Well, it is old hat that India’s electricity demand is shooting through the roof and that our peak deficit is going to get from bad to worse (from 17 GW right now to something like 25 GW very soon…).
One another dimension, we all have been hearing how solar PV based power production will work only using government subsidies. That view is quite true and is old hat as well.
So let me try to tell you something that’s not as old. And that is about the use of solar PV where it is cost competitive today. Yep, you guessed it. It is the use of solar PV as a replacement for diesel based electricity production.
At a capex of about Rs 15 crore per MW, levelized cost of power from solar PV will cost about Rs 11-12 per kWh. That’s a heck of a lot – almost three times as much as what many of us pay to the state electricity board. With this kind of comparison, it looks as if solar PV doesn’t have a chance, even with significant government subsidies (such as 30% subsidy on capital costs) thrown in.
On the other hand, the business case for diesel vs solar PV is, from one dimension, fairly simple. Diesel costs Rs 41 per liter, and could cost about 45 Rs very soon. One liter of diesel can provide about 4 kWh of electricity. And there you have the math, right in your hands. 11 vs 11. Just on fuel costs alone – without taking into account the cost of diesel generator (which is not a lot anyway compared to its running costs) and the maintenance costs (which could indeed add half a rupee to a kWh for diesel) – the costs of power generation from diesel and solar PV are almost the same. That is, the levelized cost of diesel based power is higher than that from solar, even today.
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Now fast forward to a year or two, and you have diesel costing perhaps even more, and solar based power costing perhaps a rupee or two less per kWh. You can see what I am getting at.
This is the powerful business case that solar PV has today – as a partial replacement for diesel that is equivalent in economics today and will increase in its attractiveness in future. Why do I say partial? Because for one, solar PV is not on demand, and secondly, in order for you to use a lot of electricity from PV at night, you need to have a large battery storage, and that will prove very costly indeed – high cost of energy storage is one of the real pain points in the renewable energy today. But you will surely agree that having a green and economically sustainable power for even half your needs is not a bad idea to begin with.
If you are running a company or business in which the cost of electricity is a significant component of your operating costs, you should explore the possibility of using solar PV for a portion of your backup power which is likely being contributed by diesel. And as the prices of diesel continue to increase while the levelized cost of solar power continues to decrease significantly, solar PV against diesel will only become more attractive with time. Why not start your journey now so that you are ready to fully shift to solar once the costs come down even further?
EAI has developed a comprehensive report precisely for those looking at making a start with solar PV for their captive power demand. The focus of the report is to facilitate a much deeper and more comprehensive understanding of the captive solar PV segment, specifically in the context of costs and technology aspects.
This report was last updated in the first week of Apr 2011.
To know more about this report, see here – http://www.eai.in/ref/reports/captive_power.html
Narasimhan Santhanam
EAI – Energy Alternatives India @ www.eai.in
Mob: +91-9952910083
Email:narsi@eai.in
more about me here – http://www.eai.in/ref/team/ns.html
Couldn’t agree with you more! Solar PV for off-grid applications, such as solar telecom towers, is commercially viable today, even though diesel is subsidised by the government in India. In several African countries, where the governments don’t subsidise diesel, solar PV is even more attractive with payback periods being as short as 1.5 years!
Another dimension to be considered when diesel is being used in remote off-grid applications is the delivered cost of diesel is higher than the fuel station price, due to the cost of delivery and issues such as theft.