Harnessing Solar energy, Options for India

Cumulative Capacity, Grid Parity and Cost
In India, with significant technology improvements and cost reductions, the price of solar
photovoltaic (PV) technology is likely to be competitive with peak electricity within a few years and
with coal-based generation perhaps in a decade. Since solar energy production cannot be scheduled
as per electricity demand, consequently its value to the grid is lower than power than can be
scheduled. An ideal comparison of solar and conventional sources of electricity ought to take this
into account. However, such an analysis is beyond the scope of this report.
The present chapter estimates the cumulative PV deployment in India using diffusion curves. Three
possible scenarios of capacity addition till 2022 are developed. Furthermore, future costs of PV
systems using learning curves are projected. Based on this, future costs in the absence of any subsidy
and price per unit of energy generated by PV are determined along the three scenarios. However, in
reality the cost curves for each technology will be different; the estimates given here are more to
give an idea of a range of values.
It has to be noted that the cumulative installed capacity of a new technology over a period is difficult
to estimate. This will depend on several factors, including costs coming down and consistent
government policy support. Moreover, there has not been much precedence globally of the scaling
up of a country’s solar power generating capacity in the way that it has been envisaged under the
Jawaharlal Nehru National Solar Mission (JNNSM). Today the total global installed capacity of PV is
around 20 GW, which is the targeted capacity in India by 2022. However, in the case of concentrated
solar thermal power (CSP), the total installed capacity globally is less than 1 GW. Furthermore, most
of the installations are of one particular technology – the parabolic trough. On top of that, in India
there are no working CSP plants, and even the ones that are likely to emerge in the next few years
will be based on imported technology to a large extent. Given the scarcity of data on CSP, any
projection of future costs or capacity addition will have a larger degree of uncertainty.
1. Solar PV Cost Curves and Grid Parity
PV systems have three main parts: the solar modules or panels, the inverter and the balance of
system (BOS) components. The BOS includes supporting racks, wiring and switches. The
manufacturing of panels has undergone significant efficiency improvements and material shifts over
the last couple of decades. For example, the cost per watt has decreased from $6 to $2 in the period
from 1990 to 2005. 1 The inverter technology is fairly mature and any cost decrease is likely to be the
result of economics of scale rather than technology improvements. The cost of the BOS depends on
costs of raw materials, manufacturing and labour. This has not factored in any battery, which would
not be applicable for a grid-connected system.
Though solar PV is booming, it is unclear if it can have a sustained growth in the absence of subsidies
and government support. Recall the example of the Spanish PV market, described in a previous
chapter, which dropped when the subsidy was withdrawn.
1.1. Cost Projection of the Solar PV System
In determining the price curves of PV systems, those of the three components – module, inverter and
the BOS – are individually evaluated. The methodology of determining these cost curves is laid out
in the following paragraphs.
Cumulative Capacity, Grid Parity and Cost CSTEP | Page 51