The U.S. solar market has seen a dramatic rise in recent years, quickly making up lost ground on world leaders like Germany and Italy. But other regions of the globe have begun to find success with solar power as well. Bloomberg reports that the India saw a dramatic drop in prices at its latest solar auction, offering promise that solar power could compete with traditional fossil fuels far faster than anticipated.
Solar incentives in the U.S. revolve largely around tax incentives, reducing the cost of commercial and residential solar installations, and loan guarantees for companies that ideally will never be paid. Country’s such as Europe, Italy and now China instead offer feed-in tariffs that pay a certain price per kilowatt-hour of energy produced.
India has taken a very different approach, setting up auction wherein it offers to purchase solar power at a specified rate for 25 years. Companies will then make a bid based on how cheaply it believes it can produce the necessary amount of power and a number of power plants are contracted by the companies that offer the lowest price. The latest auction allowed for as many as 28 solar installations of as much as 20 megawatts each.
The Indian government set the introductory price at 15,390 rupees, or slightly more than $300, per megawatt-hour of electricity. That amounts nearly 44 percent above the average global price for solar power. By the time the auctions had resolved, however, the average bid of the 28 successful project had fallen as low as 8,780 rupees, or around $171, per megawatt-hour of energy. That amounts to nearly 18 percent below the global average.
The top bid from Solairedirect SA of France reached as low as 7,490 rupees, or $147, per megawatt-hour, beating the global average by 30 percent. Indeed, that brings the price to less than double the global cost of coal, which sounds unimpressive before realizing that this accounts for the fact that most coal plants have already been constructed and have paid off some or all of the cost of their construction.
V. Saibaba, the chief executive officer of Lanco Solar, suggested to Reuters that the current trends in the solar industry in India could drop the cost as much as 40 percent by 2015.
While much of this might seem foreign or arcane, the stunning success of such a young solar market at a seemingly low cost could help promote cheap solar power around the globe, setting a model for other regions to follow.