I had earlier written a blog post Captive Solar Power Plant – Is it Good for My Company? that received quite a few queries and comments, with some of them saying it is a bit too early for Indian companies for think of captive solar as the business case might not be strong enough.
I would say that there is indeed some truth in that – at the same time, the business case is becoming stronger for some select industrial and commercial sectors.
In the last 2 years, at Solar Mango we have seen significant interest from these select industry segments small developers and corporates to put up captive solar power plants. The reason is not difficult to see – price of grid power is increasing alarmingly, while the cost of solar power has been decreasing at a fast pace. *By captive, we mean not just rooftop, but in most cases, offsite, grid connected, MW scale solar power plants supplying power to the developer for captive use.
Even we at Solar Mango had estimated that the rate of decrease of the cost of solar would decrease after 2014 – that is, solar power will not see such dramatic decreases in costs as it had seen between 2010 and 2014.
But we were proved wrong, as the cost of generation of solar power is breaking one record after another on its way down. Even if you assume that the tariffs as low as Rs 4.34/kWh being quoted in some parts of the country are exceptions, our estimations with even conservative cost numbers suggest that the levelised cost for solar power is around Rs 5.5/kWh for small MW power plants without trackers and without taking into account financial incentives such as accelerated depreciation. If some of these incentives are considered and if trackers are introduced into the picture, the cost of solar power is below Rs 5/kWh for even power plants in the range 1-5 MW.
At this cost, it can be said that solar power has reached grid parity – that is, the cost of solar power is the same or lower than that of grid power.
You can now see why so many companies are suddenly interested in having their own solar power plant for captive consumption – they now have the opportunity to procure power at a cheaper price than grid power, and more important, they can now lock in the cost of power for 25 years.
With this in the background, I was least surprised to read the news that Infosys would be commissioning solar power plants for 55 MW on its India campuses by end of 2016.
In 2015, Infosys became the first Indian company to join RE100, which is a group of the world’s most influential companies aiming to go 100% renewable. Now, this is another reason why some of the large companies in India could wish to go solar – their commitment to climate change efforts.
Overall, at Solar Mango we expect 2016 to be an important year for captive solar power plants in India – in this year, we expect captive solar power installations in the country to reach an inflection point in their growth. We expect annual captive solar power plant installations in the country to double or even treble its size in 2016. The coming years could see much higher growth rates for this sector as the government starts recognizing the importance of this segment and starts providing a more conducive environment for its growth.