By Vinay Goyal
When it comes to solar, 2016 had been a remarkable year. For the first time solar out-performed fossils fuels on a large scale, thus emerging as the cheaper source of electricity than burning coals in many parts of the world. In addition to this, solar projects are turning out to be cheaper than wind power as well. With this current rate, it could very well be the lowest-cost power option in the world in less than a decade.
Globally, private companies are competing for massive contracts to provide electricity, establishing a record for cheap solar power. It all started from Chile in 2016 yielding a contract for 2.91 cents/KWh followed by auction in Dubai for 2.42 cents/KWh, which was half the average global cost of coal power. And then with a private player winning a bid to produce electricity in India, which resulted in an unprecedented low tariff starting at Rs3 per unit (around 5 cents/KWh). These game-changing numbers have drastically stunned the pricing dynamics of the global solar industry.
The reduction in overall prices is because of reducing PV panel cost (which makes most of the overall package). From higher economy of scale and manufacturing experience to better technology adoption (like use of diamond-wire saws that more efficiently cut wafers to better cells that provide more spark from the same amount of sun) is helping in boosting the solar sector with cheaper panels every year.
Taking on further, Saudi Arabia, Jordan and Mexico are planning to auction tender this year, aiming to drop prices even further. India too, not behind, is accelerating an already rapid diversification away from coal-fired power generation.
Global Transformation in the Race to Renewable
The cost of solar in 58 developing nations dropped to about a third of the levels recorded in 2010, with China, in particular, setting the record of the highest number of solar projects. The solar prices has drastically lowered, and is even less than coal, natural gas, nuclear, or renewable like wind, geothermal, hydroelectric, or tidal. According to New Energy Finance, China, the biggest solar market, will witness a reduction in costs below coal by 2030. Today, as per Bloomberg, China has surpassed Germany as the country with the most installed solar capacity.
The speed at which the solar will drop below coal will vary in each country. The low cost also attributes to various other factors, such as the increase in number of projects and players, along with various government regulations in the favor of renewable, low price of photovoltaic panels and a general frugal cost base. These favorable conditions have positioned solar in the limelight as the next gen source of energy.
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Predictably, developing countries are at the forefront of this advancement, having invested in clean energy economies to stave off the catastrophic effects of climate change at a greater rate than wealthy nations. The top-scoring markets which are attracting capital for low-carbon energy projects are China, Chile, Brazil, Uruguay, South Africa, and India.
With governments seeking ways to cut carbon emissions and boost home consumption of this clean energy, these emerging markets are deploying solar energy at a lower rate, forging ahead on solar and other renewable. For those living in thickly populated cities, the shift to renewable was inevitable.
The world, today, has passed a turning point. Each year, it is adding more capacity for renewable as compared to coal and natural gas combined. The International Energy Agency expects utility-scale generation costs to decrease by another 25 percent on average in the next five years. The agency predicts a further drop in solar costs from 43 percent to 65 percent by 2025, anticipating a cumulative decline of 84 percent since 2009. Hence, the plunge in solar prices makes the technology a plausible competitor from a global perspective.
According to the prediction made by BNEF, within ten years, solar will be the dominant source of electricity in most countries, especially developing nations such as India which is trying to build a strong economy to support its rapidly increasing population. Additionally, radical new approaches to solar technologies also saw major progress in 2016, with innovative ground mounting structures and solar tracking technologies that increases energy generation by 15-20%. Hence, with constant technological breakthroughs and innovative products, India is creating a robust eco-system for the generation and adoption of renewables.
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To conclude, solar is set to become the crucial component of the global energy portfolio in the next decade and in an emerging economy like India, it is believed to become a several billion-dollar solar-centric sector. However, with increase in interconnected technologies, electricity will be required full time in the coming years; coal and other sources will continue to play an important role while solar and wind will have limitation to generate part time or intermittent electricity.
(The Author is CEO of Ganges Internationale Pvt. Ltd.)