India has seen the solar technology prices free fall to an unprecedented level, and as a result, it has canceled plans to construct 14 gigawatts of coal-fired power stations. A remarkable 25 percent drop in the solar prices means that experts are anticipating a major paradigm shift from the Indian government in their policy to cater for their energy needs.
Tim Buckley, who is the director of energy finance studies at the IEEFA, revealed how 13.7GW of coal power projects had been abandoned by the Indian government this month in response to record dip in solar prices, which according to him will never be repeated again in the future.
30 percent drop in the prices of photovoltaic panels over the course of last year has significantly contributed to the dip. Additionally, the Narendra Modi government has provided assurances to
“private renewables developers by backing a payment security mechanism,” according to Scroll.
This includes the major agreement between the Solar Energy Corporation of India – the country’s largest solar power purchases – the Central government, the Reserve Bank of India and the state government last year that ensures default payment are delivered on time by the power distribution companies to renewable energy producers.
According to The Independent, overaggressive bidding by the investors is also behind the price drop. An auction for a 500-megawatt solar facility led to a tariff of just 2.44 rupees, which is about 31 percent less than the wholesale price of 3.2 rupees charged by coal power utility.
“For the first time solar is cheaper than coal in India and the implications this has for transforming global energy markets is profound,” said Buckley. “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 as financially unviable.”
India is witnessing the
“rise of stranded assets across the Indian power generation sector.” He added, “The caliber of the global financial institutions who are 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.”
India is on its way to become the third largest country in the solar market, with a 76 percent increase in the solar generation capacity from last year and the total capacity expected to reach 8.8 gigawatts in 2017.