Sweet Answer from Solar Mango: (updated Jul 2015)

In many news reports, you might have come across something on the following lines: Solar power has now become a  competitive source of power.

What does this mean?

Or, in some news item, you might read something similar to this: Solar power now costs only 6 cents/kWh and hence is really cheap.

Now, is 6 cents/kWh really cheap?

The answer below tries to answer the above queries.

When folks ask the question “Is solar power cheap?,” or Is solar power cost competitive?”, what they usually mean is “Is solar power cheaper than or cost competitive to what I am paying for power from the grid today?”

This is an interesting question, to which the answer is a bit more intricate than one might think.

Why is the answer not a simple and straightforward one? This is because, whether or not solar power is cost competitive against grid power is dependent not just on the cost of solar power, it also depends on the cost of grid power.

And the cost of grid power depends on where you live and who you are.

For instance, if you are a resident of the state of Californiain the US, solar power is already cost competitive for you because of two reasons:

  • Most parts of California has abundant sunshine, and hence cost of solar power generation is less in that state than states where the amount of sunshine is much lower. The cost of solar power in California (even without subsidies and incentives) could cost much less than 15 US cents/kWh
  • The price paid by California residents for electricity from the conventional grid are some of the highest in the United States. These could be over US cents 20/kWh.
  • Thus, for Californian residents, solar power is already cheaper than grid power (20 cents for grid vs 15 cents/kWh for solar), without any subsidies factored in!

On the other hand, if you happen to be a residential user in India where the grid power prices have been kept artificially low for residential users, solar power might not be cost competitive for you yet.

  • In many parts of India, residential power from the grid costs only about Rs 4 per unit (less than 7 US cents/kWh), as the government subsidizes for this segment, while solar power costs about Rs 7 per unit (about 12 US cents/kWh) in India. Thus, for many in the Indian residential sector, solar power is costlier than conventional grid power.
  • But if you thought solar power was not yet cheap enough in India, hang on.Even in India, the industrial and commercial segments might have a different opinion. In states such as Maharashtra (one of the most industrialized states in the country), industries are paying over Rs 10 per unit (15 US cents/kWh) for electricity from the grid, as there are no subsidies for them, while as mentioned earlier, solar power costs about Rs 7 per unit (about 12 US cents/kWh). Thus, for many in the Indian industrial sector, solar power is already cheaper than conventional grid power.

Thus, whether or not solar power is competitive against grid power depends on

  • Where you are (REGION)
  • What type of an establishment yours is (RESIDENTIAL/COMMERCIAL), and
  • Sometimes even what time you use grid power most (PEAK TIME USE OR NON PEAK TIME USE).

Overall, Solar Mango infers that solar power is already cost competitive for some regions of the world, or for some sectors. For most other remaining regions and sectors, especially those in sunnier regions, we estimate that solar power will become cost competitive against conventional grid power by 2018, if not earlier.

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