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Solar power: Revolutionising power generation costs?

Earlier this month, a US company offered to supply power at Rs 4.63 per unit to the state of Andhra Pradesh. This event signals that solar power has now become nearly competitive with thermal or coal-based power.

But Sumant Sinha, chairman and CEO of Renew Power, a company which delivers solar and wind power solutions, says while solar power costs are coming down in general, it is nowhere close to Rs 4.63 per unit. “I would think that the proper pricing of solar power is still there, in excess of Rs 5 per unit. If you properly cost all the risks of forex, execution and so on and therefore Rs 4.63 per unit is an indicator,” he told CNBC-TV18.

On November 4, SunEdison, a US company successfully bid to supply solar power to Andhra Pradesh at Rs 4.63 per unit. Actually, nine of the 28 companies that participated bid to supply power below Rs 5.

This compares with bids of Rs 11-13 per unit that one unit of solar power cost in FY11.

Sinha adds solar power is sitting on a reducing cost curve. But going ahead, price reductions will happen mostly because of technology improvements of which there still will be quite a bit. Earlier, there was a demand-supply mismatch. But now, it has evened out and hence there is some degree of price stability.

“I believe that solar costs will keep reducing maybe at the rate of 2-4 percent every year and if we extrapolate that over let us say a 10 year time period then it is very conceivable that solar costs might very well go down by at least 30-40 percent from where we are right now,” Sinha says.

However, if power can be generated on our rooftops, and that too competitively, are we entering a brave new world where power will be available minus political and grid problems that accompany grid power?

According to Sinha: “Ground mounted solar is probably about Rs 5.60-5.70 per unit and rooftop solar is probably Rs 6.25-6.50 per unit level — is where the proper pricing with proper returns, with long-term sustainable business models really would be at, at this point in time.”

Globally, solar power costs have fallen by 200 times from USD 100 per watt in 1975 to 50 cents per watt this year.

Analysts estimate costs may fall another 50 percent by 2020.

Tony Seba, a scholar on disruption and clean energy from Stanford University, estimates solar power has achieved grid parity in 100s of markets and will achieve 80 percent parity globally by 2017.

Costs of storage of energy have also been crashing at the rate of 16 percent per year since 2010.

Tesla, Foxconn and LG Chem are rapidly setting up battery factories. Tony Seba again estimates storage costs may fall to USD 1.2 per day by 2020.

Are we therefore reaching a stage when power will be generated and stored on our rooftops or in our neighbourhood and the average consumer will no longer be dependent on the politician and the babu for a power connection?

The Secretary of the Central Ministry of Renewable Power Upendra Tripathi, says: “In some places if the cost of capital is low and the solar resource quality is high and the scale is big, the prices will come down.

… If you get panels much more efficient than what we have today, suppose with nanoparticle or non-silicon base material, the cost may further go down.”

Arvind Kumar, the energy secretary of the state of Telangana, says the state has witnessed a decline of about Rs 1.60 just in a year’s time. “In Telangana, last six months we have finalised two bids totalling about 2,500 megawatt and I must say in a year’s time, last year our rate was Rs 6.45 per unit and this year in the latest bid of 2,000 megawatt, the lowest rate quoted is Rs 5.17.”

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