You would have read about a new low price for solar power every passing day.
Early 2017, there were news reports that the cost of solar power was less than Rs 3/unit.
Is solar power really that cheap?
Well, not really. The sub-Rs 3/kWh was quoted for a special case where the scales were quite large, some incentives were provided to the developers, and where in addition some costs were borne by the government. Such a low price/cost is not applicable to everyone.
But there’s no doubt that the cost of solar power had been decreasing dramatically.
What is important to users of electricity is whether solar power costs less than what they pay today to the electricity company. And here, solar power wins hands down for industrial and commercial establishments – in almost all regions in India, solar power costs much less than what industrial and commercial units pay for grid power.
This reduction in cost is not an overnight phenomenon, but had been happening for over two decades. Some trends in cost will be enlightening:
- Solar power cost over Rs 30/unit in early 2000s
- By 2010, it had come to about Rs 15/unit
- By 2014, this had further come down to Rs 6/unit
- By 2017, the cost is only about Rs 4-5/unit for small rooftops, and only about Rs 4/unit for large scale power plants. Compare Rs 4/unit with the price of electricity for industrial and commercial units in India – a minimum of Rs 6/unit for a lucky few, going all the way to Rs 12/unit for the commercial sector in states such as Maharashtra.
To illustrate the trends in solar power costs and grid electricity tariffs for the Residential and the Commercial/Industrial sectors, we have provided the following graph.
Taking residential power tariffs at Rs 4/unit, commercial and industrial tariffs at Rs 6.5/unit and the cost of solar at Rs 4.5/unit, and taking into account possible escalations in grid tariffs for residential and commercial sectors, what you see is a picture that will likely make finance managers jump out of their chairs.