Completion of the final phase of the Bhadla Solar Park in Jodhpur, India takes the total operating capacity of the 40 square kilometer park to 2.25 gigawatts. The largest in India, it is the size of 5,600 football pitches – or as Indians would prefer to compare it, about 2,000 cricket grounds.
It comes as China completes its Huanghe solar park at Qinghai in the middle of the country. The park is geographically bigger at 57 square kilometers, but generates slightly less power at 2.2 gigawatts. As the location is remote, a 1,600 kilometer power line was constructed to transmit the electricity to China’s major cities in the east.
Each solar plant in sparsely populated desert areas contains more than six million photovoltaic panels and cost around USD 2 billion to build. Combined, they can generate enough electricity to power more than three million homes, equivalent to a city the size of London.
Aside from the environmental advantages, solar power is proving to be among the cheapest forms of energy in countries where incomes are low. The Bhadla plant can sell electricity at 2.44 rupees (3.3 US cents) per kilowatt/hour, making it the cheapest in India. Coal power on average costs over 3 rupees per kwh, though its price has been declining due to lower demand during the Covid-19 crisis.
Both China and India are major producers and consumers of coal, and both remain reliant on it. Domestic coal accounts for 57% of energy generation in both countries, making them the world’s largest and third-largest emitters of carbon, producing 9.8 billion ton and 2.5 billion tons respectively. (The US falls between them with 5.3 billion tons of carbon emitted).
China has committed to phasing out coal to become carbon-neutral by 2060, while India intends to double the share of renewable power in its total installed capacity to 40% by 2030. Reducing the carbon emissions of the world’s largest countries remains essential if the world is to meet the goals of the Paris Agreement and limit global warming to a maximum of 2 degrees Celsius by 2100.
“In the emerging markets universe, there are several companies that people can invest in to get exposure to the solar energy theme,” says Jaap van der Hart, portfolio manager for the Robeco Emerging Stars Equities fund. “These are mostly Chinese companies, as China dominates the global supply chain.”
“In the emerging markets funds, we own a Chinese solar glass company, which is in a good niche segment, and as one would expect has a strong growth outlook. Of course, the growth of solar energy is hardly an undiscovered theme, valuations are therefore pretty high, and we believe investors should be selective and focus on the companies with a clear competitive edge and reasonable valuation.”
“Another consequence is for the effect on other segments in the industry. As solar energy is still getting cheaper and is a cleaner alternative, there is increased pressure on the use of coal and other fossil fuels. The emerging market funds do not invest in coal companies, which makes sense not only for their negative impact on sustainability, but also given the outlook for declining prices and volumes.”