Wind At Parity With New Coal In India, Solar To Join By 2018: HSBC

Field and wind turbines in India. (Credit: Wikipedia/Vestas)

By Sophie Vorrath via RenewEconomy.

Wind energy is now cost competitive with new-build coal capacity in India, and solar is likely to follow suit sometime between 2016-18, according to a report by HSBC.

The report on India Renewables, Good Bye Winter, Hello Spring, published on April 30, says the growing cost-competitiveness of renewable energy with new-build coal – and the arrival of wind parity, despite the upper wind FiT range being around 15 per cent lower than the upper tariff range for new coal capacity (see chart 3 below) – is helping to drive strong renewables growth on the sub-continent.

India’s share of renewable generation in the total electricity mix increased to around 6 per cent in the 2012/13 financial year – an amount the government is hoping to grow to 20 per cent by the end of 2020, to help meet the nation’s a peak power deficit of 12GW, or around 9 per cent of its demand.

“With electricity demand expected to grow and conventional power capacity facing its own challenges, we expect developers and investors to favour renewable capacity addition,” says the report, pointing to increasing constraints on new-build coal, gas and nuclear, as well as increasing levels of water stress.

“Coal stress has been a key driver of renewables in India,” says the report. “We now see water stress as also supporting renewables growth. For the third consecutive year in a row, some coal-based capacity has been closed down during the pre-monsoon period driven by water shortages. We note that thermal power generation is the largest water consumer within the industry segment in India.”

For wind, favourable policy support mechanisms, such as increased state tariffs (although most remain well below coal tariffs, as mentioned – chart 3) and the expected 2014 reintroduction of the government’s Generation Based Incentive for wind energy projects, are expected to help deliver what some say could be a potential capacity of more than 100GW to a few hundred GW – well above the 50GW the Indian government has long been forecasting.

“Over the past 12 months, across key wind states, except Karnataka, the wind tariff has been raised,” says the report. “Six key states – Andhra Pradesh, Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Tamil Nadu – have increased tariffs in the range of 2-36 per cent,” it says, while Karnataka’s wind tariff is due to be reviewed next year, and a few other states, like Kerala, have also increased tariffs.

For solar, HSBC says it is now forecasting grid parity for between 2016-18, two years earlier than its previous prediction of 2018-20. The report notes that the cost of solar systems has declined 70 per cent over 2008-12 – a decrease that is reflected in the solar tariff decline observed in India for solar projects over the past three years (see Chart 4).

The government is aiming to install around 10GW of solar from 2013-2016, including 3.6GW capacity under the Central Government (GoI) Program and another 5.4GW from the state programs. According to HSBC, India currently has 1.2GW of installed solar capacity and over 4GW of capacity is at various stages of tariff bidding.

To drive this growth, the government recently announced project developers would be likely to be paid $US11/kWh, and could also bid for capital support if needed, through mechanisms such as Viability Gap Funding, which – as stipulated in the draft of India’s National Solar Mission, Phase II – could cover up to 30 per cent of the cost of a project.

— Sophie Vorrath. Reposted with permission from RenewEconomy.

8 Responses to Wind At Parity With New Coal In India, Solar To Join By 2018: HSBC

  1. wili says:

    I wonder if the improvements GE is saying it is making in its most recent class of turbines has been figured into these calculations. Every bit that tips wind toward being cheaper than coal makes it more likely that fewer (and eventually no) new coal plants will be built.

    Ideally, we would just all recognize as a globe that mining and burning more coal is putting a gun to our children’s head’s and pulling the trigger.

    But while we are waiting for such sanity to dawn on the global consciousness, it is good that the economic signals are starting to point point things in the right direction (though nowhere quickly enough).

  2. Sasparilla says:

    Well said wili. I doubt the GE hybrid turbines have been figured in here (since there hasn’t even been a large scale deployment of them yet).

    In this environment of the fossil fuel industry having a choke hold of our government and media – it is very satisfying to see the costs of wind / solar coming down much faster than predicted and we’re very close (past it in some places) for the market to run with renewable energy as the cheapest option (which will be a self reinforcing process as time goes on).

  3. Dr.A.Jagadeesh says:

    I disagree with the contents.

    Let us look at the genesis of Wind in India.

    The development of wind power in India began in the 1990s, and has significantly increased in the last few years. Although a relative newcomer to the wind industry compared with Denmark or the United States, India has the fifth largest installed wind power capacity in the world. In 2009-10 India’s growth rate was highest among the other top four countries.
    As of 31 Jan 2013 the installed capacity of wind power in India was 19051.5 MW, mainly spread across Tamil Nadu (7154 MW), Gujarat (3,093 MW), Maharashtra (2976 MW), Karnataka (2113 MW), Rajasthan (2355 MW), Madhya Pradesh (386 MW), Andhra Pradesh (435 MW), Kerala (35.1 MW), Orissa (2MW), West Bengal (1.1 MW) and other states (3.20 MW). It is estimated that 6,000 MW of additional wind power capacity will be installed in India by 2012. Wind power accounts for 8.5% of India’s total installed power capacity, and it generates 1.6% of the country’s power. India’s wind atlas is available.

    “Wind-turbine suppliers in India may be forced to consolidate amid increasing competition after a policy vacuum prompted a 39 percent plunge in installations in the first half of the financial year.
    In the six months ended Sept. 30, turbine makers including Suzlon Energy Ltd. (SUEL) andVestas Wind Systems A/S (VWS) installed 851 megawatts of wind capacity, down from 1,403 megawatts the previous year, according to provisional numbers from the Indian Wind Turbine Manufacturers’ Association in Chennai.
    Investors are building fewer farms in the world’s third- largest wind market after two government incentives expired in March. Turbine makers are unlikely to offset the drop in demand with exports as other major markets in China, the U.S. and Europe also slow, according to Bloomberg New Energy Finance.
    “Pressure will increase on manufacturers’ margins,” said Shantanu Jaiswal, a New Delhi-based BNEF wind analyst. “The industry may be setting itself up for future consolidation.”( India’s 39% Plunge in Wind Installations May Spur Mergers,Bloomberg,
    Natalie Obiko Pearson, Oct 17, 2012).

    In these circumstances,how can Wind At Parity With New Coal In India be a reality? Also India is yet to start an Offshore Wind Farm. Offshore wind farms are the future energy option.

    When this being the case,” Wind At Parity With New Coal In India, Solar To Join By 2018: HSBC” is an Utopian idea.Solar is expensive being of low efficiency.

    Dr.A.Jagadeesh Nellore(AP),India

  4. Superman1 says:

    Excellent comments; provides missing context!

  5. wili says:

    Yes, it is important to consider broader contexts, and the actions of decision makers in government and business will have a huge impact.

    But the sources you cite here seem to be from 2012 (or before–your first long paragraph includes the sentence “It is estimated that 6,000 MW of additional wind power capacity will be installed in India by 2012.”).

    Do you have more recent articles to help us understand the situation with alternatives in India right now?


  6. Dr.A.Jagadeesh says:


    Here is the latest information:
    “India’s move to stabilize its power grid by asking wind farms to accurately predict their output a day in advance or face fines will deepen the slowdown in Asia’s second-biggest wind market,Tata Power Co. (TPWR) said.
    A directive took effect this week ordering wind farms with a capacity of 10 megawatts or more to forecast their generation in 15-minute blocks for the following day. Missing estimates by more than 30 percent will incur penalties.
    “Forecasting at 15-minute intervals is very challenging,” and could cost a 100-megawatt farm an estimated 250 million rupees ($4.2 million) a year, Tata Power said in an e-mailed response to questions. “Developers will see this as a further handicap” and penalties will “jeopardize” the industry’s growth, the nation’s second-biggest developer said.
    India’s wind market is already reeling from a 42 percent plunge in turbine installations in the last financial year after the government withdrew subsidies. Some of the biggest developers including Tata Power, CLP Holdings Ltd. (2), and Goldman Sachs Group (GS) Inc.-backed ReNew Wind Power Pvt. have slowed plans for new projects, while turbine sales plunged forSuzlon Energy Ltd. (SUEL) and Gamesa Corp Tecnologica SA. (GAM)
    The order from India’s Central Electricity Regulatory Commission took effect yesterday. Wind farms will use seasonal records and weather forecasting tools for their estimates. Fines will be paid to state utilities through a new Renewable Regulatory Fund”.( Wind Forecast Order Jeopardizes Industry, Tata Power Says, By Natalie Obiko Pearson – Jul 16, 2013,Bloomberg).

    Dr.A.Jagadeesh Nellore(AP),India
    Wind Energy Expert

  7. wili says:

    Thanks, Dr.J.

    I wonder if the World Banks new policy not to fund any more coal plants might make them reconsider that policy. The new GE turbines do look like one way to get around it.

  8. Dr.A.Jagadeesh says:

    To Wili:
    Here is updates on the decline of wind energy in Inda:

    Wind power generation in the country dropped 1,500 MW last fiscal due to the removal of incentives given by the government, an industry body said.

    Indian Wind Power Association (IWPA) has asked the government to restore generation-based incentives and accelerated depreciation for the industry, which witnessed a dip of 1,500 MW in generation during 2012-13.

    The current installed capacity is 19,000 MW.

    “The reason for dip in wind power production is due to removal of (GBI and AD) incentives, IWPA has urged the government to restore the accelerated depreciation (AD),” IWPA Chairman K Kasthurirangan said at a conference here.

    AD is based on investment. If a company invests Rs 100 then Rs 80 it can take back as tax incentive. Under the scheme for wind power, a GBI (Generation Based Incentive) of 50 paise per unit of electricity fed into the grid is provided for a period not less than 4 years and a maximum period of 10 years.

    “GBI was encouraging large scale Independent Power Producers and generation based finance and AD was for small investors,” Kasthurirangan said.

    He added that AD provides cheaper and non-polluting electricity with no annual escalations.

    “We have been working with the Ministry of New and Renewable Energy for the past year on the issue (GBI and AD were discontinued last year) and now they are convinced that a generation loss of 1,500 MW was there,” he said.

    He added that reinstatement of GBI has been announced during the Budget 2013-14. Its form and structure is yet to be announced.

    According to various reports these incentives were scrapped as many developers took incentives to save tax and after the completion of incentives either neglected or abandoned the wind farms altogether{Wind energy dropped 1,500 MW due to withdrawal of incentives
    Association asks govt to restore generation-based incentives(GBI) and accelerated depreciation(AD) for the industry, Press Trust of India | New Delhi May 13, 2013}.

    Dr.A.Jagadeesh Nellore(AP),India.