BHADLA, India—In a dusty northwest India desert dotted with cows and the occasional camel, a solar-power plant is producing some of the world’s cheapest energy.
Built in 2018 by India’s Acme Solar Holdings Ltd., it can generate 200 megawatts of electricity, enough to power all the homes in a middle-size U.S. town. Acme sells the electricity to distributors for 2.44 rupees (3.4 cents) a kilowatt-hour, a record low for solar power in India, a country that data trackers say has the world’s cheapest solar energy.
More remarkable, the power costs less to generate in India than the cheapest competing fossil fuel—coal—even with subsidies removed and the cost of construction and financing figured in, according to the Indian government and industry trackers.
Price-conscious Indian utilities are eager to snap up that power. “We are infamous for low cost,” says Sandeep Kashyap, Acme’s president.
Solar power has entered a new global era. The industry was long dependent on subsidies and regulatory promotions. Now, technological innovation and falling solar-panel prices have made solar power inexpensive enough to compete on its own with other fuel sources in some regions, when it comes to newly built plants. That could turbocharge growth of renewables in the global energy industry, especially in fast-growing Asian markets where much of the world’s energy infrastructure expansion will take place.
Governments in many solar markets—including China, the biggest—are phasing out or reducing supports. Solar-plant development is going mainstream, with finance provided by global investors like Goldman Sachs Group Inc., Singaporean sovereign-wealth fund GIC and huge Western pension and private-equity funds.
So far, the renewable-energy push hasn’t halted the growth of global energy emissions. But the success of countries like India in feeding their rising power demands with clean energy will still be key to blunting the growth of global challenges like pollution and climate change.
The price declines in solar panels and the power they produce are jolting the industry. In the past decade, solar has grown from less than 1% of the world’s electric-power capacity to an estimated 9% by the end of this year, according to the International Energy Agency, an intergovernmental organization focused on energy policy. By 2040, the IEA expects that to grow to 24%, which would make solar the largest single energy source.
India is at the forefront of the trend, with a cost of building solar capacity that has dropped 84% in eight years, according to the International Renewable Energy Agency, an intergovernmental organization focused on renewable energy. Other countries are close behind, with costs falling fast in Australia and China.
India has increased the amount of solar power it has installed 10-fold in the past five years, to 32 gigawatts, and the government is hoping to triple that in the next few years—one of the fastest paces of growth anywhere. India’s prime minister last year said he wants 450 gigawatts of renewable energy including solar installed by 2030.
If India manages that, which many analysts say is a real stretch, it would account for nearly all the additional electric capacity the country’s Central Electricity Authority has projected it would add by then, and more than the country’s total from all power sources now. India has pledged as a climate goal that 40% of its electric capacity will come from non-fossil fuels by 2030; the latest renewable targets would likely put that percentage at over half.
Cheaper than coal
In 2018, India’s “levelized” cost of solar-power generation—an analysis removing the impact of direct subsidies and figuring in the costs of construction and financing for a new plant—fell to 14% below that of coal, the first time anywhere in the world that generating solar was cheaper than coal on that basis, according to international energy consulting firm Wood Mackenzie.
India’s national energy plan doesn’t anticipate construction of new coal power plants for at least several years. Even state-controlled Coal India, one of the world’s largest coal-producing companies, in November said it planned a pilot solar project as it navigated a future with less coal.
Across Asia, a region expected to account for two-thirds of the world’s new power demand during the next two decades, price declines will make wind and solar combined 17% cheaper than coal by 2030 on a levelized basis, says Wood Mackenzie. In India, solar generation will be almost 50% cheaper, it projects.
“This is a revolution in power generation costs,” says Wood Mackenzie analyst Alex Whitworth. “What it means is there will be a lot more solar investment in India, and in countries like India.”
