The Rising Sun – Disruption on the horizon! Solar power to revitalise Indian energy sector

India aims to reduce emission intensity of its GDP by 33 to 35 per cent by 2030 from 2005 levels, and solar power is likely to contribute 4 per cent towards this target, states KPMG in India’s report.

Nov 17, 2015 07:11 IST India Infoline News Service

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Solar could scale up substantially to be a significant energy source by 2025, with the market penetration of solar power expected to be 5.7 per cent (54 GW) by 2020 and 12.5 per cent (166 GW) by 2025. India aims to reduce emission intensity of its GDP by 33 to 35 per cent by 2030 from 2005 levels, and solar power is likely to contribute 4 per cent towards this target, states KPMG in India’s report, titled ‘The Rising Sun – Disruption on the horizon’.

The report was released by Piyush Goyal, Honourable Minister of State (IC) for Power, Coal, and New and Renewable Energy and Shri Dharmendra Pradhan, Honourable Minister of State (IC) – Petroleum and Natural Gas at ENRich 2015, KPMG in India’s annual energy conclave. Other eminent dignitaries present during the report launch included Richard Rekhy, CEO, KPMG in India, Michiel Soeting, Global Chair for ENR, KPMG, Arvind Mahajan, Partner and Head of Infrastructure, Government & Energy, KPMG in India, Nitin Atroley, Partner and Head, Sales and Markets, KPMG in India and Manish Aggarwal, Partner and Head – Energy and Natural Resources, KPMG in India among others.

The report talks about how the scale up and competitiveness of solar power could disrupt the traditional generators. The disruptive force is expected to start being felt from 2017 and may accelerate post 2020. In some states which are promoting solar (and also wind power) aggressively, conventional coal generators could see their Plant Load Factors (PLFs) fall by as much as 10-15 per cent by 2020, as solar replaces coal-fired generation in the daytime hours. This effect may speed up post 2020 with the annual addition of large amounts of solar (estimated to exceed by 20 GW per year by 2022-23). 

The report highlights that the price for solar power has seen a decline; today, in India, solar prices are within 15 per cent of the coal power prices on a levelised basis and, it is expected that that by 2020, solar power prices would be approximately 10 per cent lower than coal power prices. The solar rooftop power, today, is already competitive compared to grid power for many consumers and, as per the report, if combined with storage, it could be cheaper than grid power after 2022 for a large section of the consumers and drive a considerable shift to rooftop power. A ‘Solar House’ that is self-sufficient in energy terms could be a reality within the coming decade.

Piyush Goyal, Honourable Minister of State (IC) for Power, Coal and New and Renewable Energy said, “We need to re-engineer our process to create energy efficiency and conservation to give India an affordable energy access.  It is important that we remove all disparity at the root level to ensure social harmony for all in India and also to compete globally. A holistic vision is the need of the hour in order to reach 200 million people at a faster rate. I am personally convinced that any amount of investment in this sector will have a quick pay back. This is possible and achievable and I am confident that the era of shortage is over and we are now in the era of surplus. I am hopeful that you will see the economy picking up rapidly and the benefits would be seen across the nation.”

Dharmendra Pradhan, Honourable Minister of State (IC) – Petroleum and Natural Gas said, “Energy security and accessibility is important for the overall well-being of the nation. It is important that we identify the energy requirements and accordingly come up with a vision plan, making it our focus for the coming years. A comprehensive energy policy is the need of the hour.”

“Solar power and storage are exponential technologies, meaning they could grow very rapidly and take stakeholders by surprise. The rapid rise is good for India and may help the country leapfrog to clean energy sources to meet its needs. However, the sector needs preparation by all stakeholders – power generators need to become flexible, discoms should be efficient and retain customers, and the coal sector has to become cost-efficient and flexible to adjust to the evolving scenarios. Importantly, it needs very rigorous long-term planning that prepares for a transformed electricity grid of distributed sources, variable renewables and storage solutions,” said Santosh Kamath, Partner and Head - Renewable Energy Services, KPMG in India.

“The power sector in India is going through a significant change and solar is expected to play a dominant role in it. This presents a great opportunity for India, especially in the current political-social environment where the country has embarked on a vision to have energy security, by providing affordable and sustainable power to all. The Government of India has laid down its ambitious vision for the renewable sector, especially solar, and some of the global developments also point in the direction to achieve it, provided we understand the implications, and gear up to plan for this fundamental shift. Also, the issue is not about coal vs solar since India needs to harness all its natural resources for achieving energy security at affordable prices, which at the same time provides reasonable return to investors. The government has also identified the goal of ’Power for all by 2022’, and renewable energy sources, such as solar, are expected to play an important role in this,” said Manish Aggarwal, Partner and Head – Energy and Natural Resources, KPMG in India.

The report highlights the need for the government to significantly strengthen the planning infrastructure and processes, and emphasises the energy sector’s need for a new planning paradigm which takes into account the expected emphasis on renewable energy in India. The Government needs to focus on significant strengthening of the planning infrastructure and processes. The right incentives for investments in grid integration of solar and balancing services should be put in place early. The report also recognises that significant conventional generation capacities are also needed to meet the country’s growing energy demand. In fact, conventional generators will need to contribute 60% per cent of incremental capacity needs up to 2025, with solar contributing between 20-25% per cent, and considering another 15% per cent coming from wind. However, these additional capacities will need different attributes from the ones we have seen so far. These attributes are related to flexibility in generation (in terms of ramp rates and minimum thresholds) and low fixed cost, and higher variable cost preference, rather than vice versa.

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