Harnessing Solar energy, Options for India

The module costs are linked to global markets much more than the rest of the components, and
currently account for roughly half of the system’s price. Global factors – technology, economics and
policy – have a direct bearing on the costs of modules. The ‘experience’ or ‘learning’ curve
phenomenon is the most popular model to demonstrate how prices decline with cumulative
production – cumulative experience in production, technology and deployment. The most common
learning curve consists of costs dropping by a specific percentage for every doubling of cumulative
capacity. The equation for this is given by:
C t= C 0 (Q t/Q 0) -b
where C 0, Q 0 are initial cost and initial capacity, and C t and Q t are cost and cumulative capacity
respectively at time t, and b is the rate of innovation or learning coefficient; b will be negative as
costs come down with capacity. 2,3,4
Historical observation suggests that costs drop by 20% for every doubling of capacity: 5 here b =
log 2(0.8). If Indian PV deployment were to grow as the National Solar Mission (NSM) dictates to over
10 GW by 2022, the Indian share of the global deployment might be significant and hence will have a
bearing on global cost curves. Hence, it is unclear what the true cost curves will be. Given the
number of uncertainties and to keep the analysis simple, historical cost behaviour is assumed.
During the period 2000–2009, the global PV capacity increased at an annual rate of 36% a The
following steps describe the procedure used to arrive at the per watt system cost in 2022:
The system cost per watt peak in 2010 is assumed to be `180 per W p: `100 for the panel,
`35 for the inverter and `45 for the BOS.
Going forward, we assume this growth rate decreases annually by 10% for the next twelve
years till 2022; in other words, the cumulative annual growth rate will be 21.3%. The global
capacity will increase from the current level of 22 GW to 185 GW in 2020, and to 232 GW by
2022. This is within the ballpark of the International Energy Agency’s (IEA) projection of
210 GW. 6
Using these formulae, the panel cost in 2022 will be `51.9.
The learning curve for the inverter and BOS have not been studied as widely as modules 7
and hence we have made our own assumptions:
As the inverter technology is fairly mature, any significant cost reduction is likely to
be because of economies of scale. Hence, the price reduction is a nominal 3%
annually.
In the case of the BOS, the cost of labour and raw materials might increase at least with
inflation, whereas learning by doing would bring down the costs. Again, a nominal 3%
annual reduction in price is assumed.
This results in system cost of `108 per W p by 2022.
Using this cost curve obtained, the levelised cost of electricity from a PV plant was calculated for the
years 2011–22 using a discount rate of 10%. Furthermore, the price per unit of electricity, which
includes profit margin of the solar developer, was calculated assuming an internal rate of return
(IRR) of around 10%.
a Installed capacity in 2000 was 1,428 MW and at the end of 2009 was 22,878 MW.
Cumulative Capacity, Grid Parity and Cost CSTEP | Page 52