Solar Short of Modi's Target Seen Cutting Coal's Market in India

  • KPMG says cost of solar to plunge further within a decade
  • Coal generators will have to respond to competitve threat

The steadily declining cost of solar panels will cut in on coal’s dominance in the electricity industry in India as photovoltaic installations surge to reach Prime Minister Narendra Modi’s target, KPMG said.

The consulting firm estimated the cost of solar generation may fall to 3.59 rupees (5 cents) a megawatt-hour by 2025, which is 22 percent below the lowest bid ever received for photovoltaics in India. The coal industry will have to cut its own costs to keep up with alternatives to fossil fuels, according to a report by KPMG.

"Coal has to transform,” Michiel Soeting, global chair for energy and natural resources at KPMG, said in an interview on Monday. “May be you’ll scale back production or scale back opening of new mines. Those are calls that you won’t take in next five years but 10.”

Modi is seeking 100 gigawatts of solar in India by 2022, up from about 4 gigawatts now. KPMG estimates 54 gigawatts of capacity by the end of this decade and 160 gigawatts by 2025. 

The flood of new electricity onto India’s grid will end shortages of coal and allow the nation to stop importing the fossil fuel for coastal power plants by 2017, said Piyush Goyal, India’s power minister. At that point, the competitive pressure posed by solar developers will force coal to bring down costs, the consulting company said.

“We’re going to see effects of that in two years,” Soeting said. “The big scale up will happen around 2020 as far is India is concerned. Therefore, it’s going to be serious competition at that point.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE