Swaminathan Aiyar has made a colossal mistake in saying '100,000MW of costly solar power can sink 'Make in India' in his blog in Times of India dt 5/7/2015. He has got all the facts on solar wrong. I had great respect for him as an economist but his comments on economics of solar makes me wonder if he has done any groundwork at all. Even the die hard coal and thermal power companies in India are now admitting that only solar can deliver the power that India needs in future. Today, solar costs about 1/3rd the cost of electricity from diesel generating sets and is cheaper than the cost to serve agricultural customers which is about Rs 7 per unit in most states. Solar power is also cheaper than what residential customers (those using above 500 units per month) and commercial customers are paying for grid power which is around Rs 8.80 or more per unit in many states. In fact, now such customers are going for rooftop solar systems purely for economics even while subsidies are being phased out and many do not avail subsidies.
Swaminathan Aiyar's suggestion to wait for solar to become cheaper is rather comical. India has already lost time by not investing in R&D all these years and we have the lowest installed solar capacity of 4GW compared to Germany (38 GW), China (28 GW), Japan (23 GW) USA ( 18 GW), Italy (18.4 GW) and UK (4.1 GW). Many of these countries have much lower solar radiation levels than India. Why wait when you can buy solar at a firm price of Rs 6 per unit for 25 years compared to thermal power that costs Rs 3.5 to 4.5 per unit today and could cost more than that with 3% inflation per year. There are public sector companies like National Fertilizers Ltd and Oil Companies which are paying more for captive power generation from small generating stations that use oil or coal and it makes perfect sense for them to go for solar. And, as far as storage is concerned, we don't have to dismiss solar because it is infirm power, as economical storage solutions in the near future cannot be ruled out. Solar needs to achieve about 20% injection level in terms of the capacity of the grid before storage options become essential. Further, distributed solar power through rooftop solar systems, offgrid solutions and solar pumps for agriculture can reduce the transmission & distribution losses of the utilities and can actually help in ameliorating the financial situation of the utilities. Rather than sink 'Make in India', as Swaminathan claims, Solar can actually revive and revitalize the power sector in India besides increasing employment and reducing greenhouse gas emissions.
Swami is wrong again about the cost of solar power. At Rs 6 per unit, more than half of the cost of solar power is debt servicing cost. So, if we can reduce the interest cost or cost of capital, solar can reach Rs 4 levels. That is the approach being taken by Mr Piyush Goyal through dollar denominated PPAs and arranging funds from multilateral and bilateral funding agencies. If we have to fix the interest rates in the long term, we have to fix the economy and the balance of payments issue for which again solar may the solution to replace oil by power electric vehicles.
Lastly, it is not just Prime Minister Narender Modi's fancy to produce 100,000GW solar power nor is it Mr Piyush Goyal's. International Energy Agency (IEA) has prepared a Solar Roadmap in 2014 which projected 142GW solar in India by 2030 and 575GW by 2050 in a high renewables scenario where nuclear capacities additions don't happen as planned and where concerted efforts take place to mitigate climate change by ensuring that average global temperatures do not go up by more than 2 degrees. IEA's analysis is based on a bottom-up TIMES* model that uses cost optimisation to identify least-cost mixes of energy technologies and fuels to meet energy demand, given availability constraints of natural resources.
* The Integrated MARKAL (Market Allocation)- EFOM (energy flow optimisation model) System.