Solar power tariff hits record low, sparks worry about coal’s future

The solar power tariff bid of Rs 2.36 per kilowatt / hour is 3.3% lower than the previous record

By Kundan Pandey
Published: Wednesday 01 July 2020

India’s solar power tariffs hit a record low of Rs 2.36 per kilowatt / hour during a bid by state run Solar Energy Corporation of India Ltd on June 30,2020. The price, 3.3 per cent lower than the previous record, has sparked fear over the declining appetite for coal as well, according to experts.

The auction was conducted for 2 gigawatt of the interstate intermission system, where the lowest tariff was quoted by Amp Energy Green Pvt Ltd, Eden Renewables, Solarpack Corporacion Tecnologica SA, among others.

The previously recorded low solar bid was of Rs 2.44 per unit in May 2017 in Bhadla Solar Park. ACME Solar, one of India’s biggest solar power developers, had quoted the tariff that was then recorded at 6.9 per cent lower than the previous record.

Sharp decline in the bidding price of renewable in recent past has received attention from across the world. The 2019 average auction tariffs for solar were less than half of their 2015 levels, according to a report released by Bloomberg New Energy Finance (BNEF) recently.

The decline has been less steep for wind, but for both technologies, the average tariff in 2019 was below Rs 3 / kWh, it said, adding that the mid-case levelised cost of energy dropped by 80 and 66 per cent for solar and wind respectively since 2014.

The report stated India’s auction tariffs for both wind and solar were among the lowest in the world.

Coal also fails when it comes to one-to-one competition with solar and wind. According to the report, the best-in-class wind farms and solar plants can generate power at $27-29 / mega watt hour (~Rs 2,000) as compared to $41 / MWh (~Rs 3,000) thermal power from best-in-class new coal-fired power stations.

If it is clubbed with falling battery prices, the BNEF report predicted that renewable will out compete new coal plants as soon as 2023. Li-ion battery prices, too, have fallen by 87 per cent over the past decade.

The Union government opened 41 coal blocks for commercial mining under the Aatma Nirbhar Bharat Abhiyan — the first time private players have been allowed to mine coal for commercial mining purposes in a bid to cushion novel coronavirus disease (COVID-19) impact. Prime Minister Narendra Modi had a few days ago dubbed the auction as the ‘biggest unlockdown of the coal sector’.

This is not just an India story. In May, a global research and consultancy group Wood Mackenzie came with a report claiming the cost of solar PV system and front-of-the-meter storage cost in the United States market will decline more rapidly than the previously forecasted due to COVID-19 pandemic.

The United States is planning to build almost 30 GW of renewable energy in 2020 alone, and yet, it does not have a single new coal power plant under construction, Tim Buckley from Institute of Energy Economics and Financial Analysis had said in a recent interview with DTE.

In the competition with renewable, coal has apparently lost the confidence of investors and global capital is fleeting the thermal coal-mining sector. A think-tank working on energy, the Institute for Energy Economics and Financial Analysis claims to track 139 big global financial institutions which have now formal coal divestment policies in place.

Ashok Sreenivas, a senior fellow of Pune-based non-profit Prayas, said there is uncertainty over the future of coal.  Commenting over the India’s recent decision to auction coal blocks, he said that it seemed right at least in intention, but how it will translate on the ground is tough to predict.

He added that even if these mines are auctioned in 2020, the production will begin from 2023 or 2024. No one can confidently claim what the appetite for coal four years down the line will be, he said.

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