Solar power tariffs dropped to Rs 3.15 per unit in recent power auctions.
In this level, solar energy seems roughly competitive with thermal power.
What is the present scenario?
Lower solar power costs are now a global phenomenon. e.g California derives about 40% of its grid power from solar energy.
This has led to wholesale electricity rates dropping to zero at noon, when solar power generation actually exceeds grid demand.
India’s current solar power capacity is about 12 Gigawatt (GW) and if the Jawaharlal Nehru National Solar Mission targets are fulfilled, it will hit 100 GW by 2022.
As solar power capacity increases and it becomes cheaper to boot and it could replace thermal power, which uses coal and gas.
What are the problems?
Though solar energy much cleaner and does not involve dependence on imported fossil fuel building huge solar capacities at rapid speed also has its consequences.
Subsidies - The industry still receives large subsidies thus make this form of energy deceptively cheap.
Without the subsidies and generous tax holidays, solar power is still substantially more expensive than thermal power.
Storage - Solar power is discontinuous, therefore expensive and hard to store.
Hence, when solar power is available, it receives preference on grids, forcing thermal power plants to reduce production at such times.
This affects the plant load factor and hence, profitability, of thermal power plants.
Without alternate arrangements fast growth in the highly subsidised solar power industry could lead to economic distortions.
Import dependence - Solar energy equipment needs rare earth metals and China is pretty much the only source of these at the moment.
Hence in strategic terms, solar power could also lead to a critical import dependency on China.
Research - With growing research, it is very likely that current state-of-the-art solar energy technology will be outmoded in a few years.
A phased adoption will ensure that India’s solar energy industry is not locked into obsolete technology.
It will also provide the thermal power industry a chance to review future investments, and grid managers breathing space to develop smarter grids that manage the energy mix better.
