Solar power to revitalise the Indian energy sector: KPMG

If combined with storage, solar rooftop power, which is already competitive compared to grid power, could be cheaper than grid power after 2022, says the new KPMG report

If combined with storage, solar rooftop power, which is already competitive compared to grid power, could be cheaper than grid power after 2022, says the new KPMG report

Solar is expected to contribute substantially to India’s energy source by 2025, with the market penetration of solar power likely to be 5.7 per cent (54 GW) by 2020 and 12.5 per cent (166 GW) by 2025, according to KPMG’s report, titled ‘The rising sun: Disruption on the horizon’. With India aiming to reduce emission intensity of its GDP by 33 to 35 per cent by 2030 from 2005 levels, solar power, states the report, is likely to contribute 4 per cent towards this target.



The report was released yesterday by Piyush Goyal, Minister of State for Power, Coal, and New and Renewable Energy, and Dharmendra Pradhan, Minister of State for Petroleum and Natural Gas, at ENRich 2015, KPMG India’s annual energy conclave.



Piyush Goyal commented, “We need to re-engineer our process to create energy efficiency and conservation to give India an affordable energy access. It is important that we remove all disparity at the root level to ensure social harmony for all in India and also to compete globally. A holistic vision is the need of the hour in order to reach 200 million people at a faster rate. Any amount of investment in this sector will have a quick pay back. I am hopeful that you will see the economy picking up rapidly and the benefits would be seen across the nation.”



The disruptive force of solar power is expected to start being felt from 2017 and is likely to accelerate post 2020. In some states which are promoting solar (and also wind power) aggressively, conventional coal generators could see their plant load factors (PLFs) fall by as much as 10-15 per cent by 2020, as solar replaces coal-fired generation in the daytime hours. This effect may speed up post 2020 with the annual addition of large amounts of solar (estimated to exceed by 20 GW per year by 2022-23).



“The power sector in India is going through a significant change and solar is expected to play a dominant role in it. This presents a great opportunity for India, especially in the current political-social environment where the country has embarked on a vision to have energy security, by providing affordable and sustainable power to all. The Government of India has laid down its ambitious vision for the renewable sector, especially solar, and some of the global developments also point in the direction to achieve it, provided we understand the implications, and gear up to plan for this fundamental shift,” said Manish Aggarwal, partner and head – energy and natural resources, KPMG in India.



KPMG report highlights that the price for solar power has seen a decline; today, in India, solar prices are within 15 per cent of the coal power prices on a levelised basis and, it is expected that by 2020, solar power prices would be approximately 10 per cent lower than coal power prices. At present, the solar rooftop power is already competitive compared to grid power for many consumers and, as per the report, if combined with storage, it could be cheaper than grid power after 2022 for a large section of the consumers. This could lead to a considerable shift to rooftop power. A ‘solar house’ that is self-sufficient in energy terms could be a reality within the coming decade.



Santosh Kamath, partner and head - renewable energy services, KPMG in India, opined, “Solar power and storage are exponential technologies, meaning they could grow very rapidly and take stakeholders by surprise. The rapid rise is good for India and may help the country leapfrog to clean energy sources to meet its needs. However, the sector needs preparation by all stakeholders – power generators need to become flexible, discoms should be efficient and retain customers, and the coal sector has to become cost-efficient and flexible to adjust to the evolving scenarios. Importantly, it needs very rigorous long-term planning that prepares for a transformed electricity grid of distributed sources, variable renewables and storage solutions.”



KPMG report stressed on the need for the government to significantly strengthen the planning infrastructure and processes, and emphasises the energy sector’s need for a new planning paradigm which takes into account the expected emphasis on renewable energy in India. The right incentives for investments in grid integration of solar and balancing services should be put in place early.



The report also recognises that significant conventional generation capacities are also needed to meet the country’s growing energy demand. “In fact, conventional generators will need to contribute 60 percent of incremental capacity needs up to 2025, with solar contributing between 20-25 percent, and considering another 15 percent coming from wind. However, these additional capacities will need different attributes from the ones we have seen so far. These attributes are related to flexibility in generation (in terms of ramp rates and minimum thresholds) and low fixed cost, and higher variable cost preference, rather than vice versa,” said KPMG in a press release.



BS B2B Bureau