The price of solar power in India fell at a faster-than-expected rate this year. Now, some experts suggest that by 2020, renewable energy in Asia’s third-largest economy may become up to 10% cheaper than coal power.
Earlier this month, the Ministry of New and Renewable Energy awarded a tender for a 500-megawatt solar park in the southern state of Andhra Pradesh to US-based SunEdison at Rs4.63 a unit—the lowest rate so far in the country.
“Today, in India, solar prices are within 15% of the coal power prices on a levelised basis. While this may not fully capture costs such as grid integration costs for solar, our analysis suggest that even after considering the same, solar prices would be competitive with coal,” market research firm KPMG said in a recent report titled “The Rising Sun” (pdf).
The chart below shows the levelized cost of energy on the consumer side in 2020 (in Rs/kWh):
According to KPMG, the growing scale and competitiveness of solar power could impact local coal prices; the firm predicts that this change will become visible in 2017, and will accelerate after the year 2020.
“Post 2022, coal prices could begin chasing solar prices, and not vice versa as we see today,” KPMG said in the report. “Eventually, coal may have to respond by reducing its cost structure and an equilibrium is likely to develop, but this transition could be challenging for the coal sector if early preparation is not done.”
The chart below shows how solar power could influence domestic Indian coal pricing from 2020 (in Rs per tonne), as per KPMG:
