Que. To what factors can the recent dramatic fall in equipment costs and tariff of solar energy be attributed? What implications does the trend have for the thermal power producers and the related industry? (150 words, 10 marks)

UPSC CSE : 2015

Answer: 

Approach:

Introduction

  • Give a brief about the status of solar energy in India.

Body

  • List the factors that have led to fall in equipment costs and tariffs of solar energy.
  • Mention the impact of solar energy on thermal power plants.

Conclusion

  • Conclude stating that solar power is bound to grow but it doesn’t naturally mean an end to thermal power plants.

Introduction:

According to IEEFA, India could be able to produce up to 405 gigawatts of energy from renewable sources by 2030, which is even greater than the target of the government to produce 50% of its electricity from non-fossil fuel sources by the end of this decade. Solar energy is set to contribute a lot to that target.

Body:

The recent dramatic fall in equipment costs and tariffs of solar energy can be attributed to several factors:

  • Technological advancements: The rapid technological advancements in solar technology have made it more efficient and cost-effective, leading to a significant reduction in equipment costs.
  • Scale of production: The increasing demand for solar energy has led to an increase in production scale, which has reduced the cost of production.
  • Easier to build and maintain: solar energy is now faster to build and cheaper than new coal fired power plants, less prone to fuel volatilities and less regulated from an environmental clearance perspective.
  • Government subsidies and incentives: Governments around the world have provided subsidies and incentives for the adoption of solar energy, which has made it more affordable for consumers.
    • For instance, India has initiatives like National Solar Mission, PM-KUSUM, Grid connected rooftop, etc.
  • Increased competition: The growth of the solar industry has led to increased competition, which has further driven down equipment costs and tariffs.
  • Improved regulatory outlook: The government is demonstrating more clarity in policy. It goes a long way in helping investors to plan their strategy in India.

With the cost of solar energy falling rapidly, it is becoming increasingly competitive with traditional fossil fuel-based power generation. This is likely to result in a shift away from thermal power generation and towards renewable energy sources such as solar.

This shift is likely to have a number of implications for the thermal power producers and related industry, including:

  • Increased competition: With the growth of the solar industry, thermal power producers will face increased competition from renewable energy sources.
  • Reduced demand: As solar energy becomes more affordable, the demand for thermal power generation is likely to decrease as it is easily accessible and is sustainable.
  • Investment risks: As demand for thermal power generation decreases, there is a risk that some thermal power plants may become stranded assets, with investments made in them becoming unprofitable. This reduces the scope for new investments while the older technologies keep getting inefficient.
  • Need for transition: The shift towards renewable energy sources such as solar will require a transition for thermal power producers and the related industry, which may be difficult and expensive.

Conclusion:

Overall, the trend towards lower equipment costs and tariffs for solar energy is likely to have significant implications for the energy industry as a whole, and in particular for thermal power producers. But there are concerns on how solar energy will overcome limitations posed in areas of power load, variability of energy, quality of the grid, weather, the energy mix, power pricing and the fact that not every region is blessed with abundant sunlight while a large section of population is devoid of electricity. All these taken together will amount to some respite to the thermal sector.

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UDAAN PRELIMS WALLAH
Comprehensive coverage with a concise format
Integration of PYQ within the booklet
Designed as per recent trends of Prelims questions
हिंदी में भी उपलब्ध

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