Weekly Update: Solar PV market for diesel abatement in India is preparing for new investments
Tata Cleantech Capital recently announced that it may provide funds for as much as INR 2.5 billion (EUR 30m) of renewable and energy-efficiency projects in India (refer). The key new opportunity highlighted has been the parity driven market for a combination of power tariffs and diesel cost.
- The LCOE for diesel based generation is much higher than that of solar power
- The diesel consumption however, does not fall in proportion to the operating load
- Several companies are working on solutions that can intelligently manage different sources of power as per load requirements
India has a very large installation base of diesel gen-sets. Some industry estimates peg the market size to be around 60 GW. The typical levelized cost of energy (LCOE) for diesel based generation can be anywhere between INR 12/kWh to INR 18/kWh (EUR 0.14/kWh to EUR 0.22/kWh) (or significantly more for remote sites) and the grid commercial and industrial tariffs can be as high as INR 9/kWh (EUR 0.11/kWh) in many locations. Compared to this, the LCOE of solar power is around INR 8/kWh (EUR 0.14/kWh) for solar PV systems without storage.
Intuitively, it makes a lot of sense for companies with high diesel consumption to go solar. However, there is a technological catch in this proposition: Diesel consumption does not fall in proportion to the operating load. This means that the LCOE of diesel generation at say 40% operating load will actually be higher than the LCOE at 80% operating load. Also, as solar power is an intermittent source, in most cases it is not suggestible to shut down a part of the diesel generation in lieu of solar power as a minimum ‘spinning reserve’ (refer) for diesel based generation is usually required.
Several companies are already working on developing solutions that can intelligently manage the different sources of power as per the load requirements of a consumer. SMA has launched its ‘Fuel Saver’ product for the Indian market (refer). This solution is said to be economically viable for project sizes greater than 500 kWp. Some other companies who have a similar offering in the international market are also looking to launch products for India. In addition, new entrants are developing similar products.
BRIDGE TO INDIA is currently verifying the actual savings potential of such products. New, cost effective solutions that will provide significant and reliable savings on diesel costs to consumers can unlock a large diesel abatement market for solar PV in India.
This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.
You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.
What are your thoughts? Leave a comment below.