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Published on July 14th, 2013 | by Guest Contributor

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Wind Energy At Parity With New Coal In India

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July 14th, 2013 by
 

This article first appeared on RenewEconomy
by Sophie Vorrath

Wind energy is now cost competitive with new-build coal capacity in India, and solar is likely to follow suit sometime between 2016-18, according to a report by HSBC.

The report on India Renewables, Good bye winter, hello spring, published on April 30, says the growing cost-competitiveness of renewable energy with new-build coal – and the arrival of wind parity, despite the upper wind FiT range being around 15 per cent lower than the upper tariff range for new coal capacity (see chart 3 below) – is helping to drive strong renewables growth on the sub-continent.

India’s share of renewable generation in the total electricity mix increased to around 6 per cent in the 2012/13 financial year – an amount the government is hoping to grow to 20 per cent by the end of 2020, to help meet the nation’s a peak power deficit of 12GW, or around 9 per cent of its demand.

“With electricity demand expected to grow and conventional power capacity facing its own challenges, we expect developers and investors to favour renewable capacity addition,” says the report, pointing to increasing constraints on new-build coal, gas and nuclear, as well as increasing levels of water stress.

Screen-Shot-2013-07-10-at-12.55.10-PM“Coal stress has been a key driver of renewables in India,” says the report. “We now see water stress as also supporting renewables growth. For the third consecutive year in a row, some coal-based capacity has been closed down during the pre-monsoon period driven by water shortages. We note that thermal power generation is the largest water consumer within the industry segment in India.”

For wind, favourable policy support mechanisms, such as increased state tariffs (although most remain well below coal tariffs, as mentioned – chart 3) and the expected 2014 reintroduction of the government’s Generation Based Incentive for wind energy projects, are expected to help deliver what some say could be a potential capacity of more than 100GW to a few hundred GW – well above the 50GW the Indian government has long been forecasting.

Screen-Shot-2013-07-10-at-2.01.55-PM“Over the past 12 months, across key wind states, except Karnataka, the wind tariff has been raised,” says the report. “Six key states – Andhra Pradesh, Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Tamil Nadu – have increased tariffs in the range of 2-36 per cent,” it says, while Karnataka’s wind tariff is due to be reviewed next year, and a few other states, like Kerala, have also increased tariffs.

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For solar, HSBC says it is now forecasting grid parity for between 2016-18, two years earlier than its previous prediction of 2018-20. The report notes that the cost of solar systems has declined 70 per cent over 2008-12 – a decrease that is reflected in the solar tariff decline observed in India for solar projects over the past three years (see Chart 4).

Screen-Shot-2013-07-10-at-2.35.41-PM

The government is aiming to install around 10GW of solar from 2013-2016, including 3.6GW capacity under the Central Government (GoI) Program and another 5.4GW from the state programs. According to HSBC, India currently has 1.2GW of installed solar capacity and over 4GW of capacity is at various stages of tariff bidding.

To drive this growth, the government recently announced project developers would be likely to be paid $US11/kWh, and could also bid for capital support if needed, through mechanisms such as Viability Gap Funding, which – as stipulated in the draft of India’s National Solar Mission, Phase II – could cover up to 30 per cent of the cost of a project.

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  • Ivor O’Connor

    India is lucky not to have a preexisting grid. It’s like not having bought a house right as the housing market bubble popped.

    • agelbert

      Agreed. They can grow a smart microgrid structure with multiple redundancies to avoid large blackouts in heat emergencies or natural disasters. Good for them.

  • Others

    Every day power cut for few hours is quite common in India. Of late, the price of imported Coal has increased a lot. With a hot tropical climate, many homes turn on the Air conditioner at night, so wind energy will help a lot in this regard, while Solar energy can be used for the morning.

    But with limited resources, its high time that India makes massive investments in Hydro and Nuclear as well. During times of power cuts, many shops / factories turn on the Diesel generators which consume a lot of Foreign Oil.

    Luckily 1 nuclear power plant is starting operation soon.

    http://newindianexpress.com/states/tamil_nadu/Power-production-from-Koodankulam-plant-to-start-in-20-days-Narayanasamy/2013/07/14/article1683515.ece

    • Bob_Wallace

      India has apparently put a tax on coal use. The revenue will go to solar.

      Wind and solar along with hydro are India’s route to reliable, affordable energy. Nuclear is simply too expensive and takes too long to build.

    • Ronald Brakels

      So the Koodankulan nuclear plant will finally start generating electricity in about a month? I have to say that a plant that took 11 years to build is hardly a good advertisment for meeting India’s energy needs any time soon. And there’s the fact that as it is in a populated region if it paid insurance its rates would be quite high. And also the projected cost of second phase of construction has doubled. With wind and solar able to beat new nuclear on cost, it’s pretty clear that very few new reactors will be built in India. They can get more bang for their buck with wind and solar. (Or less bang for their buck from the point of view of safety.)

    • agelbert

      “Luckily 1 nuclear power plant is starting operation soon.”.
      You have a strange concept of “luck”.

      In case you haven’t read the news from the U.S. Department of Energy, any power plant, whether it be fossil fuel or nuclear, that requires large amounts of water to generate electricity is a huge liability in the coming weather extremes. They quote documented cases of nuclear power plants in the U.S.A. that have had to shut down for extended periods because the intake water was too hot. Extreme storms as well as hot weather are mentioned as the basis for microgrids and energy redundant flexibility. I’m sure you will revise your views (and your investments) when you read this serious, scientifically objective article.

      Renewable Energy isn’t simply the best option for the future; it’s the only one that is viable and reliable.

      Article here:

      DOE Offers Dire Warnings Of Climate Change’s Impact On Energy Grid
      July 12, 2013
      http://www.redorbit.com/news/science/1112896113/doe-offers-dire-warnings-of-climate-change%E2%80%99s-impact-on-energy-grid/

  • Jouni Valkonen

    I wonder if Indian grid is ready for wind. Even Chinese and German have great difficulties to add more wind due to limits of Grid. Therefore I think that we need to wait until wind+storage reaches parity. (GE’s brilliant wind turbine may accomplish that rather sooner than later.)

    However, I would guess that India will skip wind altogether and will go directly into solar economy.

    • Bob_Wallace

      In 2012 India was number five in the world in terms of amount of wind on grid. It was only a bit below number four, Spain.

      Suzlon, an Indian wind turbine manufacturer, was number seven in market share in 2011. They were almost tied with Germany’s the US’s and Spain’s largest manufacturers. The fourth largest manufacturer beat out Suzlon by only 6%. And number two produced only 18% more.

      I’d say that India was skipping through their wind farms rather than skipping past them… ;o)

      • Jouni Valkonen

        oh sorry, I did not check facts. . . thanks for correcting me.

        • Bob_Wallace

          I was out in Rajastan a couple years ago. I had been out to Jaiselmer a few years earlier and was surprised at all the wind turbines. Way out in the desert almost into Pakistan.

          A strange combination of 21st Century energy and 12th Century fort. You could stand on the fort walls and imagine them being some sort of fantastic war machines moving toward the fortifications.

          (Perhaps it was the heat. Or perhaps the special lassi….)

          • agelbert

            Probably the heat. :>)

    • http://twitter.com/mridul Mridul Chadha

      The growth in wind energy in India has slowed down over the last 15 months due to withdrawal of two financial incentives; one of them is expected to be reintroduced soon. Wind energy still has over 65% share in India’s renewable energy installed capacity.

      India has seen massive decline in solar bids. The bidding prices have fallen to a third over the last 3-4 years. Now, the state of Rajasthan has started calling for bids for wind energy projects as well.

      Indian regulatory bodies are taking significant measures to make renewable energy projects (especially wind and solar) suitable for the grid. They are slowly introducing measures that require developers to forecast, with good amount of accuracy, the amount of electricity they are going to feed into the grid.

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