While wind power is already cheaper than the total cost of power from a new build imported coal plant, solar power will become competitive with power from imported coal by 2019.
With the appropriate policies, the Budget 2015 target of 60 GW of wind power by 2022 can easily be met with minimal government financial support, thus providing a cost-effective path for meeting India’s renewable energy targets, according to a new report from Climate Policy Initiative (CPI) and the Indian School of Business (ISB) – titled ‘Reaching India’s renewable energy targets cost-effectively’.
In the report, CPI found that, in absence of any subsidies, wind power is already cheaper than the total cost of power from a new build imported coal plant, at Rs 5.87/kWh for electricity from wind power and Rs 6.81/kWh for electricity from imported coal. The comparison with imported coal is key because this is the fuel that additional renewable energy will likely replace, rather than domestic coal or natural gas, which are limited in supply. The analysis also finds that wind power will continue to remain competitive beyond 2022.
Because the government has a constrained budget, a cost-effective policy path to achieving its renewable energy targets is crucial. These findings suggest that wind power can provide a cost-effective path to meeting targets, and that the government should encourage rapid deployment of wind power through policy measures that address non-cost related barriers to wind power, for example challenges in land acquisition and delays in environmental clearances.
CPI also found that, as the costs of installing solar power continue to decrease; solar power will become competitive with power from imported coal by 2019, and will require some government support from 2015 to 2019. In order to achieve the target of 20 GW of solar power by 2022, the total cost of government support would be Rs 46.97 billion, or Rs 2.71/W, under the current federal policy of accelerated depreciation.
However, this government support could be significantly reduced – by 96% – by replacing the current federal policy with reduced cost, extended tenor debt. Under reduced cost, extended tenor debt, the cost of support would fall to Rs 1.81 billion, or Rs 0.1/W. To accelerate solar power sooner to meet the Budget 2015 goal of 100 GW of solar, revised upwards from 20 GW, it would need to provide more financial support.
Gireesh Shrimali, fellow at Climate Policy Initiative and lead author of the study, said, “India has ambitious targets for renewable energy, however, with a limited budget, it’s important that the Government of India take the most cost-effective policy path. Wind presents a clear win-win. Adjusting current policy to more effectively deploy solar would also help lower costs.”