Solar Cheaper Than Diesel in India, For the First Time

A combination of factors are coming together in India to make solar cheaper than diesel for the first time. And that’s without subsidies.

India is using auctions to drive down the price of solar. Combined with rising diesel prices and cheap Chinese solar panels, solar costs are down 28% since December 2010.

The average price of solar panels dropped 51% last year as the world’s largest manufacturers doubled production capacity, reports Bloomberg New Energy Finance.

"Solar is going mainstream in India, helped by Chinese pricing," says Ardeshir Contractor, founder of Kiran Energy Solar Power, a local developer told Bloomberg.

Because India has so many black-outs, many factories and homes use emergency diesel generators as back-ups. That back-up power would be more cheaply supplied by or supplemented with solar.

Demand for electricity is about 14% higher than the country can supply during peak hours, and 400 million people have no access to power, according to the United Nations.

In its December auction, where utilities and developers compete on price, winners agreed to supply solar energy for an average rate of $0.17 per kilowatt-hour (kWh) by early 2013.

In contrast, even though the country subsidizes diesel, it costs double that, an energy analyst at HSBC Holdings told Bloomberg. Coal still provides the least expensive energy at about $0.09 per kWh, but users have to be connected to the grid to access it. 

India’s largest mobile phone company, BHARTI, is switching to solar for rural cell towers that aren’t connected to the grid, and the world’s biggest mango-puree producer, Jaine Irrigation, is completing a 8.5 MW solar plant. Jaine expects the pay-back period to be just five years.

Diesel accounts for 4% of the energy that powers India’s 300,000 cell towers. This month, India’s Telecom Regulatory Authority recommended a minimum of 75% of rural mobile towers and 33% of urban towers run on a combination of solar, wind and
diesel by 2020, reports Bloomberg.

India’s National Solar Mission has set a target of producing 10% of its energy – 20,000 MW – using solar by 2022, equivalent to 18 nuclear reactors.

The country gives the solar industry tax breaks, has a feed-in law (FiT) and guarantees its output will be bought by the government.