Grid Parity per Wikipedia is defined as “the point at which alternative means of generating *(continuous) electricity produces power*(throughout the day) at a levelized cost that is equal to or less than the price of purchasing power from the grid. Reaching grid parity is considered to be an important point in the development of new sources of power, the point at which it becomes a contender for widespread development without subsidy support. The term is most commonly used when discussing renewable energy sources, notably photovoltaics (solar panels), wind power and wave power. It is widely believed that a wholesale shift in generation to these forms of energy will take place when they reach grid parity.”
*[The words in bold are an addition to define ideal and effective grid parity]
Almost every conference, renewable website, article, etc. has focused on the ability of Renewable Energy achieving grid parity in the near future or the fact that parity is a reality today especially for replacement of expensive forms of off grid generation i.e. Diesel, Furnace Oil….
To comprehend the term grid parity (a common misnomer) in the Indian context and to moderate the use in terms of actual energy production, we need to determine its actual use in replacing current technologies and sources.
Renewable Energy in forms other than Solar have had a number of fits and starts as an eco-conscious alternative without the ability to contend with conventional resources. Until renewable energy sources in one form or more are capable of providing 365 days x 24 hours continuous predictive power irrespective of input similar to conventional power plants running on coal, nuclear, hydro….grid parity has little intrinsic value, and can only address grid power peak requirement, limiting grid based capacity addition tremendously.
Power pumped to the grid only during certain hours of the day minimize the overall positive impact and as such, have negligible effect on reducing global warming which defeats the primary purpose of renewables. A far better use, is off grid, in places which require discoms to put in much effort and cost to connect remote hamlets for a negligible return or as a backup to intermittent sources of supply.
Figure 1: Load curves for a typical electricity transmission grid
Solar, Wind, Biomass (including biomass feedstock) consume more space per MW compared to conventional sources e.g A 1 MW coal thermal power equivalent of Solar PV / CSP would require approximately 20 / 10 acres per MW. A coal-fired 500MW plant equivalent in PV / CSP would require almost 10,000 / 5,000 acres or 40 / 20 Sq Kms. These plants also only generate power variably across months including various hours of the day and as such cannot form an important component of base power. Power Plants of such large scale also face difficulties being funded and land availability is now an issue.
The race for grid parity in Solar has begun with crashing prices and increasing capacities but there is still some distance to cover. Current costs have decreased from the stratospheric Rs. 190,000,000 (19 Crores) per MWp from mid 2009 to a much more realistic Rs. 85,000,000 today in January 2012.
Chart 1: Straight-line Decreasing cost of Solar Power Plants (PV) without Energy Storage
To be considered true conventional replacements, renewable energy in its current form has to overcome the hurdles below:
- Initial Capital Intensiveness especially Solar with storage compared to conventional power plants based on coal, hydro, gas, etc.
- PLFs / CUFs for Solar PV and Wind need to double at minimum
- Generation of constant and consistent power especially with wind sources which are prone to introducing spikes in the grid
- Discoms losing 30-40% of all power generation, adding substantial cost to the mix
- Land for generation requirements lower or on par with conventional power
- Current average pooled purchase cost of power from conventional power plants hover around Rs. 2.50 ($0.05) [if you add to this the 40% odd losses in Transmission and Distribution, brings the price close to Rs. 3.50 ($0.07)] which no renewable energy source has the capability to match currently. The APPCs for various Indian states are:- Andhra Pradesh – Rs 1.78/kWh, Maharashtra- Rs 2.43/kWh, Karnataka – Rs 1.85/kWh, Kerala – Rs 1.46/kWh, Tamilnadu- Rs 2.62/kWh, Gujarat- Rs 2.21/kWh, Rajasthan – Rs 2.48/kWh.
Chart 2: Residential Grid Prices across India and average state solar irradiation
Source: CEA 2009, Q-Cells
Indian residential tariffs start from around Rs. 2-3 per KWh and increase based on usage of every hundred or so KWh units until they hit a ceiling of around Rs. 6-7 per KWh excluding taxes. Industries currently procure grid power at around Rs. 5-6 + taxes while the most expensive power is provided to commercial establishments who bear the brunt of cross subsidies for the varied sops and subsidies. Discoms are currently at a very high risk of default due to various reasons explained in my article on India’s transmission and distribution utilities – It’s time to transform.
Table 1: Aggregate Cash Loss of Discoms
Source: IDFC Report 2010
These low APPC rates of Discoms are predominantly due to the mix of Coal, Gas, Nuclear and Large Hydro power plants that consist of more than 80% of the entire power generated in India. PPAs with these generators (who also receive subsidized fuels) have been signed much earlier and prices are skewed towards the lower end. Coupled with inefficiencies and the upward trend of coal prices, thermal plants have been increasingly finding such low rates unviable and have consistently approached regulators as well as discoms to increase their acquisition rates with little success to date. The Adani Group has recently moved to scrap its PPA with a discom and the government has also entered the fray stating that those power producers who sell power in the open market will no longer receive subsidized / indigenous coal at preferential rates.
Table 2: Power Generation across geographic regions and types
Power Utilities and Discoms have to work around two main issues with installing renewable energy on their system – ability in scheduling power inputs (i.e. known as day ahead) and stability due to fluctuations from wind power in particular. Government and private organizations in India, at both the development board and utility level, are looking for ways to “schedule” renewable energy to avoid this problem. But there has been little progress to show to date.
Renewable Energy Certificates have recently been launched this year and are trying to bridge the pricing gap for carbon credits in the Indian context but have had a fitful beginning with only some wind projects making more than the floor price. It’s a step in the right direction, though. There has been talk of a few brave investors in Solar willing to setup projects based on the REC mechanism however none of them have begun commissioning as of yet.
Table 3: REC’s returns based on forbearance and floor prices
Source: IDFC Report on Economics, Regulation, and Implementation Strategy for Renewable Energy Certiﬁcates in India
Renewable Energy in the form of small hydro can achieve grid parity but given sources are limited, can’t contribute majorly to mainstream power and can only form a small portfolio of the nation’s energy requirement. This is a tremendous limitation, also in times of drought and global warming these installations are prone to lower production factors.
Chart 3: Capacity and Electricity Generation from Renewable Energy Sources (2008-2009)
Source: IDFC RE Report
Biomass is another source extremely limited by feedstock procurement due to competition from other users such as industries and even though India is touted as an agricultural country, non-availability of crop waste is a common cause of project failure, with some plants using more than 50% coal at times.
Neither is India a wind rich state with PLF’s varying between 20% to the low 30% making it a not so viable prospect except for the tax rebate which made wind a popular RE source for corporates with supernormal profits. With the introduction of the Direct Tax Code, this may change.
I have covered Renewable Energy Sources in perspective to the Indian Subcontinent in my article on Renewable Energy – Is it working for India?
Table 5: RPOs targets and compliance across states in India
Source: IDFC Report on Economics, Regulation, and Implementation Strategy for Renewable Energy Certiﬁcates in India
With the advent of continuous energy storage mechanisms in the future for Solar power, power costs should ideally reduce, efficiencies improve and even with inflation, should be able to generate energy below existing high costs. The latest round of JNNSM Solar allocations have dropped solar off take prices to a new low of Rs. 7.49 / KWh, with a few developers offering lower prices making solar increasingly viable for commercial use. Solar currently has the most potential to meet and sustain rates for power for the coming decade(s) thus spurring a renewed industrial revolution for India.
Chart 4: Grid Parity for Solar PV in India
Different Solar based hybrid technology solutions with the ability to generate heat and power alongside have come into the market, complementing existing sources to provide greener solutions.
The most promising grid based solution to resolve the ongoing issues with coal based plants seems to be the Gemasolar plant which delivers power on a 24 hour cycle thus providing a continuous, consistent replacement. TheAndasol CSP plant with 7.5 hours of storage as well as the Terrasol CSP tower plant in Spain with 15 hours of storage, are amongst the frontrunners for the type of renewable energy technology that is set to replace coal based power stations with clean alternatives. Also being able to be installed in the arid region of nations, are the perfect foil to conventional polluting sources.
Terrasol’s Gemasolar plant is amongst the world’s first commercial-scale concentrated solar power plant (CSP) using molten salts receiver technology, heat is generated using 2,650 large mirrors (heliostats) reflecting the sun’s rays to a receiver on top of 450-feet tower which reduces the amount of piping and other issues that other technologies face due to their complexity.
The stored energy in the molten salt releases stored energy for approximately 15 hours without the sun shining, providing enough power for 1,00,000 homes. The receiver heats the salts to enormous temperatures in excess of 500 oC, when the molten liquid is pumped up the tower to soak up the sun’s heat directed to the receiver. The high temperature at which solar energy is transfer in the receiver to the molten salt provides steam at a higher pressure and temperature which considerably increases the thermal cycle efficiency.
Each pound or kilogram of molten salt is able to store up to three times the amount of energy that can be stored in oil, an energy-store that is used at other CSP power plants. Cooling liquid salts release energy that is used to produce steam, which turns turbines and generates electricity that is transferred to a general grid hookup at the plant. This structure is similar to coal based power plants where molten salts replace the need for burning fossil fuel.
The $325 million 19.9MW equivalent plant is a joint venture, between the Spanish engineering and construction firm Sener that owns 60% and investment partners from Abu Dhabi’s Masdar energy company. The price per MWp is almost 10 times that of a standardized PV based plant, however the PLF’s of 60%+ allow for a quicker recover period.
The technology is more suited for large scale plants of 100MW+ where better sweet spots are possible. These prices have already reduced to an extent since the installation and localizing manufacturing of the Balance of Systems would drive down costs even further and quicker while increasing employment in the country.
Chart 5: Concentrated Solar Power (CSP) time to grid parity
Source: KPMG report – The Rising Sun
On an average, a system attached to a CSP plant with approx. 8-10 hours of storage will increase the capital costs by 1.8-2.0 times the compared to without, but generates 2-2.2 times the energy i.e. In place of installing a 2 MW capacity plant ideally a 1MW plant with 10 hours of storage will generate more energy while costing less along with consistent and continuous grid power.
Prices for CSP with storage should ideally hit the Rs. 5 benchmark by 2015-16 if current downward trends prevail and will possibly create a viable alternative to coal based thermal stations.
Current issues in dealing with the increasing prices of power have been discussed at length in my previous article on Transmission and Distribution. If the discoms do manage to get their act together quickly, there is a tremendous amount of benefit that renewable energy can provide to a nation already bogged down by increasing inflation and infrastructure issues.
So while grid parity is possible, the ball is firmly in the technologist’s court to mainline renewable energy.
Editor’s Note: Ritesh Pothan leads an advisory organization focused on renewable energy projects and also runs two of the largest renewable energy forums on linkedin.com dedicated to the Indian subcontinent.