India Eyes Dollar Power To Cut Solar Tariff
India’s Ministry of New and Renewable Energy has asked all Indian states to come up with their own state level policy and targets, as part of the country’s efforts to increase its solar power installations.
In a written reply to a question in India’s parliament, the minister for power, coal, and renewable energy, Piyush Goyal, stated that 14 states have so far issued solar policies, and that a draft policy has been sent to all states to offer guidance on how to meet clean energy targets.
In related interesting news, the Economic Times reported that the Ministry of New and Renewable Energy (MNRE) has been toying with an idea to take advantage of hedging over long-term US dollar-rupee exchange rate outlook to reduce solar tariffs.
In what is said to be a brainchild of Goyal, an experienced investment banker, India may direct its distribution companies (discoms) to adopt US dollar-denominated tariff bidding in their tenders. The discoms would quote their price in dollars, while tying up solar power for 25-year contracts, but charge the consumers in Indian Rupee.
As per the report, this could reduce the solar tariff to about ₹4.5/kWh. This would potentially make solar comparable to the electricity output from gas fired power plants in India (still a bit more expensive than the coal fired ones) and make it easier for discoms to sell directly, or bundle with supplies from conventional sources.
While the plan is still said to be at the drawing boards, once implemented, it would give a strong push to the solar sector.
Goyal also revealed that India and the US have agreed on a number of initiatives which were discussed during US President Obama’s visit to India in January. These include the setting up of an “Innovative Finance Forum”, establishment of “PACESetter Fund” to support innovative clean energy access project, and expansion of the current “Partnership to Advance Clean Energy” (both Research and Development).
By the end of February, grid connected solar power in India had risen to 3.38 GW while the total grid connected renewable energy installations (excluding large hydro) had reached 34.35 GW.
Sometime back, India had released a list of commitments from Indian banks and financial institutions (FIs) to invest $57 billion in green energy projects.
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“… still a bit more expensive than the coal fired ones …” Please look out for information on Indian coal prices. There’s a disjunction between the Ministry’s ambitions to expand coal and the news on the ground of cutbacks to coal projects. Is the reason down to the price? That is, more coal could be mined in India – but not anywhere near the low prices Indian generators have got used to? If that’s right, solar could already be competitive with realistically priced new coal electricity.
Thanks for adding that explanation. Yes, what you say is correct, but it is still somewhere in the future! From the news available, the Ministry’s ambitions is to cut down on new coal projects, but to make available coal for the existing projects, hence the push for coal mining and the recent reorganization of the coal mess.
This article makes for an interesting read -> http://www.business-standard.com/article/economy-policy/aggressive-bidding-for-coal-blocks-is-likely-to-cost-power-companies-dear-115031100029_1.html
The article makes strange reading. The power companies seem to have bought the rights to coal mines at a quite high price to themselves, at the same time promising lower electricity prices. “They would have to use better technology for mining.” Or exploit the workforce, or cut corners on safety. or discover that the geology is worse than they counted on. This can all go very badly wrong, in human terms as well as financial.
You are comparing the cost of new solar to paid off coal.
And you are not including the external costs of coal.
New coal costs between 1.50 and 1.80 rupees per unit . Still between a third and a fourth of solar. http://www.thehindubusinessline.com/todays-paper/tp-economy/article1722042.ece
States need to be forced to buy the expensive solar power ,hardly a sustainable economic model.
I suspect you are misreading that article. 1.8 rupees, 3 US cents per kWh is the most likely the operating cost for a coal plant. The article calls it a “generating price”. It almost certainly does not include capex and finex payments.
PV solar should move into the 2 cents, 1.2 rupee range in India with your abundant sunshine and inexpensive land and labor costs.
Solar will be more expensive at first as you build your solar infrastructure and strengthen your supply streams.
That is what the consumer pays .Wheres as the consumer pays 5-6 rupees a unit for solar. A direct comparison..
Now you’ve moved from generating cost to retail cost.
Find out the actual cost of electricity from a new coal plant. With no subsidies and then you can make a fair comparison to solar.
If you want make a very fair comparison add in the health and environmental damage caused by burning coal. Those are real costs that someone is paying.
I’ll stick on the latest Lazard LCOE numbers for the US. That will let you see what costs are here.
Those numbers do not include the external costs of burning coal which run from 9 to over 20 cents per kWh, depending on the value one puts on a human life.
My mistake cost to the consumer is 2.2 rupees per unit.
What the consumer actually pays, is much more than Rs. 2.2/kWh.
First of all there are different categories of consumers and they pay differently – 2.2 would be at the very low end of the spectrum. The average cost of power (total bill divided by total units consumed) would be in about Rs. 3.5 to 4.5/kWh for residential users and at least 7-8 for industrial users.
Tariffs across india – https://www.bijlibachao.com/news/domestic-electricity-lt-tariff-slabs-and-rates-for-all-states-in-india-in-2015.html
If you factor in the external costs this goes up dramatically. Though any data is hardly available, a TERI report cites the external costs of coal power from the Indraprastha power plant in Delhi to be about Rs 1.8 to 2.32/kWh. This was in 1992.
TERI report – http://www.teriin.org/ee/pdf/fca.pdf
Price to consumer is not a valid guide. It does not reflect subsidies and external costs.
You need to look at “all-in” accounting. Subsidy free and all external costs included.
I should have phrased it differently … the cost the government discom pays to the generating company which is 2.2 rupees . Private generators get no subsidies. By that same metric the cost of a sloar plant is 6 rupees. Read the first article I linked . States find solar power too expensive to buy . Which is pretty bad considering the solar plants were subsidised to begin with .
Are you talking about buying electricity from a brand new coal plant or from one built and paid off?
New . Old ones are below one rupee.
I did some digging and did find that for some reason the overnight cost (capital cost) of coal plants in India is about half that of the cost in the US. I would imagine labor costs are a large part.
Coal probably is cheaper than solar at this point in time, or not.
How much is the low cost of coal due to the government giving away coal resources?
“Comptroller & Auditor General of India’s report that the government lost Rs.10.7 lakh crore (~$196 billion) by giving away mining blocks rather than auctioning them, an LCOE of Rs. 4.8/kWh is probably significantly under-stating the true cost of generation to the country.”
http://www.renewableenergyworld.com/rea/news/article/2013/04/risk-and-cost-solars-trajectory-compared-to-coal
The actual cost of coal electricity could be higher than Rs. 4.8 but being sold lower due to government subsidies. You should check that out.
And read this article –
http://articles.economictimes.indiatimes.com/2014-12-11/news/56955223_1_thermal-power-plants-coal-prices-grid-parity
Coal, as you must know, makes life in many Indian cities miserable at times. It makes people ill, kills some, lowers productivity, and raises health costs.
Coal is damaging India’s heritage. The government moved many plants and factories out of Agra because of the damage to the Taj.
Focusing on the 2.2 rupees paid is ignoring the real cost. In the US the price of coal looks good on paper but health damage makes the cost 9 to 15 cents per kWh higher.
Now the price of solar. New technologies are almost always expensive. Know much about the cost of personal computers and cell phones when they first appeared?
It takes some time to grow markets large enough to bring efficiency and cost cutting. The price of solar panels has fallen from around $100/watt to around $0.50/watt. It also takes time to bring down the cost of installing even after the hardware becomes affordable.
Everything is cheaper in India as the currency is undervalued so labour is naturally lower too .. Most companies import equipment for the power stations as the cost would be even lower. Rs2.2 is from one of the newer supercritical powerstations that run on (mostly) coal from Indonesia so local cost of coal is not really relevant . Also your article is does not give the whole picture government lost 1.8 ~lakh crore not 10 lakh crore.
http://timesofindia.indiatimes.com/india/Coal-block-auction-shows-CAG-got-figure-right/articleshow/46548212.cms
This benefit was not passed down to the consumers but was pocketed by the companies . The cost of power will now go down as power plant operators have captive supplies and assured links as opposed to the earlier practice of buying from the spot market or importing from Australia.
Cost of mobile phones was pretty cheap when they first came to India as they were manufactured here . The same can happen for solar , if not solar does not have much of a future in India. Pushing the mobile phone analogy further …we had phones that were simply called “chinese” that were cheaper , they had no brand name ,but they had the unique feature of shattering into pieces if accidentally dropped or the phone frying up while charging. A similar situation now exists with chinese solar panels. http://articles.economictimes.indiatimes.com/2015-01-03/news/57633918_1_tata-power-solar-panels-gagan-pal
Solar is on its way to $0.02/kWh (sunny areas) to $0.04/kWh (less sunny areas) in the US.
India should do as well or better due to lower labor and land prices.
Cell phones may have started fairly cheap in India, which tells us only that cell phones came to India late. Initially cell phones were hundreds of dollars each. In the same way India will be able to purchase much less expensive solar panels and inverters because other countries built their market and cause the price of hardware to fall.
India will have to pay a bit more for solar up front while it establishes its own solar industry and learns to be efficient.
When considering the cost of electricity from various sources do not fail to do all-in accounting. Cheap coal is not really cheap when it is killing the people who live in India’s coal pollution and dying in its mines.
But it isn’t in India . When it becomes cheap enough it will come to india in a big way if not it won’t . The government should encourage R&D and manufacturing of solar panels not their installation which should be consumer driven.
The “cost “of not having power capacity is higher than health costs as the further India delays industrialisation the longer India remains in poverty . The availability of power is the 2nd biggest stumbling block to industries wanting to set up here right after land acquisition.
I’ll still say you are not looking at the entire picture.
Yes, the price that get reported in the official government papers is dismally low, BUT it is pseudo pricing. Do you really think that we have enough resources to meet our entire electricity demand at these prices?
Those prices are low because they have been forcefully not allowed to rise. Same is the case with the Indian railways. At these prices we can’t even maintain status quo, forget about improving the grid and making it ‘smart’.
If the cost of coal power s really that low, why are we forcing our industries to pay through their nose at Rs. 10-14/kWh (Maharashtra) ??!!
And honestly, enough with “Chinese” products bashing already. You get what you pay for! In the ToI story you linked, it reads in one place – A shopkeeper at Lajpat Rai Market said most buyers go for cheap Chinese solar panels despite traders’ warnings. “We tell them these have no service warranty, no performance guarantees but they think we’re fooling them into buying costly products. Within months their solar systems stop working and they call up crying after having lost all investment,” he said.
Finally, when you say “The cost of not having power capacity is higher than health costs” – you are effectively saying that the economy should make money whether or not our health takes a toll. That is the whole problem.
No private company sets up a plant unless there is profit to be made . Private UMPPS sell to the government discoms at 2.2 Rs what mahashashtra charges its end consumers is irrelevant . That are many consumers that do not pay at all ever considered that ? The rail way comparison is a poor one . The railways is run as a social service the power generation industry is not the distribution is another matter.
Yes you get exactly what you pay for keep that in mind when quoting cheaper prices for substandard solar panels, when they fail before they have recovered the investment who pays for that loss ?
Whether you or I like it or not our health will take a back seat to the economy . Coal is a cheap source that has no equal and our government will not give up on that rightfully so.
Wrong.
Just as has happened in many other countries we arrive at cheap solar by starting with government support for more expensive solar. Industries are built and prices fall.
Other countries have done the heavy lifting for India. Solar panels and inverters have become inexpensive thanks to Germany, the US, Australia, Spain, Italy and other countries.
Now suck it up. Pay your way to cheap solar and cleaner air.
And shake down some of your billionaires and millionaires. Get some capital together to install millions of micro-solar systems each year so your poorest no longer have to waste money on kerosene and live in the fumes. Bangladesh has shown you how.
India’s got it easy. Other’s have done the hard work. Don’t whine, get to work.
You want companies to locate in India? Install a lot of wind and solar. Work out your storage solution. Clean up your environment. Who wants to send their employees to work in a place that kills them?
Lets not get to name calling! Peace out.
Sorry, not seeing any name-calling.
Really? What was “Who wants to send their employees to work in a place that kills them?”
In that list of yours, it’s debatable what US and Australia have done, or more importantly, not done. Also you seem to have conveniently forgotten China.
Pride or Prejudice?
Me thinks thou art a bit too defensive. ;o)
There was no name calling. I did not call Karn a tin can, hubcap, or anything else. Name-calling (in the US) means saying something like “You’re an idiot.”
The discussion is about India. India has enormous air pollution problems. I’ve been traveling to India for over 30 years. It’s bad. I got stuck in an autorickshaw in Agra traffic a few years back. It was painful to breath. It was hard to imagine how people could possibly live in that amount of pollution on a daily basis.
China also has very bad air pollution problems, which we commonly discuss.
The US and the UK had very bad air pollution problems earlier, which have largely been solved. I can remember Gary, Indiana and Pittsburg having air as bad as what I experienced in Agra, but that’s been cleaned up.
But that’s bit off topic.
China is moving rapidly to bring renewables on line. India needs to speed up. And that’s what your article is about.
My exception was to your comment about India being a place that kills. So that was name calling India!
But now that you are on topic….
Suck it up and pay eh .? Well something we are not inclined to do g . The drive to become a net exporter far outweighs the drive for
renewable energy . There is no future of solar in India built on imports.
The hard work so to speak has already been done on domestic nuclear energy ,we’d rather buy that.
Shake down millionares and billionares ?Wonderful more capital flight .
Millions of poor were given electricity, Gujrat has already shown us the way . Looking at China no one seems to have a problem with a place that kills them when there is money to be made they will come.
You actually believe nuclear is cheaper than solar?
You actually think India should not contribute to limiting climate change?
It is cheaper . Its not even a debate . Only Westinghouse and Areva are more expensive than solar
The contribution of India to climate change was small. Its contribution to limiting climate change will be equally small. People who did not have access to electricity or a motor vehicle for decades did not cause the climate change.
Wind power and nuclear power and more hydo will be significant in the future.
In 2014 India produced 5.7% of the world’s CO2. That made it the third highest CO2 producing country in the world.
If you wish to believe that nuclear is cheap and solar expensive, have at it. You are free to delude yourself.
While having 16% of the population . We can have this conversation again when India produces 16% of the worlds CO2 emissions.
Thankfully there are more responsible people in India than you.
Just keep a track of thermal plants vs renewables being commisioned the whole picture will become clear to you. Already the government is rolling back on the absurd 100GW solar target as they know that it’s not practical.
So when you hear about Indian children dying due to respiratory problems do you rub your hands in glee?
Yawn …..spare me .The only people that benefit from a “solar mission” are the manufacturers of diesel generators for emergency power when the programme invariably falls on its face .
And you think thermal plants never fail?
Clueless….
Go back and read the comment again .
I am not sure which utility scale solar plants were subsidised. Could you share some names? Even if there are a few, it would hardly amount to a very very small fraction of the entire solar sector.
I think you meant that question for me?
I’m using a broader definition of ‘subsidy’. Making it possible to buy cheap fuel by the government “giving away mining blocks” is an economic benefit/subsidy.
Not requiring industries to pay external costs is another subsidy, in the broader sense.
In both cases the cost to the coal plant is lowered and they can sell product for less money. Consumers are still paying full price, but paying part through general taxes.
BTW, people talk about US wind and solar receiving subsidies. In the pure sense of the word, they don’t. The government does not send wind and solar farms a check. They allow them to pay less taxes on profit. (PTC is a production tax credit.)
Nope. It wasn’t for you!
I came across that while reading up on the large solar power plant in MP .I can’t find the article but it seems all solar plants operators can apply for subsidies.
https://www.bijlibachao.com/solar/procedure-to-get-subsidy-on-solar-pv-systems-through-nabard-in-india.html
Nope. That article talks about small scale decentralised applications, and no one even applies for these small scale solar subsidies 😀 Those take eons to get processed!