× Close
Power Grid

Here comes the sun: Indian consumers go solar as costs plunge

Although it still faces issues, solar power is competitive with newly-built thermal, hydro and nuclear power plants.

The price of solar energy has fallen by half over two years, with prices dropping from Rs 10-12 per unit to Rs 4.63 per unit in 2015, the price at which Sun Edison, a US company, offered to supply electricity in Andhra Pradesh recently, closely followed by another project.

At these levels, solar power is competitive with newly-built thermal, hydro and nuclear power plants, although it still faces issues of being available mainly when the sun shines. Nevertheless, these rates are encouraging a growing number of consumers to bypass India’s creaky electricity grid and directly go solar.

These prices will also boost Prime Minister Narendra Modi’s ambitious solar-energy plans. Of a target of 175 giga watt or 175,000 MW of renewable energy capacity by 2022, solar power will account for 100 GW, as Factchecker.in reported. India currently has 5,000 MW of solar power installations; so the government’s target is a 20-fold jump over the next seven years.

Distortions in India’s power sector act as an indirect carbon tax and are pushing some consumers to adopt solar electricity much faster than they would otherwise have, but, as we explain later, this inadvertent push to solar carries great risks of further crippling already crippled power-distribution companies. Two reasons drive these distortions:

First, industrial and commercial users pay above-market prices for electricity in India, and this is pushing them towards solar power. Second, irregular supply forces many industrial users to install backup in form of diesel generators, which are even more expensive. India now has a captive-generation capacity of 36,500 mega watts (MW), or the equivalent of 15% of the country’s conventional power-generation capacity.

India’s state power utilities lose 23% of the electricity they generate to transmission losses (including theft), as IndiaSpend has reported, and 22% as subsidised or free electricity to farmers. To make up for these losses, other consumers–particularly industrial and other commercial users–are charged up to 50% to 90% more than other consumers.

Source: Lok Sabha
Source: Lok Sabha

The three central-government power utilities – National Thermal Power Corporation, National Hydro Power Corporation and Nuclear Power Corporation of India – which generate electricity using coal, hydropower and nuclear energy, charged between Rs 2.8 to Rs 3.6 per unit for electricity during the financial year 2014-15. These companies operate many older plants, which drive down electricity costs.

Source: National Thermal Power Corporation (NTPC), National Hydroelectric Power Corporation (NHPC), Nuclear Power Corporation of India Limited (NPCIL)
Source: National Thermal Power Corporation (NTPC), National Hydroelectric Power Corporation (NHPC), Nuclear Power Corporation of India Limited (NPCIL)

If electricity were sold at prices close to those charged by the big three, solar power would still have a lot of catching up to do. However, industrial and commercial users, on average, pay more than twice the cost of the cheapest power generated by the big three. At these prices, shifting from grid power to solar electricity, increasingly, makes commercial sense.

Why airports, oil companies and homes like solar power–when it shines

In August this year, the Cochin International Airport went completely solar, with a 12-MW captive solar farm. The idea appeared to have caught on, with the Civil Aviation Minister calling for more airports to go solar. The Kolkata Airport has just finished installation of a 2-MW rooftop solar plant and wants to follow up with a 15-MW solar farm.

Public-sector oil companies have also started to adopt renewable power for their operations, with 3,135 petrol pumps using solar power. Indian Oil leads; it has converted 2,600 of its petrol pumps to operate on solar energy. Technology major Infosys has just completed a 6.6-MW solar plant at one of its software development centers in Telangana, which is now completely run by renewable energy. Infosys is already building a 40-MW solar farm and plans to add 110-MW solar capacity in the next two years, according to a news report. RBL Bank, a small private sector lender, has also decided to go solar in a small way at 10 of its branches, with rooftop solar panels. Tata Power recently installed a 12-megawatt rooftop solar plant at an educational institute in Amritsar.

However, this is not the full story.

Solar-electricity cost is competitive with grid power, but it is available only for about five or six hours every day. For the rest of the day, users must rely on the grid or store energy in batteries, which can be expensive.

Another market distortion has helped here: Since state power utilities lose money, they are often unable to supply electricity round the clock. As a result, many industrial and commercial users have backup diesel-run generation sets. During 2013-14, more than 2 million tonne diesel was consumed by industrial users to make up for irregular power supply.

“Rooftop solar costs around Rs. 6.5 per kWh (kilo watt hour) for systems of 200 kW or more,” said Dr Tobias Engelmeier, founder and director of Bridge to India, a solar-power consulting firm. “With batteries, you are looking at a doubling of the electricity cost. This currently makes no sense vis-à-vis grid tariff. People are trying to replace diesel gensets (which cost more than Rs 15 per kWh), but this is still early stage.”

Rooftop solar’ – solar panels fitted on rooftops of houses, factories and commercial establishments – reached 525 MW across India by October 2015, of which 75% has been installed either by industrial or commercial users, according to Bridge to India estimates. The next 12 months should see another 455 MW of rooftop capacity, said the company. Mercom, another consulting firm, expects India to add 2,150 MW of solar capacity in 2015 and 3,645 MW in 2016.

In other words, the solar-power capacity added over these two years is more than the entire solar capacity added up till 2014, indicating a tipping point for solar power.

Rooftop solar plants are usually enough for a single user, a home-owner or a factory. Their popularity indicates costs are competitive. Thus far, only large users generated their own power.

Without energy reforms, the Prime Minister’s solar-power dreams are difficult

The shift of industrial and commercial users from grid electricity will mean that high-paying customers will continue to leave state-owned power-distribution utilities, which lost Rs 62,154 crore ($10.3 billion) during 2013-14.

The Central Government appears to recognize the need for energy reform and has recently launched a scheme – the Ujjawal Discom Assurance Yojna – to restructure the debts of power distribution companies and reduce the cost of electricity.

However, these measures do not address the energy stolen or lost and given to farmers free or almost free. These losses burden the taxpayer and prevent distribution and generation companies from investing in new infrastructure or technologies, such as solar power.

This article was originally published on IndiaSpend, a data-driven and public-interest journalism non-profit.

We welcome your comments at letters@scroll.in.
Sponsored Content BULLETIN BY 

45% consumers purchase financial products online according to our survey. Here’s why

How one of the last bastions of offline transactions is rapidly moving online.

With flight bookings, shopping and buying movie tickets all moving online, it was only a matter of time before purchasing financial products followed suit. In fact, with greater safety, better user interfaces, simpler processes and of course, busier lives, many Indians are opting to buy financial products like insurance and bank deposits online and on-the-go rather than at a bank branch.

We conducted a survey among 150 consumers in 4 metro cities (Mumbai, New Delhi, Bangalore and Ahmedabad) and 2 tier-II cities (Indore and Bhopal) to understand the financial products Indians are buying online and their needs.

The market for financial products still has huge potential for growth with 29% respondents reporting that they owned no financial instruments. Insurance is without a doubt the most widely owned financial instrument for Indians. Nearly half the sample—45% of the respondents—reported investing in insurance. Apart from that, around 27% invested in bank deposits like Fixed and Recurring Deposits and only 13% opted for mutual funds, 13% bought stocks, and just 10% took home loans. While many people still consume financial products only at their bank branches, a large number have started seeking financial information and buying financial instruments online.

The shifting tide

We found that 45% of the survey respondents bought financial products online, indicating that a large chunk of Indians is trusting the internet to manage something as sensitive as their financial investments. It is clear that Indians value the distinct advantages of transacting online. Convenience is an integral part of the experience—60% of those who bought financial products online felt that convenience played an important role in choosing to purchase online. Multiple aspects of convenience resonate with buyers—over 40% felt that the availability of 24/7 services and the ease of comparing different products from drove them to buy online.

However, findings also reveal some concerns that even tech-savvy Indians have with the online medium.

Security is king

Understandably, security is a key factor for buyers of financial products. Even among the 45% who purchased financial products online, almost half felt that the lack of security prevented them from buying more financial products online. Tellingly, the most commonly bought financial product online is general insurance. It has to be bought (in the case of travel) or renewed (in the case of car insurance) regularly and quickly, which is easier done online. It also doesn’t require the submission of too many personal documents—another­ factor reported by many as a barrier to online purchase of financial products.

To overcome these security concerns, many companies are taking concrete steps to improve the online security of their portals. They are setting up SSL security systems that encrypt and protect the user’s data and payments and are educating customers on how to recognize online payment scams. Thus, people are slowly moving towards buying high involvement financial items like life insurance as well online.

The human factor

Research is a crucial part of the buying process, and most buyers seek information from multiple sources. While research for several consumer products like electronics and furniture has moved online even if purchase is offline, financial products have been slower to move, especially due to the need for expertise. From the sample, 55% rated talking to financial consultants and advisors as very important. Similarly, 55% rated advice from friends and family as very important.

As is evident, while the world is going online, there is something to be said for the familiarity and comfort of human interaction. Even online buyers value non-digital channels of communication. Of those who bought financial products online, 25% felt that visiting bank branches was important, 30% felt that recommendations from friends and family was important, and 33% felt that discussing it with financial advisors was important.

However, we find that online forums and aggregators are also gaining in terms of people using them to research products. According to a BCG report, search queries on life and health insurance have grown 4.5 times from 2008 to 2013, showing that digital is certainly influencing the research part of the buying cycle. Many life insurance companies and banks have caught on to this trend and are finding ways of making customer service executives available online through chat facilities on their portals. Additionally, companies are also investing in a better online user experience by designing their websites to be simple, attractive and easy-to-understand, so that the process of purchase becomes easier for customers.

When it comes to buying insurance, finding an appropriate plan is not an easy process. Life insurance companies are using technology and algorithms to overcome these human biases with innovative products like life insurance calculators. An example of this is the HDFC Life insurance profiler which simplifies the process of choosing an insurance plan. A person can enter five to six parameters and get an objective opinion on the best insurance plan suited to his or her time and status in life.

HDFC Life Insurance has also taken detailed note of its customers’ requirements as they move towards the digital age. Its product website has been designed to ensure consumers feel secure and well attended to when transacting online. All payment gateways have SSL security and are ISO 27001 certified to ensure optimum security. Additionally, to facilitate easy query resolution, it offers an online chat function along with co-browsing where a user can give control of her or her system to the chat executive so that details can be filled in for them. To solve for the barrier of document submission, HDFC Life even allows users to submit documents through e-mail or upload files on Google drive in place of hard copies. Easy e-KYC facilities allow for the Aadhar card and address proof to be uploaded online to quickly verify identity. To find the right insurance plan for yourself and experience the innovative services that the organization has to proffer head to their insurance profiler to start your journey towards buying a life insurance plan.


This article was produced by the Scroll marketing team on behalf of HDFC Life and not by the Scroll editorial team.

× Close