Only four gw of new thermal capacity added last year; renewable additions were 9.7 gw
Fossil fuel most at risk due to a large-scale addition of renewable energy, led by solar, in the recent past is coal.
S&P Global Platts Analytics’ report on Global Solar Outlook (2019-2025) reveals that the coal new-builds or new coal-based power plants have declined to just four gigawatt (gw) last year.
The global energy research firm views this development as enhanced competitiveness of solar over thermal or fossil fuel in India, which will dramatically alter the energy mix of domestic power plants.
“Interestingly, a sign that solar is becoming competitive against thermal could be found in the fact that coal new-build has been slowing very considerably. Only 4 gw of coal capacity has been added in 2018, although the number of projects under construction is second only to China (48 gw),” said the S&P Global Platts report published recently.
However, since LNG and other fossil fuel are not well placed to grow in the Indian power sector, the share of coal may not diminish in a jiffy. Given the strong power demand, despatches of coal is likely to show some growth in the medium term.
As per the report, the risk for coal is that it could dwindle to 1.25 gw per year when the optimistic view of the International Energy Agency Sustainable Development Scenario (IEA SDS) for solar deployment of 20 gw per year is taken into consideration.
Gaurav Mathur, CEO, Trina Solar, said solar has got a big push from the government while coal has got expensive with “every kind of cess levied on it”.
According to him, limited availability of fossil fuel will see it getting out of favour as it would only put upward pressure on prices.
“We will see prices of electricity going up because of fossil fuel as their availability is still an issue. Many thermal power plants are not yet operational because of non-availability of continuous supply of coal or even gas. This is giving a big boost to renewable energy,” he said.
In December, 2018, state-owned Coal India’s production declined 0.9% year, but its dispatch to the power sector went up 1.9% year on year. This rise in allocation to the power sector led to improved coal inventory at the power stations to 16.6 million tonne, a rise of 25.8%.
Another reason coal inventory levels shot up was a higher hydropower generation in comparison to thermal power.
Last year, India’s grid-connected power generation capacity from all sources rose by 4% between January and October to 347 gw. This was an addition of 13 gw compared to the year before during the same period. A large part of the new capacity consisted of renewable energy at 9.7 gw.
Last year, aggressive bidding for solar project saw tariff hit a low of Rs 2.44 per unit. The government is reportedly looking at setting a ceiling for solar tariff between Rs 2.5 and Rs 2.68 per unit for developers who use both domestic and imported equipment.
Mathur believes this kind of tariff caps could make the projects sustainable. He said a more realistic tariff for Indian solar would be in the region of Rs 3 per unit.
“Today, solar has achieved grid parity. However, the availability and quality of some of the projects are a matter of concern,” he said.
In December last year, short-term power prices fell to Rs 3.30 per unit on a monthly basis on subdued demand. On an annual basis, though, it was higher compared to Rs 3 per unit in December, 2017.
During the month, energy demand increased 4.9% from the year before while the available energy rose 5.0%. This narrowed the deficit to 0.5% in the month to 0.6% in December 2017.
Sunil Rathi, director, Waaree Energies, said solar tariff of Rs 2.5 per unit may be sustainable in the long run.
“While on one hand, the fluctuating dollar prices may seem as an added challenge to the mix, we believe that when the industry achieves economies of scale the volumes will help the tariff become sustainable. Earlier, similar questions were raised when the tariff was set at Rs 2.44, but the projects in question, are well under execution at the moment. Solar power has surpassed grid parity and even with the current tariff, it is still one of the cheapest sources of energy in the country. In fact, other sources, renewable or conventional, will now aim to match the solar parity, and solar power is on its way to become the most prominent source of energy generation in India,” he said.
According to the data released by the Central Electricity Authority (CEA), India’s solar capacity was 25.8 gw in 2018, with at least 13.8 gw under construction currently and 22.8 gw tendered under various schemes and state-level allocations.
“The Indian PV sector has been struggling given the introduction of a safeguard duty for imported modules in the summer 2018, which has compounded with the fall of the Indian rupee, and is now facing significant financing challenges. These factors have been offset by a further decline in dollar-denominated module prices.
THE RISE OF GREEN POWER
- 347gw – Total power generation capacity in India from all sources
- 13.8gw – Solar power capacity under construction in India currently
- Rs 2.44 – Solar power tariffs hit a low per unit in the last year
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As per the report, the risk for coal is that it could dwindle to 1.25 gw per year when the optimistic view of the International Energy Agency Sustainable Development Scenario (IEA SDS) for solar deployment of 20 gw per year is taken into consideration.
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