Grid Parity of solar PV may heavily dent electric utilities
As solar PV cost has come down heavily in last three years the economics of solar electricity has become attractive to commercial building owners and many domestics & international roof top companies are pitching into install roof top PV system and make it a business case. The sector is taking shape in the form of distribution generation utilities to provide captive power through solar PV to the building owner’s interest of commercial building owners as well as industries towards captive solar plants may heavily dent the profits of electricity distribution companies, as these consumers are high paying consumers which will gradually shift to captive generation. As solar PV will be there captive generation source, the utilities will not be able to charge them the cross subsidies are charge & leave to losses.
FIGURE: Contribution of Key Drivers Toward Module Cost Reduction, Best-in-Class China Producer, Q4 2010-Q4 2012
This situation can be compared with telecom sector where in BSNL was the only service provider having landline everywhere and advent of mobile telecom solutions and internet telephony made the visibility of BSNL landline solution invisible. Although solar PV do not provide the complete solution, but the shift of consumers towards captive generation and advancement of electricity storage system will make consumer’s independent to utilities
Utilities are already experiencing significant losses as most of the large consumers are shifting towards open access category and sourcing cheaper electricity through a solar project under a bilateral PPA. Commercial consumers need not to do investment of their own in solar PV as there are plenty of investors want to explore these opportunities under a rooftop lease model. The enforcement of solar purchase obligations by the states i.e. Tamil Nadu has change the dynamic of rooftop solar economics. PPAs were signed with a rooftop installers at the rate of 7 Rs/unit, which is a typical retail tariff for commercial consumer categories. Top of this the roof top installer can avail benefits i.e. REC as well as Accelerated depreciation which makes it win-win situation to the roof top installers as well as to the building owner.
Figure: Solar rooftop price Vs. Grid price
Many utilities are discouraging open access as well as net metering options in order to differ the solar PV installations in these building and keep the commercial consumer base intact with them. It won’t be possible for utilities to hold these policies decision for long time and the utilities need to deal with this situation as the rooftop solar PV market evolves. Then it is still unclear how utilities will deal with this situation wherein the only option left is agriculture & domestic consumers which are heavily subsidies due to various political reasons.
Article By: Dr. Sanjay Vashishtha & Kapil Dev Sharma