What is the Opposite of a Solar Subsidy?

The answer, apparently, might be something like India’s recent solar auction.

India has a goal of installing 20,000 megawatts of solar power by 2022. But instead of subsidizing the industry to spur growth, India has set up a reverse auction. According to a recent article in Bloomberg, under the program,

the government [of India] proposed to buy solar power at 15,390 rupees a megawatt-hour for 25 years. Companies bid to sell at a discount to that price in a process known as a reverse auction. Those offering the lowest rates win and are awarded the rights to build plants with capacities of as much as 20 megawatts each.

Why offer to sell you power for so little? It seems that installers are making a bet that the future cost of installing solar power will be lower, thus offsetting the lower amount they bid for the rights, and that there will be strong long-term demand for solar.

While solar prices have been coming down lately, it remains to be seen if these will be good bets. One trend has emerged from this year’s and last year’s reverse auctions in India: bids to provide solar power are decreasing, and rapidly approaching parity with coal-fired power.

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