How India Slashed Solar Costs from Rs 16 to Rs 2.5 per Unit: Goyal Explains

Speaking at the Vibrant Gujarat Regional Conference flagship programme on Solar Dividends in Rajkot, Gujarat, Goyal highlighted how market competition and technological scaling transformed solar power from a high-cost alternative into an economically viable energy source.

The Minister recalled that during Prime Minister Narendra Modi's tenure as the Chief Minister of Gujarat, solar energy faced significant criticism due to high initial costs. Goyal noted that at that time, electricity was priced at Rs 16 per kilowatt hour.

He explained that the Prime Minister maintained a clear vision that while prices were high due to small volumes and new technology, costs would inevitably drop as the scale of application increased and technology improved.

"When the Prime Minister was the Chief Minister of Gujarat he started encouraging solar energy. I still remember, there was a lot of criticism. People used to say that it is such an expensive electricity. At that time, electricity was for Rs 16 per kilowatt hour, per unit. People used to criticize that why are you buying electricity for Rs 16 per unit. The Prime Minister had a very clear thought."

The transition from a feed-in tariff system to a competitive bidding model marked a pivotal change in India's energy economy. Goyal mentioned that in the final months of 2014, the government decided to purchase solar energy through reverse auctions rather than having regulators determine costs based on investment expenses. This introduction of market forces allowed developers to compete online and quote lower rates, which subsequently brought prices down significantly.

"I still remember that in the last few months of 2014, for the first time in the country, a directive was issued to procure solar energy through a reverse auction," Goyal said.

Reflecting on the impact of these reforms, Goyal pointed out that in the very first auction conducted through reverse bidding, the rate fell to approximately Rs 2.5 per unit. This reduction represented less than half of previous rates and paved the way for utility-scale projects.

These massive installations, ranging from 1,000 MW to 2,000 MW, began emerging rapidly across the country as the government prioritized renewable energy as a national necessity.

The scaling of ambition played a critical role in the sector's growth. Goyal noted that while the initial national goal was to produce 20,000 MW of solar energy by 2030, the target was revised to 100 Gigawatts, or 1 lakh Megawatts, shortly after the current administration took office in 2014.

This aggressive target-setting occurred at a time when electricity still cost approximately Rs 5 to Rs 6.5 per unit, underscoring a firm resolve to promote renewables.

Beyond the financial metrics, the Minister emphasized the operational advantages of solar power. He stated that once the initial capital investment is made, there is no subsequent expenditure on fuel such as coal, gas, or diesel.

Goyal described solar energy as a natural resource available on a large scale across India and Gujarat, contributing to the broader effort against pollution while providing a sustainable alternative to traditional fossil fuels.

- ANI