India based think tank Climate Risk Horizons (CRH) calculates INR 90 billion ($1.1 billion) in savings for energy consumers in Kerala over 5-year duration if the state swaps its scheduled coal power purchase contracts with new renewable energy at an average of INR 3.00 ($0.036)/kWh.

According to the analysts, currently new solar PV tariffs across India range within INR 2.3 to INR 2.5 ($0.028 to $0.030)/kWh. In Kerala, the tariff for ground mounted solar PV is between INR 2.44 and INR 3.83 ($0.030 and $0.046)/kWh, and for floating PV it ranges around INR 3.16 ($0.038)/kWh.

Here’s the math in CRH’s recent report Greening Kerala’s Grid: Thanks to the coal-power’s inflationary trajectory, the per unit cost of generation for central government owned coal power plants has gone up 12% from INR 3.4 ($0.041)/kWh in FY 2022 to INR 3.8 ($0.046)/kWh in FY 2023.

Since most of the increase is from the old coal units of Ramagundam and Talcher, both in Kerala, the fossil-fuel accounts of a large portion of the South Indian state’s supply from central stations.

“There will be a 9.66% increase in per unit cost of energy from coal contracts during this financial year, increasing from INR 3.65 ($0.044)/kWh in FY 21–22 to ₹4 ($0.049)/kWh in FY 22–23,” explain CRH analysts. “Total cost of power purchase based on energy scheduled from coal contracts for FY 22–23 is INR 73.7 billion ($893 million), 10.5% higher than previous financial year.”

However, if Kerala can replace all of its currently scheduled coal power contracts from central sector plans with new renewable energy at an average of INR 3.00/kWh, every year it would translate to around INR 9.7 billion ($117 million) in savings.

They add, “A phased energy transition plan with the goal of replacing all coal power contracts with renewable energy could ultimately save an estimated INR 18.43 billion ($223 million) annually, or over INR 90 billion over 5 years.”

Their assumption is based on the tariffs sought by Kerala State Electricity Board (KSEB) for FY 2022-2027.

CRH believes Kerala has not been tapping its renewable energy potential as it has installed only 10% of its 1.97 GW target by 2022. It should be focusing on distributed generation of renewables to make up for land constraints faced by ground mounted solar, and largely domestic patterns of consumption.

It counts more than 8.6 GW of floating PV capacity potential for Kerala, covering 20% of the surface area of its existing large and medium sized water bodies, according to the report. Over 5 years, 5.078 GW floating PV capacity can help save INR 14.2 billion ($172 million) annually by replacing 1.59 GW of coal power currently purchased by the state from central generating stations.

“Thus, in the near future the gradual adoption of FPV/ PV combined with an increase in power procurement from medium- and short-term sources to replace longterm coal agreements would reap marginal cost benefits as the blended tariff from these sources would be below ₹4/kWh but probably not as low as INR 3.00 or INR 3.16/kWh,” stated CRH CEO, Lead Analyst and one of the authors of the report Ashish Fernandes. “The real benefits in the near future would be in terms of higher energy self-reliance, a growing ecosystem of entrepreneurs and installers, and a hedge against the ever-increasing cost of coal-based power.”

Complete report is available on CRH’s website for free download.