Subject: Economy

The unprecedented decline in solar energy costs represents a transformative shift in the global energy landscape, driven by technological innovations and policy support.

Factors Contributing to Fall in Solar Equipment Cost and Tariff

Technological Advancements

• Manufacturing Efficiency: Improved production techniques and automation have led to significant cost reductions in solar PV modules.
• Research and Development: Continuous innovation in solar cell technology has enhanced efficiency and reduced material usage.
• Economies of Scale: Large-scale production, especially in China (projected PV module capacity of 157.85 GW by 2028), has decreased per-unit costs.

Policy Support and Incentives

• Customs Duty Reduction: India's reduction of import duties on solar cells (from 25% to 20%) and modules (from 40% to 20%) has lowered equipment costs.
• Government Schemes: Implementation of programs like Development of Solar Parks scheme with subsidies up to INR 2 million per MW has boosted solar adoption.
• Green Energy Open Access Rules (2022): Enhanced support for Commercial & Industrial solar projects.

Implications for Thermal Power Producers

Short-term Impact

• Market Competition: Falling solar tariffs (reaching ₹4.98 per kWh) are challenging thermal power's cost competitiveness.
• Capacity Utilization: Increasing solar penetration affects thermal plants' operational hours and efficiency.

Long-term Adaptations

• Diversification: Traditional power producers like Adani Power are expanding into renewable energy sectors.
• Hybrid Solutions: Integration of solar with thermal plants for balanced power generation.
• Financial Performance: Despite solar competition, thermal producers show resilience (Adani Power's EBITDA rose 96% to ₹28,111 crore in FY 2023-24).

Impact on Related Industries

• Coal Sector: Reduced long-term demand affecting mining companies and transportation.
• Manufacturing Opportunities: Growth in domestic solar equipment manufacturing creating new industrial opportunities.
• Grid Infrastructure: Need for modernization to handle intermittent solar power.

The solar energy revolution, marked by falling costs and increasing efficiency, is reshaping India's energy landscape. While presenting challenges for thermal power producers, it's creating opportunities for industrial transformation and sustainable development through initiatives like PLI schemes and Green Energy Corridors.