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Solar power costs trend down, wind blows away tariff advantage

According to reports, wind and solar, the two major renewable sources of energy being harnessed in India, offer a study in contrast.

While the price of solar energy has come down by 50 per cent in the last five years, primarily due to the introduction of competitive bidding based on tariffs, wind energy continues to be paid ‘feed-in’ or preferential tariffs, leading to a visible surge in tariffs the same period.

For instance, in 2011, when the government invited bids to build 500 MW of solar power capacity, participants quoted an average Rs 12.15 per unit of power—a very high rate compared to the average Rs 3.5 per unit price for domestic coal-fired electricity.

In just two years though, the gap has come down sharply. While the price of coal-fired electricity has now gone up to about Rs 5 per unit now, solar energy costs (based on solar photovoltaic technology) is now around Rs 7.

KPMG Advisory Services, in a 2012 report, projected that the cost of solar power in India could be on par with other conventional sources of electricity by 2017.

Wind power has offered a different experience altogether. Even though larger turbines are being developed that are proving more efficient at India’s lower wind speeds, wind energy costs are heading northward.

India is forecast to put up 2,050 megawatts of wind capacity in 2013, compared with the 2,000 MW expected in the United States, there are already protests in states such as Maharashtra over the increasing tariffs, where tariffs for wind power have increased from Rs 3.37 to nearly Rs 6 per unit over the last four years.

In other states, including Tamil Nadu and Karnataka too, the wind tariffs have been inching upwards.

The Central Electricity Authority (CEA) in a new report titled ‘Large Scale Grid integration of Renewable Energy Sources – The Way Forward’, said, “The history of regulation worldwide bears out that cost-plus tariff in generation, as is being followed for wind in India, does not normally result in reduction in tariff.”

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