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India Cancels 14 GW of New Coal as Solar Costs Continue ‘Free-Falling’

Koshy Koshy/Wikipedia

India has cancelled 13.7 gigawatts of new coal capacity in the last month, as “free-falling” solar prices sweep away plans for additional power plant construction that seemed inevitable as recently as last year.

“India’s solar tariffs have literally been free-falling in recent months,” Tim Buckley, director of energy finance studies, Australasia at the Institute for Energy Economics and Financial Analysis (IEEFA), told The Independent late last week.

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“For the first time, solar is cheaper than coal in India, and the implications this has for transforming global energy markets is profound,” he added. “Measures taken by the Indian government to improve energy efficiency, coupled with ambitious renewable energy targets and the plummeting cost of solar, has had an impact on existing as well as proposed coal-fired power plants, rendering an increasing number financially unviable.”

CleanTechnica notes [2] that India had plans late last year for more than 300 GW of new coal capacity by 2030. But that plan “was found [3] to be almost entirely unnecessary and wasteful, considering that 94% of the planned new coal capacity would probably lay idle in and past 2022.” The U.S.-based news outlet adds [4] that the country’s solar prices now undercut 92% of its existing thermal power plants.

Citing Buckley, The Independent traces the recent history of solar auctions in India, recalling a January, 2016 bid price [5] of 4.34 rupees (C$0.09) per kilowatt-hour that analysts considered an outlier, never to be repeated. Then earlier this month, a 500-MW solar project delivered a tariff of 2.44 rupees—well below the wholesale cost of coal generation, at 3.2 rupees.

Just last March, international management consulting firm KPMG made news with its bold prediction that solar in India would be 10% cheaper than coal—by 2020 [6].

While the mounting price disparity points to a significant risk of stranded assets in India’s power generation sector, Buckley said the country’s solar potential is turning heads. “The calibre of the global financial institutions bidding into India’s solar power infrastructure tenders is a strong endorsement of India’s leadership in this energy transformation, and will have significant ripple effects into other transforming markets, as is already seen in the UAE, South Africa, Australia, Chile, and Mexico,” he said.

One sign of rapid progress in India is the new role the state-owned utility, National Thermal Power Corporation (NTPC), is taking in the transition. NTPC is the country’s seventh-largest generator, ranks third in the world in coal-fired capacity, and seventh in coal generation, IEEFA reports [7]. Now, it’s taking on a new role.

“Despite its deep historical connection to coal-fired electricity generation technology, NTPC has recently moved to the forefront of India’s energy transition and stands to be the country’s key new energy enabler,” Buckley said in a release last week. While the utility’s duty to support economic growth while providing reliable, affordable electricity “has arguably required expansion of coal-fired power generation in the past, times have changed—and indeed 2017 has already seen several watershed moments that have signaled a new era in India’s electricity sector.”

2 Comments (Open | Close)

2 Comments To "India Cancels 14 GW of New Coal as Solar Costs Continue ‘Free-Falling’"

#1 Comment By Alan Drake On May 29, 2017 @ 12:32 PM

India is going to need to increase transmission capacity (within ten years) within a decade to shift solar power from sunny areas to cloudy areas. The desert areas (high solar, low demand) are already moving into surplus. And soon even humid areas with some population & industry will have a solar surplus on very sunny mornings. This surplus will need to be shifted to other areas that are cloudy that day.

#2 Comment By Ned Ford On May 29, 2017 @ 4:29 PM

I regard this as a first shot in the energy revolution that we have been awaiting. The unit of currency used in the article is a little confusing. I think it is supposed to be Euros. 4.34 rupees is 7 cents U.S. 2.44 rupees is 4 cents per KWh.

Solar projects married to storage are coming on line around 3 cents per KWh in Arizona. U.S. projects can still be criticized for being subsidized, although the subsidy only applies to the first ten years of operation, or less than half the useful life of a project, and the wind and solar subsidies are expected to be gone in 2022. As far as I know there is no subsidy in India, although there is cheap labor. We spent years listening to the nuclear industry tout the cost of the last nuclear plant built there, which appeared cheap after the labor costs and the exchange rate of the rupee gave the plant cost a facelift.

Most of the public doesn’t know that wind and solar is so cheap that it beats out fossil fuels even without the subsidy today. But the market knows. And it won’t look back.