The per unit cost of solar power in India, considered among the cheapest in the world, is unlikely to cost less than what it is in Gulf countries, according to an analysis by an energy think tank. This is primarily due to the lower cost of finance in the countries in the region along with factors such as cheaper land prices.
Recent record-low tariffs in Abu Dhabi, Dubai, Saudi Arabia and Qatar are the result of the lower cost of U.S. dollar-denominated, long-dated financing, with major tax concessions and other factors driving prices down in the region, according to the report’s authors Vibhuti Garg, Energy Economist at IEEFA, and Jyoti Gulia, JMK Research Founder, and Shilpi Jain, JMK Research Director.
“India and other countries will struggle to secure the same low tariffs discovered in the Gulf auctions,” the authors said in a statement, “It would be extremely difficult for the Indian market to replicate the combination of factors leading to low solar tariffs in the Gulf region.”
The Gulf region has achieved tariffs in the range of U.S. cent 1.35-1.80/kWh, and (outside the Gulf region) Portugal was able to offer a record-low tariff discovery cost of U.S. cent 1.32/kWh at a recent bid at a 700MW solar energy auction on August 24, 2020. (1 cent = ₹0.7 approx.)
India’s tariffs, some of the lowest in the world, are about twice that in the Gulf region or around U.S. cent 3.14-3.25/kWh, the report noted.
To arrive at their figures, the authors used mathematical modelling and compared two kinds of projects in India that were typical of solar power installations in India and one project in Abu Dhabi as well as expert feedback from industry experts.
“We note the ongoing technological development of solar combined with ever larger factories driving economies of scale means solar tariffs will continue to see 5-10% annual declines over the coming decade, driving ever-stronger competitiveness against incumbent fossil fuel alternatives,” the authors of the report underline.
Favourable destination
India has for years being considered a favourable destination for solar projects and nearly 20 gigawatt of solar capacity is under installation currently.
According to the latest estimates, India has deployed about 87,000 MW of renewable energy capacity as of 2019, and has committed to achieving 450 GW of renewable energy capacity — a significant fraction of which is by solar — by 2030, according to a report by the Centre for Science and Environment.
