Wind power vs Solar power in India

The question is really simple, can solar power projects compete with wind power projects in India?

There has been a debate in India on the policy front for renewables, specially the Accelerated Depreciation incentive for projects. The debate was just reignited after the latest government orders have reinstated the Accelerated Depreciation Benefit for wind power projects in India.

Competition between solar-wind seems irrelevant or rather non-existent when you look at the industry presence. Out of 30GW installed renewable energy power sources (Indian Govt. excludes Large Hydro projects which is 40GW till date from classified Renewable energy projects) in India so far 21GW is wind and solar is just over 2GW.

RE-june 2014

So what competition are we talking about? The competition that began late in 2010 when the Government of India came up with the ambitious JNNSM project which targets 20GW of solar power by 2022.

Now lets focus on the projects installed after 2010. I’m using the data provided by the Renewable Energy Certificate Registry (REC)of India. Why REC?

Accelerated Depreciation (AD) is a tax benefit provided to investors who can avail 80% -100% of the project cost as tax saving in the first year. To claim this you have to be an incorporated corporation paying taxes in India. This benefit was a bug which caught on with the industrialists in India who wanted to save on taxes and at the same own an asset and what more could they have asked for when the asset was a power plant which in turn provided power to their industries. (Wind power:A Success with Industries)

Projects installed for this purpose also had the added incentive of claiming clean energy credits of Renewable Energy Certificates. In ideal case developers who claimed AD also ended up registering with the REC, and that is why I go to REC to analyze the impact of AD.

In the time frame from 2010 till date for which the data is available, we can see the no of projects installed and the total cumulative capacity of wind and solar projects in India.

Solar-WIndStats

In 2010, solar power as a power source was virtually non existent and at the same time wind was an established and a reliable power source. The AD benefit was available for both projects till 2012, AD was withdrawn for wind projects in 2012 until now in 2014 when it is restored.

Going to the details in the picture will reveal wind was a dominant force in the years between 2010-2012. In contrast if AD was the major driving force for wind projects, then the results between 2012-2014 should have shown a downward trend, however it is not so. Wind has consistently risen to the top. In fact the size of projects installed in the period 2012-14 is higher than 2010-2012.

What about solar? Solar projects involved almost double the investment of wind projects in the years between 2010-2011. The project cost has come down ever since that time frame and now is only marginally higher compared to wind projects. So, investors who earlier invested a certain amount as part of tax savings had to now (2012-2014) spend more to own a power project which was still unreliable and claim tax benefits. Adding a constraint to this equation was lack of power deficiency. Yes, industries who had invested in wind for AD also got rid of their power crisis and were now self sufficient with their own power production, certain industries even sold excess power on the exchange. So solar power as a power savior was ruled out. Not to mention Industrial growth or GDP in India during the period of 2012-2014 were lower than the period of 2010-2012 which meant most of the industries made less or no profit to invest in new ventures and save tax. This explains why only very few ventured out to invest in solar and claim AD benefits.

So solar power did not gain much in the period of 2012-2014 when AD was removed for wind power projects whereas wind power was very reliable by then which ensured new Independent Power Producers (IPP) were born and they kept the sector growing. In short solar power was in its growth stage during this period but wind power is now stabilized.

Can we conclude that solar power will always be overshadowed by wind power projects in India?

I’m afraid, but from my little professional experience so far, I feel it will take a while for solar power and its developers to establish themselves amongst the investors and the market, let alone compete with the wind power developers. Until then wind power will continue to be the big brother of renewable energy projects in India.

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