Declining capital costs, increase in efficiency, affinity with utility-scale projects and investment despite long-term RoI are all contributing to solar photovoltaic energy production at grid parity.

In another 3 years electricity from solar energy projects could come cheaper than output from conventional energy sources. Marketing research firm India Ratings and Research has estimated that solar energy costs could touch Rs 4-4.5 per unit by 2017-18.

International Renewable Energy Agency had reported recently that the prices of solar photovoltaic modules have fallen by about 80 percent since 2008. At the same time, solar module efficiency has been improving at the rate of 3.5 percent to 4.5 percent.

According to India Ratings, developers are able to save expenses in component procurement and better able to absorb fixed costs as the size of projects has been increased from 5 megawatts to 10 megawatts.

The lowest per unit price in recent times was Rs 5.05 quoted during auction of solar projects by MP Power Management Company. In a recent bid, NV Energy, a Nevada-based utility, agreed to purchase 100 MW solar power under a fixed-price 20-year power purchase agreement at 3.87 cents per unit, which works out to Rs 2.43, India Ratings reports.

The marketing research firm expects strong growth in solar power installations over the next 4-5 years. It will be driven largely by government impetus of 100 GW of solar power by 2021-22.

“These factors will in due course eliminate the requirement of government support by way of subsidies or viability gap funding (VGF),” India Ratings has stated.

Solar energy segment has witnessed significant decline in tariffs. It has coincided with reduction in feed-in-tariffs (FiT)declared by state electricity regulatory commissions considering cost-plus return on equity model.

FIT for solar energy in Gujarat has come down to Rs 8.03 per unit in 2014-15 from Rs 12.54 in 2010. In Rajasthan FiT for solar energy has declined from Rs 15.32 in 2010-11 to Rs 6.74 per unit for 2015-16.

Ajith Kumar S

editor@greentechlead.com