‘Grid parity’, or the decline of prices to the same level as conventional electricity has been achieved. Today, electricity produced by large solar power plants costs between Rs 4 and Rs 5 a kWhr if the company that owns the solar plant is in a position to avail itself of a tax benefit called ‘accelerated depreciation’; otherwise, it is around Rs 6.5 a kWhr — not bad, considering that these costs will stay fixed over 20 years, while the cost of conventional power will only go up.
This decline in prices has been possible due to the drop in the prices of ‘modules’— the blue-coloured panels that are kept facing the sun. Even in 2010, module prices cost about $1.8 a watt; today it costs between 60 and 80 cents . Though the fall was aided by technology, the principal reason was the intense competition caused by over capacity of module making.
Now, at the end of 2013, the question is whether module prices will further fall, or rise. What happens in 2014 is very important because it is expected that about 2,500 MW of solar power capacity will get built in the year. This is more than the 2,000 MW that has come up in the country in the last three years.
A number of globally reputed solar market research firms have come up with their predictions for 2014 and one common message is that more solar power plants will be put up in the year than in 2013. Current year’s estimate is about 35,000 MW; the firms expect anywhere between 40,000 MW to 55,000 MW to be added next year globally.
Given the spurt in demand, one would expect module prices to go up. However, four leading solar market research firms have predicted prices to dip, although not as much as they did in the recent years. China-based IHS Solar Research says that while the demand will rise (to 40,500 MW) in 2014, “some overcapacity will persist in the market”. Prices will decline but the drop in prices will be moderate compared with the collapse of 2011 and 2012, says Stefan de Haan, Principal Analyst, IHS – Solar Research. IHS expects prices to fall to 65 cents a watt, down from its benchmark of 73 cents in the current year.
NPD Solarbuzz predicts a 6 per cent fall in prices thanks to competition. “The severe oversupply and extremely low selling prices are forcing polysilicon and wafer makers to continue to find ways to lower costs,” says Charles Annis, Vice-President, NPD Solarbuzz. The prediction of a (small) dip in module prices contrasts with the view in the Indian solar industry. Industry leaders, such as Pasupathy Gopalan of SunEdison (a project developer) and H. R. Gupta of Indo Solar (module manufacturer), see a rise in prices. While the developers seem to have braced themselves to a rise in prices, the manufacturers are happy. Gupta, for instance, notes that a 5-10 per cent rise in prices is good for the industry because “the graveyard is full of bankrupt solar manufacturing companies (globally). These companies, he says, have lost $80 billion in the last three years.
Indian cells and module manufacturers have two cushions—the various government-supported schemes that mandate local procurement and the 375 MW of capacity earmarked for domestic cells and modules under the upcoming bid of the National Solar Mission. Against this demand, Indian manufacturers are all expanding their capacities. Industry observers therefore foresee the build-up of overcapacity in India too relative to the demand that will arise out of mandated local procurement.