WILL THE SUN SHINE ON INDIA?
Enter the sun
Hindus have always worshiped the sun and its life-giving rays. The nearest star to the earth is 149.6 million kms and the light from the sun takes 8 minutes and 19 seconds to reach the earth, Nuclear fusion is what happens in the sun – it’s the combination of light elements into heavier elements to produce energy. The Sun produces a large amount of energy by combining very light elements such as hydrogen to heavier elements such as helium and then lithium, oxygen, carbon, right up to iron.
The worship of the life-giving energy of the Sun is now going to be or will now be of a different and more practical kind as it will be trapped by India, China and the rest of the world as it has never been tapped before, because of 4 outstanding reasons.
- It is free energy
- It is clean energy
- It is in abundance
- It does not pollute the environment
- The earlier limitations to the use of solar energy related to:
- High cost of equipment/installations
- Lower capacity utilization
- High cost of storage etc
Where do we stand?
The utility electricity sector in India has one National Grid with an installed capacity of 330.86 GW as on 31 December 2017. Renewable power plants constituted 31.7% of total installed capacity. The gross electricity consumption was 1,122 kWh per capita in the year 2016-17. India is the world’s third largest producer and fourth largest consumer of electricity. The per capita electricity consumption is low compared to many countries despite cheaper electricity tariff in India.
In order to address the lack of adequate electricity supply to all people in the country by March 2019, the Government of India launched an ambitious scheme called “Power for All”. This scheme will ensure continues and uninterrupted electricity supply to all households, industries and commercial establishments by creating and improving necessary infrastructure. It’s a joint collaboration of the Government of India with the States to share funding and create overall economic growth.
India’s electricity sector is dominated by fossil fuels, in particular coal, which in 2016 produced about two thirds of all electricity. However, the government is pushing for an increased investment in renewable energy. The draft National Electricity Plan of 2016 prepared by the Government of India states that the country does not need additional non-renewable power plants in the utility sector until 2027, with the commission of 50,025 MW coal-based power plants ready under construction and achieving 275,000MW total installed renewable power capacity.
How to go solar in a population-dense nation?
Land is scarce in India, and per-capita land availability is low. Dedication of land for installation of solar arrays must compete with other needs. The land required for Utility-scale solar power plants is around 250 acres for every 40-60 MW generated.
One alternative is to use the water-surface area on canals, lakes, reservoirs, farm ponds and the sea for large solar power plants. These water bodies can also provide water to clean the solar panels. Highways and railways may also avoid high cost of land nearer to consumption centers, thus minimizing transmission-line costs by having solar plants about 10 meters above the roads or rail tracks.
Solar power generated by road areas may also be used for in-motion charging of electric vehicles thus reducing fuel costs. Highways covered by solar panels would also avoid damage from rain and summer heat and greater comfort for users.
National Solar Mission
The National Solar Mission was launched on 11th January, 2010. The Mission originally set a target of developing 20,000 MW of grid connected solar power by 2022 aimed at reducing the cost of solar power generation in the country through (i) long term policy; (ii) large scale deployment goals; (iii) aggressive R&D; and (iv) domestic production of critical raw materials, components and products, as a result to achieve grid tariff parity by 2022. The mission was to create an enabling policy framework to achieve this objective and make India a global leader in solar energy.
In 2015, the present Governement drastically revised the target of Grid Connected Solar Power Projects from 20,000 MW by the year 2021-22 to an ambitious 100,000 MW by the year 2021-22 under the National Solar Mission.
India’s push for Solar
India’s push for solar has as much to do with the growing realization of the deleterious effects of fossil fuels and its international commitment to reduce emissions to combat global warming, as it has to do with the very visible pollution in major cities like Delhi, Mumbai, Bengaluru etc. The plummeting capital cost in the case of solar energy installations and the enticing possibility of its use to light up and connect remote settlements across India are also an important consideration.
In January 2015, the Government of India announced an ambitious plan of attaining 100 GW of solar capacity, which included 40GW of rooftop solar power by 2022. This would entail an investment of $100 billion. This hugely ambitious leap is made possible by substantial improvements in solar thermal storage power technology as cheaper solar power is no longer auxiliary to costly and polluting coal/gas/nuclear power generating on which we depend for stable grid operation.
India is also giving a big push to developing off-grid solar power for meeting local energy needs in far-flung rural areas where only 55% of the households had access to electricity and nearly 85% depend on solid fuel etc for cooking. By 2017 end 1.4 million solar cookers were distributed in India, 46,655 street lighting installations, 118,700 solar home lighting systems and a little less than 1 million solar lanterns were sold in the country.
International Solar Alliance
India’s solar push is reflected in the key role it has taken up in The International Solar Alliance (ISA), which is an alliance of more than 121 countries, most of them being sunshine countries, which com e either completely or partly between the Tropic of Cancer and the Tropic of Capricorn.
The primary objective of the organization, which is headquartered at Gurgaon, India is to work for efficient exploitation of solar energy and to reduce dependence on fossil fuels. This initiative was first proposed by Indian Prime Minister Mr. Narendra Modi in a speech in November 2015 at Wembley Stadium, in which he referred to sunshine countries as Suryaputra (“Sons of the Sun”).
The Indian government has dedicated five acres of land campus for ISA’s future headquarters and contributed US$ 28 million to the fund to build the ISA campus and for meeting expeditures for the ISA’s first five years.
The formation of the ISA also sent out a strong signal about the concern of developing nations about climate change. India has pledged a target of installing 100GW of Solar capacity by 2022 and reduction in emission intensity by 33-35% by 2030. India has also pledged to bring 40% of its electricity generation capacity (not actual production) from non-fossil sources (renewable, large hydro and nuclear) by 2030.
One major expectation from the ISA is that wider deployment will reduce production and development costs, facilitating the increased deployment of solar technologies to poor and remote region.
What is the current situation?
With a massive push from the Government of India, solar power is making rapid progress.
As of October 2017, the country’s solar grid had a cumulative capacity of 15.60 GW. India quadrupled its solar-generation capacity from 2,650 MW on 26 May 2014 to 12,289 MW on 31 March 2017. The country added 3.01 GW of solar capacity in 2015-16 and 5.525 GW in 2016-17, the highest of any year, with the average current price of solar electricity dropping to 18% below the average price of its coal-fired counterpart.
R.K. Singh, Minister for Power and Renewable Energy recently announced the roadmap to meet the Government’s ambitious target of creating 100 GW of solar Power capacity by 2022. The Government will auction 17GW of solar capacity by March 2018 and another 30GW each in 2018-19 and 2019-20.
The Solar Energy Corporation of India signed enabling power supply agreements with the utilities of Odisha, Goa, Uttar Pradesh, Bihar, Jharkhand, Assam and Punjab.
Anand Kumar, Secretary, Ministry of New & Renewable Energy explained that to achieve this, the Ministry, along with the States, would lay out bids for ground-mounted solar parks for 20GW in 2017-18, out of which 3.6 GW has already been bid out in December 2017, 3GW in January 2018, 5GW in February 2018 and 6 GW will be bid out in March 2018. Another 30 GW will be bid out in 2018-19 and 30 GW in 2019-20.
In addition, to encourage the Make in India programme, MNRE is working out the Scheme and will issue an Expression of Interest (EOI) for establishing domestic manufacturing facilities to the tune of 20GW, in the near future. It also plans to achieve additional installed Renewable Energy capacity through floating Solar Power Plants over dams, offshore wind energy systems and hybrid solar-wind power systems, which may provide over 10GW additional capacity.
A team of experts has already surveyed the Bhakra Nangal dam for floating solar power plants and off-shore Gujarat and Tamil Nadu for wind power plants.
Benchmarking with China
China’s power generation far outstrips India in terms of size with a energy mix of 1646 GW as compared to just 320 GW for India. That makes it more than 5 times greater than India’s.
As for Wind & Solar Energy, China has 149 GW of Wind and 77 GW of solar which is again far ahead of India, which has just 32 GW of wind power and 12 GW of Solar Power.
Chine, however, has less renewal energy capacity (excluding large-scale hydropower) as a proportion of its total capacity as compared to India which is 17%.
For both China & India – Coal is out, renewable is in
China and India are two largest emerging economies, though China dwarfs India with a GDP of $11.22 trillion compared to India’s $ 2.45 trillion, almost 6 times larger. Their economic development has been fueled primarily by coal. China’s coal consumption is globally the highest and India ranks 3rd.
But while China got off to an early lead in renewables, India is looking to catch up over the next ten years. Can it?
Overall, India’s plans will see it develop 248.5 GW of coal power by 2022, whereas China, which has also placed a strict limit on coal power, will cap capacity at 1,100 GW.
With renewable energy capacity expanding and growth in coal power slowing, India estimates that non-fossil fuel sources will account for 47% of domestic energy capacity by 2022, with the share of coal power falling from 60% to 48%. By 2027 renewables could increase their share further to 56.5% of total power capacity.
On the other hand, while non0fossil fuel generation is also expanding in China, it will do so more slowly. By the end of 2020, 39% of China’s power generation will be from non-fossil sources, while coal power will account for 55% of generation.
So, if everything goes to plan then India will draw a higher proportion of its power from non-fossil fuel sources and so be greener and less carbon-intensive. But its non-fossil fuel generation capacity will still be less than one third of China’s.
How self-reliant are we?
India’s import of solar cells and modules is more than 35 times its exports, says a recent study by Mercom Capital Group which tracks the clean energy segment. India imported solar equipment worth Rs. 14,630 crores between April 2016 and January 2017 while its exports declined to just Rs. 404 crores. In these 10 months India’s solar imports increased by 39% over the corresponding period in proceeding year even as exports dropped by 56%.
The simple reason for this dismal state of affairs is that Chinese solar panels are 10-20% cheaper than domestically manufactured modules. In fact, solar tariffs in India have been going down at successive auctions largely due to cheaper Chinese modules. China was the biggest exporter of solar equipment to India, according to Mercom’s findings during a 10-month period, with 87% market share and accounting for $1.9 billion, while Malaysia was a distant second with 8% share, at a total value of $170.42 million.
As per the Mercom report, Chinese solar equipment is cheaper than Indian, mainly due to economies of scale at its manufacturing units, as well as, the fact that India does not manufacture polysilicon, the basic material for making solar modules, but imports it.
The only reason India still manages to export a relatively small quantity of solar equipment is because of some of the European countries which have anti-dumping rules against Chinese manufacturers which stes the base price. Britain is the biggest importer of Indian solar modules, accounting for 31% of India’s solar exports ($18.84 million), followed by Italy and Belgium. Within the country too, locally made solar modules account for barely 5% of the total number in use.
The government has tried to encourage solar manufacturing by including a domestic content required (DCR) in some of its solar auctions, but following a complaint from the US, the World Trade Organisaton ruled out this practice as unfair.
India manufacturers have old equipment and have been mostly dependent on the Government to create a market for them. In the near future, unless there is a drastic change in conditions, India will be depending largely on China to attain its ambitious solar capacity target of 100GW by 2022.
The Opposing View – Installed Capacity v CUF
In an interesting article “Why increasing India’s Solar Energy Capacity won’t Work”, Armin Rosencranz and Kamakshi Puri explain that the actual power yield from the planned 10-fold increase in solar energy capacity will be as little as 20% of the total capacity, making little difference to India’s emissions.
They rely on a 2014 performance analysis study by the Malpani Group, as per which, for every megawatt of solar power capacity installed, the average output was a mere 19%. Reference is made to a Solar Power Plant in Gujarat with a capacity of 40 MW which generated 68.3 million units, a mere 18.2% of its capacity.
This had nothing to do with any particular inefficiency of the plant, but for obvious reasons such as night, monsoon, dust storms etc., solar power is neither produced all day or all year.
In terms of data released by the Ministry of New and Renewable Energy (MNRE) in May 2013, India’s capacity utilization factor (CUF) was anywhere between 11-31% and the draft National Electricity Plan released by Central Electricity Authority in December 2016, mentions the CUF of solar power plants as being 20%.
The measurement of solar power in terms of GW of installed capacity is, therefore, fictitious. These should be rightfully measured by their effective producible output, and that would reveal India’s capacity to be a very low figure.
Ground mounted Grid Connected Solar v Rooftop Solar
The article is very skeptical of the targets being realized, especially in the case of rooftop solar.
The ambitious commitment to increase solar power to 100 GW is in two parts 1) Increasing ground mounted grid connected solar power to 60 GW and 2) Increasing rooftop grid interactive solar power to 40 GW.
A majority of the target that of 60 GW, is to be fulfilled by the scheme for developing solar parks and ultra-mega solar power projects launched by the MNRE. The Government under this Scheme approved a total of 34 solar parks with a total capacity of 20 GW in 21 different states.
India’s cumulative solar capacity has grown to almost 8 GW of ground-mounted grid connected power as on October 31, 2016, and this is rapidly rising. Sixteen major states have set individual targets for capacity addition under separate state solar policies. The capacity addition from these state targets adds up to 50 GW of power. Recalculating this figure in terms of CUF, the deliverable power is close to 10GW.
The growth of rooftop solar in India is relatively low. As on the same date, October 31, 2016, rooftop solar contributed an approximate total of 1 GW of generated solar panel. For this to increase to 40 GW in the next five years in a highly ambitious task for the government.
Despite the government schemes providing up to 30% subsidy (70% in case of special category states) for rooftop solar and attractive feed-in tariffs offered by state regulators, the high capital cost of rooftop solar panels overrides the tangible benefit in the eyes of customers. Due to the instability in solar power production, the dependence of households with rooftop solar on coal based electricity/diesel generators may persist.
In an article, ‘Energy Landscape’, Soumya Sarkar talks about Solar Project tariffs tumbling and yet investment continues to pour into India. Experts feel that enthusiastic developers may be overreaching themselves and land into trouble. But for the moment everyone is on a high.
Tariffs in the Indian renewable sector are in free fall and the appetite of private developers to secure large, grid-connected solar and wind power projects by offering rock bottom unit prices shows no sign of slacking.
In the most recent instance, the India arm of France’s Engie SA won a contract to build a 250 MW solar power project in Kadapa in Andhra Pradesh for a flat Rs. 3.15 per kWh through competitive reverse bidding. “Clean affordable power for all,” Energy Minister Mr. Piyush Goyal announced on Twitter on April 11. “Solar achieves another record low of Rs. 3.15/unit (flat rate) during auction in Kadapa, AP by NTPC.”
A study by Bridge to India, referred in the article, found that the average harmonized tariff of Rs. 4.31 per kWh in the solar projects contracted out in the past year and a half translates into equity internal rate of return (IRR) of 14.20%, significantly below the benchmark expectation of 18%. This is a clear demonstration of aggressive bidding in the sector, the consultancy said.
In spite of concerns about narrow margins and squeezed bottom-lines, investments are pouring into India’s renewable sector. Total corporate funding into the Solar Sector alone, which includes venture capital funding, public market and debt financing, doubled to USD 3.2 billion in the first quarter of 2017 compared with USD 1.6 billion in the three months ended December 31, according to Mercom Capital Group.
Carving a role for Indian Manufacturers
Despite the rapid growth of solar power in India and the world, domestic solar manufacturers have not been able to capitalize on it as they are unable to compete with Chinese manufacturers who are supported by their Government, in terms of scale and cost. The Ministry of New and Renewable Energy (MNRE) has released a concept note of a proposal to build out India’s manufacturing supply chain, including polysilicon, wafer/ingots, cell and modules.
The Ministry of New and Renewable Energy MNRE is now responding to the threat of total eclipse of domestic manufacturers, which also has a security implication, by proposing a host of subsidies and incentives. This includes direct financial support of more than $1.7 billion for manufacturers to expand and upgrade, a 12 GW Central Public-Sector Undertaking (CPSU) domestic content requirement (DCR) program o create strong domestic demand, an increasing DCR requirement from modules to polysilicon, 30 percent central financial assistance, cheaper loans, a custom duty exemption, and cheaper power.
The Government has a comprehensive 3-pronged policy to support domestic manufacturers:
- Creating a level playing field by imposing anti-dumping duty on cells and modules.
- Creating demand through Domestic Content Requirement (DCR)
- Offering multiple subsidies and financial support to manufacturers.
After the National Solar Mission was implemented in 2009, 2 anti-dumping cases were filed by Indian manufacturers against exports from China and other countries. The first case was dismissed in 2014 without imposing any protectionist duty. The second case is yet to be decided, but industry believes that this time, duty will be imposed, as the Government is keen to help domestic manufacturers gain a large share of the solar market.
Currently, the only incentive technically available for PV manufacturers is the 20-25% capital subsidy and other tax incentives, in common with other companies that manufacture electronic goods, under the Modified Special Incentive Package Program (M-SIPS). However, no solar PV applicants seem to have been approved under this program so far.
While there are varying figures of actual capacity of solar cell and module manufacturing capacity, according to Mercom India Research, many manufacturers believe that the real capacity is approximately 1.5 GW/year for Solar Cells and 4 GW/year for modules.
Key Subsidies Proposed to Hel Local Manufacturers
- Direct Financial support of more than $1.7 billion
- Concessions to support solar cell and module manufacturers expand and upgrade their existing facilities or set up new manufacturing facilities.
- To ensure a guaranteed market, the policy proposes a 12,000 MW CPSU (this is higher than the earlier proposed 7.5 GWs) program that would have to comply with World Trade Organisation (WTO) rules.
- To encourage continuous quality improvement, the Domestic Content Requirement will be reviewed every year to earmark part of it for higher quality requirements.
- It is proposed to encourage a gradual shift in the production capacity for the entire manufacturing chain by earmarking certain components of the DCR category for earlier stages. This earmarking would be gradually increased over time to encourage manufacturers to vertically integrate. At the initial stage, the policy will target the creation of 10GW of manufacturing capacity over a period of five years, with a focus on both integrated silica-to-modules packages and also for intermediate standalone packages or combinations.
- Central Financial Assistance (CFA) in the form of 30 percent capital has been proposed, to set up or upgrade domestic manufacturing capacity. The CFA will be allocated based on what component is being manufactured.
- In cases where domestic manufacturing capacity is being set up without taking recourse to use of capital subsidy, an interest reduction of 3 percent will be provided for loans taken through nationalized banks for manufacturers that set up new capacity.
- To create a sustainable ecosystem and for demonstration purposes, four Public Sector Units will be supported to set up 1 GW each of polysilicon to module manufacturing facility.
- Capital goods required to set up a solar manufacturing facility would be exempted from customs duty.
- To offset high power costs, it is proposed that solar manufacturing units be allowed to set up solar power projects of twice the required capacity. They would also be allowed to bank surplus production during the day into the grid and draw down the same amount of power during the night.
With this and earlier initiatives the Government has certainly created an enabling environment. One result is that Chinese solar equipment company Longi Green has announced a plan to set up a 500 MW module plant in Andhra Pradesh and other Chinese manufacturers have also expressed interest in establishing their own Indian manufacturing plants if they can obtain better government incentive packages and clear installation goals with consistent auction announcements.
The Government appears to have a long-term ambitious vision for solar power. There is already visible evidence of concerted effort to implement the vision. If the Government comes good on the concept note of MNRE Indian manufacturers may finally begin to find their own place under Indian sun.
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