Solar power prices inching towards common man's reach

The aggressive tariffs quoted by solar power developers in the second round of bidding under the National Solar Mission shows that solar power is slowly inching towards the reach of the common man.

The industry has been speaking of “achieving grid-parity” in about four years, meaning that solar power would cost no more than what the distribution companies sell at in less than half a decade. The bids that opened today suggest that grid-parity may well happen even earlier.

Implications

The French company, Solairedirect won a mandate to put up a 5-MW project by quoting a tariff of Rs 7.49. The highest quote was of Green Infra, of Rs 9.39.

What this implies is that some fifteen project developers believe that they can put up solar photo voltaic power plants, sell the electricity they produce at prices under Rs 9.40, and still make money.

Compare this with the quotes of the previous round (Batch-I) and the point becomes clear. Last time around, the lowest tariff was Rs 10.90 and that tariff kicked up a huge debate on whether the developers were foolhardy and if they actually hoped to get funding from banks.

What is worthy of note is that the prices quoted in this round are lower than the prices at which electricity is sometimes traded on the energy exchanges. And, solar has beaten diesel power squarely, though purely in terms of cost.

What happened in the meantime that the tariffs should fall so steeply? Presumably, it is the precipitous fall in the prices of solar modules — panels containing silicon cells that generate electricity when sunlight falls on them.

A year back, when the Batch I bidding was happening, solar modules were sold for $1.70 a watt. Now, there are companies that are offering the same at 90 cents. Due to advancements in technology, material use is coming down and efficiency levels – a measure of how much of sun's energy falling on the panel is converted into electricity – are on the rise.

A further fall in module prices is anticipated and solar power is very likely to get still cheaper.