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Assessing Risk and Cost in India: Solar's Trajectory Compared to Coal
Assessing Risk and Cost in India: Solar's Trajectory Compared to Coal
By Sourabh Sen, Co-Chairman, Astonfield Renewables
April 17, 2013
Only months after the world's largest electricity blackout, which left over 600 million people in the dark, the energy supply gap in India has reached a level that jeopardizes the country's economic growth prospects and national security. Last July, average peak demand exceeded supply by 10.5 gigawatts (GW), or roughly 8.1 percent, according to the Central Electricity Authority (CEA). In January, demand exceeded supply by 8.4 GW, or roughly 9.9 percent. In 2006, India's Integrated Energy Policy developed by the country's central Planning Commission estimated that installed energy capacity in the country would need to reach 960 GW by 2031-32 in order to support 9 percent annual GDP growth. As of January 2013, India's installed capacity base stood at only 213 GW, implying that almost 37 GW of new generation capacity (the equivalent of 37 nuclear power plants) would need to be commissioned each year for the next two decades in order to meet this target.
With such ambitious requirements set against a lack of abundant domestic conventional energy resources, solar power must play a significant role in supporting the country’s power sector growth plan. The country’s landmark national solar policy, implemented through the Jawaharlal Nehru National Solar Mission (JNNSM), aims to build 20 GW of solar generation capacity by 2022, although the market opportunity is generally believed to be multiples of that target. But as India builds other types of power plants to electrify the 400 million people who were without power before the blackouts, some inevitable scenarios are becoming a reality. Coal-based power’s cost and risk profile is steadily climbing, and solar energy is becoming increasingly attractive (i.e. more economically viable). Coal’s predicament is based principally on domestic fuel scarcity and fuel price volatility driven by increasing reliance of importation of the resource, which affects both existing plants and those under construction.
Coal
India has made great strides in building new power generation capacity. In the past five years, the country has added 35 percent more generation, reaching over 213 GW—though a good portion of that capacity is not available during periods of peak demand due to fuel inventory shortages. Coal represents approximately 57.2 percent of India’s total power capacity. This heavy reliance on coal power will exacerbate India’s energy crisis and affect every sector of its economy.
According to Bloomberg New Energy Finance estimates, in July, the levelized cost of electricity (LCOE) for coal was estimated to be approximately Rs.1.9-4.8 per kilowatt-hour (kWh). However, it is well documented that coal supply shortages have crippled the nation’s ability to meet electric demand, and the ability for new coal plants to secure supply contracts. Private coal plant developers have said that over 68 GW worth of new coal projects are at risk of default because they cannot secure supply.
The coal supply gap could be five times as big as it is today in 2017, according to Credit Suisse, and the cost of importing coal could equal 1 percent of GDP. The Economist reported last January that benchmark coal prices have risen at least 50 percent above its 2009 average. Others have pegged it as high as 180 percent. Meanwhile, solar module prices have fallen 70 percent since 2009.
Coal’s risk profile should make anyone shudder...
By Sourabh Sen, Co-Chairman, Astonfield Renewables
April 17, 2013
Only months after the world's largest electricity blackout, which left over 600 million people in the dark, the energy supply gap in India has reached a level that jeopardizes the country's economic growth prospects and national security. Last July, average peak demand exceeded supply by 10.5 gigawatts (GW), or roughly 8.1 percent, according to the Central Electricity Authority (CEA). In January, demand exceeded supply by 8.4 GW, or roughly 9.9 percent. In 2006, India's Integrated Energy Policy developed by the country's central Planning Commission estimated that installed energy capacity in the country would need to reach 960 GW by 2031-32 in order to support 9 percent annual GDP growth. As of January 2013, India's installed capacity base stood at only 213 GW, implying that almost 37 GW of new generation capacity (the equivalent of 37 nuclear power plants) would need to be commissioned each year for the next two decades in order to meet this target.
With such ambitious requirements set against a lack of abundant domestic conventional energy resources, solar power must play a significant role in supporting the country’s power sector growth plan. The country’s landmark national solar policy, implemented through the Jawaharlal Nehru National Solar Mission (JNNSM), aims to build 20 GW of solar generation capacity by 2022, although the market opportunity is generally believed to be multiples of that target. But as India builds other types of power plants to electrify the 400 million people who were without power before the blackouts, some inevitable scenarios are becoming a reality. Coal-based power’s cost and risk profile is steadily climbing, and solar energy is becoming increasingly attractive (i.e. more economically viable). Coal’s predicament is based principally on domestic fuel scarcity and fuel price volatility driven by increasing reliance of importation of the resource, which affects both existing plants and those under construction.
Coal
India has made great strides in building new power generation capacity. In the past five years, the country has added 35 percent more generation, reaching over 213 GW—though a good portion of that capacity is not available during periods of peak demand due to fuel inventory shortages. Coal represents approximately 57.2 percent of India’s total power capacity. This heavy reliance on coal power will exacerbate India’s energy crisis and affect every sector of its economy.
According to Bloomberg New Energy Finance estimates, in July, the levelized cost of electricity (LCOE) for coal was estimated to be approximately Rs.1.9-4.8 per kilowatt-hour (kWh). However, it is well documented that coal supply shortages have crippled the nation’s ability to meet electric demand, and the ability for new coal plants to secure supply contracts. Private coal plant developers have said that over 68 GW worth of new coal projects are at risk of default because they cannot secure supply.
The coal supply gap could be five times as big as it is today in 2017, according to Credit Suisse, and the cost of importing coal could equal 1 percent of GDP. The Economist reported last January that benchmark coal prices have risen at least 50 percent above its 2009 average. Others have pegged it as high as 180 percent. Meanwhile, solar module prices have fallen 70 percent since 2009.
Coal’s risk profile should make anyone shudder...
http://www.renewableenergyworld.com/rea/news/article/2013/04/risk-and-cost-solars-trajectory-compared-to-coal?cmpid=SolarNL-Thursday-April18-2013
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