Solar Power Price in India Rs 4.2/kWh by 2020, Says KPMG, and Rs 3.69/kWh by 2025

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





7 thoughts on “Solar Power Price in India Rs 4.2/kWh by 2020, Says KPMG, and Rs 3.69/kWh by 2025

    1. Narasimhan Santhanam Post author

      Thanks Megan for your comment

      Fortunately, we do not need to wait until 2020 to find out. Trends available by end of 2016 will show us which way the wind is blowing!

  1. Gagandeep Singh

    Solar power already costs only Rs 4.63, and it is down from Rs 17 just 5 years back. In five years it will be only Rs 4.2?? Not correct

  2. Hiten Shah

    Dear Narasimhan

    Rather than guessing wildly about the solar prices, let us consider the key components of solar power plants, and project how they would fare over the next 5-10 years. Based on this, we can arrive at a forecast. I think it is not unreasonable to assume the following in the next 5 years: panel prices decrease by another 20%, inverter prices also by another 20% and mounting structures/tracker prices can decrease by about 10%. If I factor in these reduced costs, what will be the price? I think the result will be the true price forecast for solar for next 10 years.

    Let me know your thoughts and estimates based on my above assumptions.

  3. Minu Mehta

    I think nuclear power will be the cheapest source of electricity now and future. It is a clean energy source also so why we are not using that more?

  4. Pranit

    what we are assuming is that rupee remains at current level with dollar for 5 years, which in itself is not possible.
    Historical data analysis shows rupee will depreciate at least 5 % vs $ over next 5 years, this means cost will only be reduced by 10-15% at max by 2020 in rupees terms.

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