150MW of solar PV.

CEO Kevin Smith says his company will offer power from its Chilean hybrid PV-thermal solar projects as a bundle, and promises it will sell for “well under” $US100/MWh.

That is even cheaper than the $US125/MWh for power it will supply from the Redstone 100MW solar tower facility it is to build in South Africa, also adjacent to two solar PV arrays already in production.

solar redstone

That $US100/MWh mark is a key metric. It is where the Australian roadmap for solar thermal – set out by the Australian Renewable Energy Agency – hopes to take local generation costs.

It also suggests that the estimated costs of a plant to replace the Port Augusta coal-fired power station – at more than $200/MWh – are grossly inflated.

In Australia, many gas-fired peaking power stations operate at a significantly higher price than that.

If the solar tower and storage technology can get a foothold in Australia any time soon – possibly via the ACT government’s “next generation” solar auction – then it has the potential to rapidly transform Australia’s electricity grid, working with battery storage to allow for more flexible capacity to fit in with the increasing penetration of renewables.  

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  • Leigh Ryan

    And that’s why anyone with shares in a fossil fuel technology company, would do well to sell at any price, the question is, which major company is so arrogant and so stubborn that it will be the one stuck with all the worthless assets, question 2 will it be a company at all or will it be a government, i am betting it will be a government, especially a LNP government they are after all the most likely to protect their mates and stick the taxpayer with the dead assets.

  • David McKay

    A CAPEX comparison between Coal/Gas & Renewanbles is pretty meaningless as I doubt there will be any new build coal or gas plants. I suspect Abbott may have had a crazy scheme to use some or all of the $5B Northern Aust fund on a new coal plant, however, that appetite may have shifted. Especially with a range of new solar & wind projects moving into the same area. Cost/mwh is really the only measure, as that is what creases the income stream. PV is just so easy to install at scale. CSP is a major project, which unfortunately for Australia, means it will be very, very costly. Molten salt storage drives this cost even higher.We need to do something to reduce our project costs. I don’t advocate floods of foreign workers on 457s or having unsafe project sites, however, global contractors I deal with are astounded by what goes on with projects in this country & how costs escalate.

  • john

    Considering the low prices that solar is achieving, just which storage system is going to compliment it?
    Perhaps solar and hydro storage would be an option.
    If CSP is so out of the equation how can we reduce the cost?
    Time to step up to the mark and consider the most cost effective method of converting free solar energy into a 24/7 energy source.
    Considering Australia has some of the best research facilities I find it very hard to think this is beyond our capability.
    So there is a market opportunity here to look into the price mark of perhaps under $30MWH to $70MWH maximum.
    If some company can achieve those figures they will totally corner the total market which is rather large.
    Yes I know at times the return is under $30MWh however look at the base average which I think is in the $30 to $80 area and going lower all the time.

    • Jacob

      I wish they would do an auction for storage so then we would know the price of storage.

      The price of solar power is crystal clear now thanks to these auctions.

    • Ian

      The thing about battery storage is that it can perform all sorts of valuable services to the grid, and because it can be both charged and discharged- it does double the duty of a equal sized power plant. Batteries can replace investment in new or upgraded transmission infrastructure. So, if you have the right utility structure which is capable of monetizing all the services batteries can provide, they can actually be quite expensive and still pay off.

  • Ian

    India has two drivers for low cost solar. 1. They have a potentially huge market for these sorts of projects and companies are falling over each other to get a toehold in the market. 2. Indians know how to strike a bargain. I suspect Australian utilities are gullible and desperate to show their climate credentials, besides they can forward their costs onto their milch-cow customers and get fat subsidies from our government’s largesse.

    • Jacob

      It was a state auction, not a federal one.

  • Jacob

    This is great news and hopefully solar panels keep crashing in price.

    And it raises questions about China’s promise to build coal power stations in Pakistan.

    • Mike Dill

      The coal plants in Pakistan will be built, as they already have a PPA. The real question is if they will be run when they have a drought or when the coal cost more than building some solar arrays. As always there is some politics involved, and Pakistan has had more than one forced government change.

      Will a RPG set off a pile of coal?

      • Jacob

        Yeah Pakistan has military coups from time to time.

        If the Chinese build coal power stations there that pollute too much while depleting freshwater supplies, one could declare that they cause cancer and order them to stop burning coal.

        With or without a military coup.

      • Ronald Brakels

        Mined coal can spontaneously catch fire due to oxidation raising its temperature. Interestingly, a small amount of water will increase the amount of heat generated and the chance of spontaneous combustion. Lignite is the worst for this, which makes it difficult to transport.

        An RPG can melt through the steel armour plate of a tank.

        So I would say that if one fired an RPG at something that is quite capable of catching on fire all by itself, combustion as a result would be highly probable.

        Fortunately not having fire fighting equipment near a coal pile that could be used to hose it down with a large quanity of water would be rather improbable.

  • ecoh
    • Mike Dill

      While I agree that this is destroying some landscape, It is much less destruction than you see from a coal mine. Also, this is in the middle of a desert, and will not consume as much water as a coal plant would.

      In many places water is a much more precious resource than empty land.

    • Ronald Brakels

      Thank you, we try. However, Australia’s roofspace alone is sufficient to generate electricity equal to the entire continent’s consumption from rooftop solar alone, so there is a good chance that the sunburnt country won’t get the solar cover it needs to stop being so sunburnt.

    • Ian

      It might be interesting to see what becomes of the landscape under these panels and mirrors. I could imagine that some kritters (and plants) would take advantage of the shade, and possible protection from hawk predation. All the earth movement and truck access probably causes more damage than the panels and mirrors themselves. It would be interesting to know the facts.

    • Chris Drongers

      Yeah, concrete piles supporting mirrors/PV modules are sooooooo destructive of the native environment. At the end of life, the panels can be removed and the piles left or pulled out as well. Herbage continues to grow around and under the panels, subsoils are not disturbed, groundwater flows continue etc. Meanwhile, back at the (illustration is Saraji) mine this land can never be taken back to growing sunflowers, the cuts into the near surface aquifers and residual coal and sulphates will leave potential groundwater flow and quality changes for future generations (thankfully not the corporations involved in profiting from the coal) to deal with.