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Two revolutions set to transform India’s energy sector

Two revolutions are set to transform the energy sector in India: the 2015 tariff parity of solar with thermal energy, and affordable storage that could make solar a 24×7 service by 2020. The last few solar auctions in states like Andhra Pradesh, Telangana and Rajasthan have testified the efficacy of the solar-thermal tariff parity.

The power purchase price of under Rs 4.50 indicated that solar is ready to outpace other conventional energy systems in terms of cost far sooner than earlier anticipated. In 2003, solar panel rates hovered around the $4.50-a-watt mark, with the cost of entire installations going up to $10 a watt.

A $1-a-watt target at that time was described as a distant dream. Yet, here we are today, seeing large-scale projects being built with costs below the $1mark. Radical reduction of the cost of solar-grade silicon over the last 15 years has been the single-largest component driving the solar cost curve down. Cost of a kilogram of silicon has dropped from nearly $200 to below $20.

This reduction, combined with incredible learning curves throughout the production and installation supply chains, has brought us to the magic number of $1per installed watt. Lithium-ion costs have declined at 14% a year since 2000. Major South Korean (LG Chem) and Japanese (Panasonic) companies, along with Tesla in the US, are building gigafactories to fill the lithium-ion needs.

China (Foxconn, Huawei and BYD) has got started with gigafactories as well. Just as with the $1-a-watt goal in solar, the magical $100-per-kilowatt-hour —equivalent of Rs 1 per unit in India at which mass adoption becomes economical — target in storage is likely to be achieved by 2020.

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