Pricing policies and openness to private investment
The move in many countries to establish more commercial
arrangements for electricity supply and to be open to private investment should
also help improve the returns to solar energy investments. The marginal costs of
electricity supply are typically 4¢/kWh at off-peak and 15 to 20¢/kWh
at peak in urban areas; the marginal costs at peak are sometimes higher in the
developing countries because demands are spikier. Average costs are about
10¢/kWh in urban areas and may range from 20 to 40¢/kWh in rural
Yet until recently average prices fell far short of these levels
(around 4 to 5¢/kWh in 1990), and peak-load pricing was rarely applied,
notwithstanding many attempts to introduce it over the past 20 years. If the
reforms now ongoing in many countries are successful, they will move prices
toward marginal costs, and this in turn will favor the use of solar energy in
both urban and rural areas and for large- and small-scale applications.
Peak-load pricing would also stimulate the development of technologies for
short-term storage, thus making some of the renewable technologies better
equipped to supply dispatchable power.
Box 3. A PV Program in India: A Worrying Experience
"PV systems are easy to transport and install, require no fuel for
operation, have no moving parts, are noise and pollution free and require very
little maintenance. They are thus ideally suited for applications in rural
areas, remote and isolated locations, and other places where conventional
electricity is not available or is unreliable. The programme has four major
applications viz. Street Lighting system, Domestic Lighting System, Community
Light and TV System, and Water pumping system for drinking water and micro
Rs. 69.11 crores was spent on the Solar Photo-Voltaic Programme,
during the period 1986-92, constituting 62% of the total expenditure of the
Solar Energy Programme. But there were substantial shortfalls in achievements of
the systems installed. Most of them were not working due to lack of proper
maintenance, subquality performance of the systems and apathy of the local
users. Out of the 5,496 street lighting systems surveyed 56.5% were not working.
The average failure rate ranged from 33 to 100% in various states. In the case
of domestic lighting systems the failure rate ranged from 25 to 94% in four
states. In six states not a single community IV system had been installed. In
the case of water pumps, 1,181 pumps had been installed till 31 st Dec. 91. The
failure rates of the pumps ranged from 41 to 100% in the five states surveyed.
There were many cases of these systems having been installed at offices and
residences of high officials contrary to the guidelines for the programme.
Coordination between receipt and issue in the inventory was
wanting resulting in overstocking, non-availability of closing stock and
materials. Systems costing Rs. 1.28 crores could not be utilised in two States
due to coordination problems."
- From "Report of the Comptroller and Auditor General of India
for Year Ending March 1993"