Benefiting from solar energy revolution in India

Indias solar journey started with approval of Jawaharlal Nehru National Solar
Mission in 2010. Solar energy is important considering large environmental
benefits and countrys goal of energy independence. Under JNNSM Government
set a target of 20,000 MW solar power capacity by 2022. It was envisaged that
price of electricity from solar power plants will match that of grid electricity by
2022.

India has recently crossed the milestone of 5,000 MW solar power plant capacity.
Most of this capacity is utility scale solar power projects for sale of electricity to
grid. This power is procured by the process of Reverse Bidding where the
contract is signed with the bidders with the low electricity tariffs. Since 2009,
tariffs for solar power plant have rapidly fallen from Rs. 17.00 per unit in 2010 to
Rs. 4.34 per unit in 2016. To benefit from fall in prices, Government has recently
revised the targer under JNNSM from 20,000 MW to 1,00,000 MW by 2022. This
change has been because of following reasons:

Since beginning of the decade, module manufacturing has shifted from

Europe to China. As China built large manufacturing capacity and
efficiency increased, prices of solar modules decreased rapidly. This graph
 shows the benchmark capital cost for utility-scale solar power project by
Central Electricity Regulatory Commission:

Rapidly reducing capital cost solar power plants (Rs. Lakhs per MW)
1,700 1,690
1,442

1,000
800
691
606
501

FY 0910 FY 1011 FY 1112 FY 1213 FY 1314 FY 1415 FY 1516 FY 1617

Government has reduced project risks by providing facilities Land

procurement, Evacuation facility, water availability, selecting areas with
good irradiation and development of good roads for access to site in the
solar power park
In case of lower tariffs, electricity will be procured by NTPC which has
better financial situation than by most Discoms in the Country

However it needs to be considered that

None of the below Rs. 5 per unit have closed the financing from the
lenders
If developers are banking on the fact that module prices have been falling
and so will fall in the future, then this could work adversely for them since
module prices have already started stabilising
Indian developers may face challenge while procuring modules and
inverters due to depreciating rupee in last few months
Due to margin pressures EPC players may use sub-standard components
which may result in loss of generation in long term

Considering these factors, it is expected that prices of electricity from utility

scale power plants will stabilise between Rs. 4.50 to Rs. 5.00 per unit. Price of
electricity consumed from coal power plants which account to about 80% of
Indias total electricity, is about Rs. 2.50 to Rs. 4.00 per unit depending on the
type of coal used. Hence tariff from solar energy is only going to increase the
average power purchase cost albeit marginally and will not help electricity
consumers reduce cost of electricity.

To benefit from solar revolution in India, industrial and commercial electricity

consumers should opt for rooftop solar power plants. Depending on discom tariff,
location, size of solar power plant and type of roof, payback for solar power plant
for these consumers is expected to be between 2.5 to 4 years. After payback free
solar energy can be utilised for the total period of up to 25 years.