Solar Plant Price Reduction in India

The rapid decrease in solar panel prices has led to a sharp decrease in overall solar system prices, with the India’s central electricity regulator reducing the reference prices for a solar PV plant to $1.5/watt during 2013; a sharp cut of 20% from the previous year. Note solar panels can be bought at 65-70c/watt from wholesale sources in China which is a massive decline from the $4/watt solar panel ASP in 2008. Chinese solar panel producers have managed to sharply cut processing costs despite falling revenues and margins. The cheapest solar panel maker Jinko Solar recently announced that it can produce a normal multicrystalline solar panel from polysilicon at just 48c/watt. This is a stunning fall from the 65-70c/watt processing cost in 2012.

India has also reduced the reference price for a solar farm built with solar thermal technology to $2.2/watt a decline of 10%. I am not completely sure from where this reference price has been taken since solar thermal plant costs considerably more than the Rs 12 crore per MW fixed by CERC. However these prices are important as most states which are strongly pushing for solar power through subsidies will use this reference price for giving incentives and signing PPAs with solar developers.

The Indian governments should basically stop giving subsidies to solar thermal power plants given that the technology is getting obsolete in the face of competition from solar crystalline panels technology. Large solar thermal companies have stopped investing in the technology (Siemens, Solar Millenium) while a number of solar thermal plants in California have converted themselves into solar panel farms.

Solar Thermal Energy has been losing out in the last couple of years to solar photovoltaic energy which is seeing a huge increase in demand amidst very low prices. Some of the major solar thermal energy projects in the globe have been converted into solar PV installations due to its lower costs. Some of the major solar thermal energy companies like Solar Millennium have sold their solar thermal portfolios to other companies while Stirling Power Systems has gone bankrupt. Tessera has sold its solar thermal plants which had gotten DOE Loan Guarantees in California to Solar Developers who have made these solar thermal plants into solar panel ones.

Disadvantages of Solar Thermal Energy

1) High Costs – Solar Thermal Energy costs at least Euro 3.5/watt and has not declined too much in the last 3-4 years. However these costs are too high as Solar PV already costs Euro 2.5/watt and even on a conservative basis will have its costs reduced by 5% in the next 10 years making it attain half the cost of Solar Thermal Technology by 2020.

2) Future Technology has a high probability of making CSP Obsolete – Solar Energy has become a Hotbed of Innovation with daily news of some new breakthrough in materials and process in PV Technology. Oerlikon has come out with a radial new a-Si Technology while CIGs player are touting increased efficiencies. Chinese Solar Companies have captured large chunks of the Solar Market through low cost leadership while number of Global Heavyweights like Posco, Samsung, Hyundai, Sharp, GE, TSMC promise to further decrease these costs.

3) Water Issue – Solar Thermal Plants use lots of Water which is Major Problem in Desert Areas. Using non-water cooling raises the cost of CSP projects too much. While using Sea Water has been proposed it remains to be seen if it possible to implement this solution as this would imply building Plants very near the Coastline.

4) Ecological and Cultural Issues – The Usage of Massive Arrays of Mirrors is noted to heavily impact the Desert  Wildlife endangering the endangered species. California has already seen a massive fight on this issue with Project Developers curtailing the size of their Plants and spending money to move the wildlife.

5) Limited Locations and Size Limitations – Solar Thermal  Energy can only be built in places which have the high amount of solar radiation. They can be built in deserts mostly and require a large land area. This means its not possible to build them in populated areas. Solar Thermal Energy also can only be built in large sizes which are at least 50 MW in size to be economical. This contrasts to Solar PV which is sold in sizes as low as 5 Watts.

6) Long Gestation Time Leading to Cost Overruns – The Gestation Time for permitting,financing,drilling etc. can easily take 5-7 years to develop a concentrated solar thermal power plant. Compare this to 6 months for a small wind farm or 3 months for a Solar PV plant.

7)  Financing is the biggest problem in developing projects particularly for small solar thermal developers in this industry.