Two revolutions are set to transform the energy sector in India: the 2015 tariff parity of solar with thermal energy, and affordable storage that could make solar a 24×7 service by 2020. The last few solar auctions in states like Andhra Pradesh, Telangana and Rajasthan have testified the efficacy of the solar-thermal tariff parity.
The power purchase price of under Rs 4.50 indicated that solar is ready to outpace other conventional energy systems in terms of cost far sooner than earlier anticipated. In 2003, solar panel rates hovered around the $4.50-a-watt mark, with the cost of entire installations going up to $10 a watt.
A $1-a-watt target at that time was described as a distant dream. Yet, here we are today, seeing large-scale projects being built with costs below the $1mark. Radical reduction of the cost of solar-grade silicon over the last 15 years has been the single-largest component driving the solar cost curve down. Cost of a kilogram of silicon has dropped from nearly $200 to below $20.
This reduction, combined with incredible learning curves throughout the production and installation supply chains, has brought us to the magic number of $1per installed watt. Lithium-ion costs have declined at 14% a year since 2000. Major South Korean (LG Chem) and Japanese (Panasonic) companies, along with Tesla in the US, are building gigafactories to fill the lithium-ion needs.
China (Foxconn, Huawei and BYD) has got started with gigafactories as well. Just as with the $1-a-watt goal in solar, the magical $100-per-kilowatt-hour —equivalent of Rs 1 per unit in India at which mass adoption becomes economical — target in storage is likely to be achieved by 2020.
Despite the ascending share of renewables in the energy mix, there is still going to be a lot of fossil fuel in our lives. But the future belongs to renewables and the energy mix for 2040 is likely to be composed of 35% renewables as per International Energy Agency (IEA) estimates. Revolution in storage technology is going to be the prime driver of this, once production cost parity has been achieved.
India is at the forefront of the global transition from fossil fuels to renewable energy. It has raised its 2022 solar energy target to 100 GW from 20 GW in an effort to lower dependence on coalfuelled electricity. Buoyed by the sharp increase in solar power capacity addition of more than 2 GW in 2015, the government is expecting over 10 GW of addition in 2016.
With this, India is forecast to enter the Top Five club for solar capacity this year, moving up from 10th position last year. Until now, India’s renewable energy plans envisaged the quick evacuation of solar power to the grid rather than its storage. Governments both at the Centre and the states have taken a few bold steps in the field of storage.
Recently, the Solar Energy Corporation of India invited expressions of interest for India’s first utility-scale energy storage project to be combined with a solar and wind hybrid project in Himachal Pradesh. Earlier, Telangana had floated a hybrid tender for a 750 MW photovoltaic plant equipped with 100 MW of energy storage capacity.
To facilitate mass adoption of storage amid its high cost, the government needs to devise robust and sustainable storage policies, similar to those in developed markets such as France, Germany, Netherlands, Britain and the US. The French government, for example, offers strong support and incentives for deployment of innovative battery and solar photovoltaic configurations specifically for isolated island grids. This enables the energy autonomy of the French islands and its overseas territories.
Germany has extended its rebate programme comprising discounted credit for solar-cum-storage systems. Backed by strong policies and regulations, the US energy storage market grew 243% in 2015, to a record 221MW. It is estimated that annual US energy storage market will surpass the 1GW mark by 2019.
An ideal approach for India would be to formulate sustainable regulations and incentives such as the discounted credits for developers looking to add an energy storage system to a solar photovoltaic system, in addition to its already proposed capital and interest subsidies and viability gap funding.
Similarly, the government should encourage battery manufacturing under the ‘Make in India’ programme, as import of grid-scale batteries due to their extreme weight not only leads to high transportation costs but creates other logistical challenges.
In this regard, the government can co-locate battery manufacturing with top solar regions in India, which are attractive to storage companies.
By Manoj Kohli, The writer is executive chairman, SoftBank Energy
(This news story is from The Economic Times, Blog)