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Why Indian State owned Electricity Distibutors and Generators are living in mortal fear of the Sun

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India’s Green Companies are seeing tremendous growth backed by the nation’s massive energy demand increase. However, it is a known fact that India’s power situation is abysmal, with both the supply and quality of electricity being quite pathetic in most parts of the country. India’s power generation companies are hampered by lack of land, fuel, payment delays, high cost of capital etc. Even when the power is generated most of it is stolen and the rest sold at below costs by the state owned power distribution companies who have accumulated losses in billions of dollars. The regulators are puppets in the hands of the politicians who won’t allow a realistic price of power. Residential customers and farmers are sold electricity at heavily subsidized prices or even for free. This has created a situation where electricity customers can’t buy power at even high prices despite there being power producers who can sell at those costs as the government controls the distribution and pricing. This has led to a proliferation of industries and home owners using pollution generating, high cost oil based power generation sets. The economies of scale which is essential in fossil fuel power generation is not utilized by the dysfunctional system.

Solar Energy does not require any fuel like other Renewable energy (Wind Energy) and the operation and maintenance costs are extremely low. Industrial and commercial customers in India have to pay very high prices for power at around 15-20c/Kwh in order to subsidize the power sold to residential customers and farmers. In fact most of the revenues of the state distributors are derived from this segment. However with solar power cost going down drastically in cost, it has become viable without subsidy for these customers. Solar power can be produced these days at Rs 8-9/ Kwh in large scale compared to the prices of Rs 10-12/ unit being paid currently. Industries can now easily generate 20-40% of their requirement by putting solar panels on their roofs. This will sharply cut the revenues and profits of the state distributors. As solar panel costs keep going down by around 10% each year, these utilities will eventually have to lower their tariffs or go out of business altogether.

Solar Energy Cost Curve Declining Continuously

As you can see Solar Energy costs have decreased continuously over the past decades and continue to do so at even a faster pace with powerful global companies like TSMC, GE, Samsung, Hyundai, Siemens, Toshiba, AUO, Honda etc entering the field. Solar Energy can already compete with other forms of energy in high radiation, high electricity places like Italy. By 2015, expect Solar Energy to compete with Fossil Fuel Energy in most places on Earth. Solar price decline of 10% annually in the  next few years, are considered as a base case by large solar companies in their business models. Note I think PV and CPV Technology will beat Solar Thermal Technology in the future because of a variety of reasons.

Why Solar Energy is Being Underestimated

I am surprised by the extent that solar energy growth is being underestimated by analysts and policymakers. Solar Demand has exceeded forecasts by a wide margin in the last 3 years. While this is on a low base, you have to factor in that solar energy is still being subsidized. Think of the growth possibility when solar energy costs decline another 50%. While all countries have underestimated the penetration of Solar Energy, I am taking the example of India which had been praised for its  ambitious plan of generating 22 GW by 2022. I think solar energy will easily be 3-4x of that capacity by that time as India has a huge potential  in solar energy. Bloomberg one of the most respected analysts in the Green Space has forecast 4.2% of US Energy Demand from Solar by 2020. This again is too low in my view. Once Solar Energy reaches low enough costs, then energy demand as a whole will expand just at the advent of LED lighting will expand the whole lighting market. The Potential of Solar Energy is not restricted to the Global Electricity Demand, it is much higher because it will expand that Capacity.

PG

Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to greensneha@yahoo.in

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