To what factors can the recent dramatic fall in equipment costs and tariff of solar energy be attributed ?…

Question

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 ?

Ghissu Editorial · Accepted Answer

The fall in solar costs and tariffs came from a global fall in module prices, Chinese scale and Indian reverse auctions and solar parks, and it has pushed thermal power from baseload to costly back-up. Tariffs fell to Rs 2.15 per unit by 2024-25.

**Introduction**

Solar tariffs in India fell from about Rs 12 per unit in 2010 to under Rs 5 by late 2015, and to Rs 2.15 by 2024-25 (PIB, 2025), reshaping the economics of thermal power.

**Factors Behind the Fall in Solar Costs and Tariffs**

1. **Learning curve**: Module prices fell about 80% between 2009 and 2015 (IRENA) as polysilicon gluts, scale and higher cell efficiency cut costs.
2. **Chinese overcapacity**: Huge Chinese factories pushed module prices down, and Indian developers imported cheaply until the 2018 safeguard duty.
3. **Policy-driven scale**: The 100 GW solar target, SECI reverse auctions and solar parks such as Bhadla and Kurnool reduced land and evacuation risk for developers.
4. **Cheaper finance**: Twenty-five-year PPAs, SECI's payment security and green bonds lowered the cost of capital.

**Implications for Thermal Producers and Related Industry**

SKETCH: flow | Cheaper solar to thermal stress
- Cheaper modules
- Lower auction tariffs
- Discoms prefer solar
- Thermal PLF falls
- Stranded coal assets

1. **Stressed assets**: The Standing Committee on Energy (2018) found 34 thermal projects of about 40 GW under stress.
2. **Balancing role**: Coal plants now ramp for the evening peak, and CEA rules require flexible operation down to 40% load.
3. **Industry ripple**: Coal India, railway coal freight, BHEL's orders and bank loans to power face a squeeze, prompting NTPC and Coal India to enter solar.

**Conclusion**

Cheap solar, born of global learning and Indian market design, has made thermal power a costly back-up rather than the default. A managed transition with flexible coal, storage and worker redeployment will secure both net zero and reliable power.

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 ?

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