The Success of Solar Sector and the Downfall of the Traditional Ones

A recent solar power auction has generated an electric price of merely Rs 3.15 unit, down from INR 5 from the last two years. Solar energy is giving some serious competition to the coal-based thermal power. The Indian Govt. has increased its target of solar capacity to 40 gigawatts by 2020 and 100 gigawatt by the year 2030, up from 12 gigawatts today. This seems as a promising step to replace the dirty coal-based thermal power by renewable and cheap solar power.

A much bigger problem for coal-based power is that solar energy is given preference over it when supply exceeds demand. So, thermal plants have no option but to back down. About 6 years ago, the Plant Load Factor (PLF) or the capacity utilization of thermal plants was about 76 percent. However, now it is just 58 percent. Earlier, India used to be continually short of electric power, but now almost all the regions have surplus electricity. India now even exports electricity to neighboring countries such as Nepal, Myanmar and Bangladesh.

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The thermal power generators had expected a continuous power shortage and hoped for a 70 percent PLF, which would yield them a good profit. But today’s PLF outcome of 58 percent has put many in jeopardy, especially the merchant plants that are selling power in open markets as they don’t possess power purchasing agreement with the state govt.

If the average PLF falls beyond 48 percent, and that of the merchant plants drops even more (this is likely to happen if the solar capacity ascends to 40,000 megawatts by the year 2020) then numerous coal-based projects are likely to go bust. The financed projects overwhelmed by loans. The interest on the loans needs to be paid irrespective of whether the plant is working or idle, thus the high interest cost could kill projects even when the PLF drops.

The solar power is sporadic. It fails to work efficiently at night and operates weakly on foggy or cloudy days. Ideally, solar plants should stockpile part of their power generation during the day and later release it post sunset.

If the solar power that generates surplus supply is kept, the thermal plants do not have to back down when there is sunshine. The power storage on the conventional batteries is quite expensive. There is a need for new technologies to cut down the cost.

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With time, the solar costs are dropping fast. Raising solar targets look green and good. However, it has a hidden and potentially disastrous cost.

Rather than the solar target practice, which is currently gaining popularity in India, the country needs to come up with a plan to match complete power supply with slowing demand and target for a thermal solar mix. This could avoid huge idle capacities. It is necessary for solar and thermal capacity creation to slow down. The breakneck speed of solar power will eventually break the neck of banks and thermal plants.