Solar prices in India could be substantially lower than coal by 2020, according to a report by international consultancy firm KPMG.

KPMG’s report, ‘The rising sun: Disruption on the horizon’, predicts that over the next decade solar will scale up significantly, reaching a 12.5% market penetration by 2025.

On prices, KPMG predicts that by 2020 utility-scale, grid connected solar power will have reached Rs 4.20/kWh and Rs 3.59/kWh by 2025, up to 10% lower than coal. These are at 2015 price levels (actual prices for 2020 and 2025 are Rs 5.83 and Rs 6.25/kWh respectively).

Rs 4.2/kWh is still a considerable decrease from the lowest tariff we have heard so far – Rs 4.63/kWh from SunEdison.

But even then, I have a feeling that KPMG is being quite conservative here. Because we are talking about 5 long years.

Imagine that overnight, while you are sound asleep, all the changes that will happen to solar power in the next five years happen. The cost reductions from economies of scale in manufacturing of solar panels and balance of systems, higher efficiencies achieved in installation, higher generation from a number of technical advancements, even better interest rates on loans, and more.

You wake up.

Do you expect the price of (utility-scale) solar power to have dropped by 10% (Rs 4.63 to Rs 4.2), or would you expect it to have dropped by 20-25% (from Rs 4.63 to Rs 3.6 or whereabouts/kWh).

I expect the latter. That is, I expect what KPMG predicts as the price by 2025 to happen by 2020!

What about you?

While on this topic, you might want to read two other blog posts:

How low can solar prices go, asks Bloomberg New Energy Finance

Costs and optimal tariffs for small MW grid connected power plants