May 12 (Bloomberg) -- Jakson Group, one of India’s biggest suppliers of diesel generators, expects about half of its sales to come from the solar business within three years as rising fuel costs make sun-based power more attractive.
Jakson, which assembles and sells Cummins Inc. generators in India, completed its first photovoltaic power plant in Bap, Rajasthan, about 25 percent below cost and ahead of schedule, Managing Director Sameer Gupta said in an interview.
“It’s no longer sustainable to use diesel generation as a continuous source of power” as the government unwinds subsidies for the fuel and its import-cost surges, Gupta said. “There’s no constraint on solar radiation in India. Sooner or later people will realize that.”
Factories, homes and businesses in India fire up diesel engines daily to combat chronic blackouts that can last eight hours in some areas. Those machines amount to an estimated 60 gigawatts of capacity, according to New Delhi-based consultant Bridge to India Energy Pvt. That’s roughly equal to Australia’s total power generation capacity and a quarter of India’s official capacity.
Jakson targets increasing group sales by 70 percent to 25 billion rupees ($418 million) in three years. Its solar and electrical contracting business will account for about half of revenue by then, up from a third today, Gupta said.
The New Delhi-based group plans to build another 80 megawatts of photovoltaic capacity for its own portfolio and also build plants for other companies, Gupta said. Jakson built a 10-megawatt solar project in Talcher, Odisha state, for NTPC Ltd., India’s largest generator.
“The diesel generator market will still continue to grow as the overall power sector grows,” Gupta said. “But its application will change.” Instead of relying on diesel for continuous power, generators will increasingly be used as an emergency energy source, similar to markets such as the U.S. and Europe, he said.
The cost of producing electricity from a diesel generator has surged 10 times in two decades to as much as 20 rupees a kilowatt-hour, Gupta said. In contrast, declining panel prices and competition has driven the cost of solar down 25 percent since 2011 to an average of 6.5 rupees a kilowatt-hour in India’s latest national auction of solar-plant permits in February.
Jakson has introduced solar-based generators -- collapsible panels deployed on rooftops in combination with batteries or a traditional diesel engine -- priced from 500,000 rupees to 4 million rupees depending on capacity, Gupta said. With lower maintenance and fuel costs, the payoff period is less than seven years, he said.
Cummins’ India unit, Kirloskar Group and Mahindra & Mahindra Ltd. are the three biggest suppliers of diesel generators in India, a market expected to rise to $2.4 billion in sales by 2015, according to Frost & Sullivan.
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