Solar Power Costs Coming Down? You betcha!

DFN: Solar Costs declining are going to be driven by technological improvements (as the article points out), but they’re also going to be influenced downward by excess foreign production capacity looking for fill new markets with capacity no longer in demand in country markets (ie, Germany).

Companies see a realistic chance of bringing down cost of solar power
10 May, 2011, 06.41AM IST, Shelley Singh,ET Bureau

It’s an old idea whose time has finally come. Converting the sun’s energy into electricity, or solar power, is a compelling proposition. It’s clean and green, with an endless supply of fuel (from the sun). It’s also faster to set up: a farm of solar cells to trap the sun’s energy can be installed in six months; by comparison , a nuclear plant would take a decade, and thermal and hydro projects four to six years. Making the case for solar power stronger are the growing risks associated with conventional power – from pollution and galloping costs to natural and manmade disasters. The ongoing nuclear crisis in Japan has made power generation from reactors a less popular alternative. The only barrier to harnessing solar energy on a large scale has been the high costs involved. Solar power costs 14-16 a unit, against 4-6 for conventional generation.

The good news, though, is that prices have been falling, from 50 per unit 15-20 years back. And they’re set to fall further in the next three to five years, thanks to a combination of business and technology factors. Says Rajiv Arya, CEO, Moser Baer Solar: “We see a clear path to under 10 per unit via technology improvements and a massive scale-up in volume.” V Saibaba, CEO, Lanco Solar, is even more specific and optimistic . “In a couple of years, we see solar power costs coming down to 7-8 per unit,” he says. PricewaterhouseCooper’s (PwC’s ) energy expert Kameswara Rao sees solar power at 9-10 per unit in below five years. Saibaba adds that between 2003 and 2010, solar power generation globally has grown from 3,000 MW per annum to 17,000 MW per annum . “Costs of solar have come down, the main reason being the high growth in installation of solar power globally,” points out Saibaba. Lanco Solar has signed power purchase agreements for 141 MW of solar power with NTPC Vidyut Vyapar Nigam under the National Solar Mission and with Gujarat Urja Vikas Nigam under the state policy.

A KPMG report to be released next week says that India could produce 45,000 MW of additional solar power , taking total solar power generation to 67,000 MW, by 2022. That’s because technological breakthroughs, economies of scale and local manufacturing will bring solar power costs to levels of conventional power by around 2017. The report says solar power prices will drop by 7% a year over the next decade. It further notes that, by 2022, cheaper solar power will help cut coal imports by 30%, or 71 million tonnes a year. This would result in a saving of $5.5 billion in imports per year from 2022 onwards. According to KPMG the projected increase in solar capacity will also reduce India’s carbon emissions by 2.5%, which is a tenth of the 20-25 % reduction India had volunteered at the international summit on climate change in Copenhagen .

If costs are high today, the biggest reason for that is that each component that goes into solar projects is imported. Solar power generation via solar photovoltaic cells, the most commonly used process, calls for silicon panels and glass; in addition , a switch yard, including inverters and cabling, that help put together a heat-trapping mechanism . The other method is solar thermal, or CSP (concentrated solar power) in industry parlance. CSP relies on the sun’s heat to generate superheated steam to run turbines and produce electricity. It doesn’t need cells, but a combination of mirrors and glass tubes. For costs to come down, some of such components will have to be made locally. And global manufacturers may be ready to do just that. For example, glass, a key component in making solar panels, is imported from China and Taiwan because the domestic market is not big enough for glass-makers like Saint Gobain, Guardian and Flabeg to focus on this segment.

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