Solar on Slow Track

With 3,000 hours of sunshine every year, which is equivalent to 5,000 trillion kilowatts of energy, India´s solar energy potential is vast. According to the Ministry of New & Renewable Energy Annual report 2014-15, of the total renewable energy potential of 8,96,602 MW, solar energy potential of 7,48,990 MW (750 GW) is the highest. Yet, less than 0.5 per cent of the total estimated potential has been tapped so far. If the enormous solar energy potential is harnessed effectively, it will also help in electrifying several villages, and reducing carbon emissions. Recognising the immense potential, the Indian Government had rolled out several policies and schemes to promote the solar industry.

India was the first country in the world to set up a separate ministry for promoting renewable energy sources. The Ministry of Non-conventional Energy Sources, formed in 1992, was re-christened as the Ministry of New and Renewable Energy (MNRE) in 2006. In 2010 the government launched the Jawaharlal Nehru National Solar Mission (JNNSM ) with the objective of deploying 20,000 MW of grid connected solar power by 2022. Further, the Indian Renewable Energy Development Agency (IREDA) was set up in 1987 to extend financial assistance to renewable energy projects. The government also converted the 25-year old Solar Energy Centre into the National Institute of Solar Energy in 2013 to coordinate research and technology related issues . In addition, the government has been offering several incentives like generation-based incentives, capital and interest subsidies, viability gap funding, etc.

Despite all these efforts, India´s solar energy installation currently stands at a mere 3 GW as against its huge potential of 750 GW. Many industry players are hoping that the Indian Government´s recent decision to raise the solar power generation target to 100 GW by 2022 will provide the necessary fillip to the industry.

¨With the new government´s 100 GW solar vision, we clearly see a transition from solar playing a complimentary role in the energy mix to becoming the next big contributor in India´s future energy scenario. There is an unprecedented interest among investors to fund solar projects. In the last six months, there has been considerable improvement in the banks´ approach towards solar projects too. Investor sentiment has changed for the better, and we foresee substantial inflow of funds into this sector in the coming years,¨ predicts Vineet Mittal, Vice Chairman, Welspun Renewables Energy Pvt Ltd, which has plans to generate 8660 MW of solar power in the next few years.

The opportunities
With the Indian Government´s renewed focus and targets, hopes of the solar energy sector experiencing exponential growth in the coming years is soaring not only amid Indian players, but also among the international players.

¨A fast growing economy, increasing energy costs, shortage of power supply over demand, and to top it all consistent and high intensity sunlight round the year ensure a healthy sustaining solar market,¨ says Santosh KM, Managing Director -India, Enerparc Energy Pvt Ltd. ¨This in turn has opened up opportunities for investment, project development, contracting, consulting as well as manufacturing for global technology, and service providers. Indian government´s plans to have a USD denominated power purchase agreement, eliminating the foreign exchange hedging risk, accelerated depreciation driven tax breaks are other attractions for global players. However, margin expectations in the market need to be set right, and one must enter the field for long time play and not for opportunistic reasons,¨ he advises. Enerparc, a global player, which undertakes EPC and O&M projects, has several commissioned and ongoing projects in India, including a 2.1 MW solar project at Delhi International Airport, 2 MW project under Punjab state policy, and a 5 MW ongoing project at Hyderabad International Airport.

New doors of opportunities are also opening with some projects being developed under the public-private partnership (PPP) model. For private players, it is a win-win situation says Mayank Shah, Director Finance and Chief Financial Officer, Waaneep Solar Pvt Ltd : ¨ It facilitates on boarding of key stakeholders such as banks or lenders, etc. In solar sector, having an attractive PPA (Power Purchase Agreement) with a bankable consumer is an awesome combination for ensuring guaranteed delivery of the projects. Partnering with a PSU (Public Sector Unit) and the combined strength of the partners also facilitates in bidding for bigger projects. A long-term and guaranteed PPA from PSU would make the PPP attractive for the private player as it would allay the concerns about the financial health of the off-takers.¨ Waaneep is a PPP between Waaree Energies, a lead player in the solar sector and NEEPCO, a PSU predominantly in thermal and hydro power sector in north-eastern states. Waaneep at present has a 50MW IPP commissioned project in Madhya Pradesh and an ongoing 50 MW Grid Connected Solar PV Project in Andhra Pradesh under state policy.

With the predicted robust growth in solar power generation, other allied industries are also expected to benefit, including the solar power equipment market. According to TechSci Research report titled ¨India Solar Power Equipment Market Forecast & Opportunities, 2020¨, solar equipment market in India is projected to surpass USD 4 billion by 2020. However, the road ahead to ensure that all the predictions, prospects, and ambitious targets become a reality is laid with several roadblocks and challenges, aver industry pundits.

Challenges
¨Solar energy is going to be big in coming years, more so with the government recently resetting the solar power generation target from 20 GW to 100 GW by 2022. However, there are many issues that the sector is battling with. For example, setting up large solar power projects of 500-1000 MW capacity is fraught with several issues like evacuation, huge investments in transmission lines, transmission and distribution losses, including theft, etc.,¨ points out Anil Sardana, Managing Director and Chief Executive Officer, Tata Power. ¨The solar energy evolution in India has been consistent with the framing of Feed in Tariffs (FITs) and enabling mechanisms, but with the FIT reaching grid parity, it poses a risk to the project viability. Hence, the enforcement of RPO (Renewable Purchase Obligation) mechanisms has become the need of the hour,¨ he adds.

¨India has miles to go before it can reach the new set target in solar energy generation. In reality, India´s solar capacity at 3.7 GW is merely five per cent of Western Europe´s capacity and one per cent of our own total installed capacity,¨ states Rajya Ghei, Chief Executive Officer, Hindustan Cleanenergy Ltd, the solar power vertical of Hindustan Power Projects Ltd, which has commissioned 430 MW of solar farms. ¨One of the major problems today is the evacuation of power from plants involving massive transmission costs. Hence, our aim should be to generate and consume locally, thereby, cutting down on transmission costs. Locally consumed power is also good for grid security,¨ he adds.

Much will also depend on how the government counters the challenges, and implements the plans and programmes says Santosh, ¨Now the government needs to facilitate implementation of the announcements made, so that the talk gets walked, thereby, building confidence in international communities. Also, since majority of the state utilities are not in a good shape financially, the central government can provide counter guarantees to boost investor confidence in state government policies for some states. Lastly, there is a fast emerging self-generation and consumption market, and the government must provide clarity through long-term net metering, wheeling, and banking policies.¨

There are several other issues that need to be addressed like high costs of solar power generation, inadequate financing sources, dependence on imports for raw materials, lack of grid infrastructure, land acquisition, low investment in R&D, etc. The solar projects are capital-intensive, and lack an effective financing infrastructure, which is a major impediment. The high costs are largely due to heavy dependence on imports for silicon and solar wafers used for the manufacture of solar cells. Land acquisition, is another major hurdle as the land space required to install a solar plant is quite large. Apart from the high price, the land holdings, often divided among several family members, give rise to disputes among the family members.

¨Land ownership is often fragmented, which means one has to negotiate with multiple land owners, which is a time-consuming process. The entire project can be jeopardised if any litigation crops up over the land at a later stage. The ideal solution would be solar parks, where the land and infrastructure for evacuation is owned by the respective state governments, and leased to developers on a long-term basis. This will reduce the time required for setting up large capacity projects, and also costs through cost sharing,¨ opines Shah.

Concurs Ghei, ¨Big-sized solar power projects and residential rooftop installations are not long term solutions for India as they would result in huge cost for supplying electricity. India must focus on comm¡ssioning solar farms of 50 MWp (megawatt peak) and 200 MWp sizes, which have economies of scale, while the energy generated from it would be consumed locally. With no additional distribution network requi¡red, the cost of transmission will be lower.¨ Hindustan Cleanenergy had set up the country´s first 5 MW solar farm at Sivaganga in Tamil Nadu, and a 50 MW solar farm at Charanka, Gujarat.

The MNRE has plans to set up several solar parks across the country in collaboration with the state governments. However, some industry pundits are not in favour of such centralised solar power generation. They advocate in-situ power generation and consumption, more so since India has 25û30 per cent transmission losses.

Other suggestions put forward by industry pro¡fessionals include single window clearance, faster and efficient implementation of renewable energy certi¡ficates (RECs), selective implementation of on-grid application where feasible, development of off-grid application in villages, debt structuring options, and collaborative focus on research and development.

Evidently, there is a need for drastic reforms to overcome the challenges as also to fast-track the solar sector in India.

¨Need for a prudent and practical RPO mechanism¨

Anil Sardana, Managing Director and Chief Executive Officer, Tata Power, shares his own perspective of the Indian solar industry and Tata Power´s achievements.

What are the challenges in setting up solar power plants in India?
Land acquisition in areas with high insolation continues to be an issue. There is a need to identify and develop land banks in suitable areas and formulate a transparent method for acquiring lands for project development. Also, a prudent and practical RPO mechanism would help develop the Feed in Tariffs (FITs) and enabling mechanisms as commercially viable alternatives.

Financing of renewable energy projects has been a concern for a very long time. It is a part of the power sector financing scheme and many banks have reached their sectoral exposure limits. For successful implementation, the solar and other renewable energy projects should also get priority sector lending status under RBI guidelines.The government should also look at innovative financing schemes for solar and other renewable projects.

What are the critical issues in the technology front?
On the technology side, the equipment that are being used like modules and inverters are largely imported as they are cheaper compared to the indigen¡ously manufactured products. However, these equipment are not designed for Indian conditions, and cannot withstand the temperature and dust conditions, resulting in low output. Hence, there is a need to promote locally produced products, that have been manufactured and tested under Indian conditions. Developing cost-effective energy storage technologies is of utmost importance now as investment on storage technology is a huge challenge.

The high initial cost of setting up solar systems and power subsidies are considered to be the two major barriers to adopting solar in India. What is your view on this, and how can they be overcome?
The capex for solar has been drastically falling since 2010. The capital cost of solar went down from as Rs 14.5 crore per MW in 2010 to Rs. 6 crore per MW in 2015- that is, a massive 140 per cent reduction in just five years. The falling module prices (that was almost 70 per cent of the project cost) have helped to bring down the cost of solar installations. However, the cost of balance of system (BOS) components have not changed much, and this should be the key target area for cost reduction. It is important to bring the capex further down to ensure the viability of the projects when the solar FIT reaches grid parity.

Power subsidies have always been affecting the health of the discoms. The history of the discoms will showcase replete examples of committed subsidies not being paid on time, or not being paid at all. This is a huge loss not only in terms of money, but also in terms of opportunity costs. This amount could have been invested in enhancing and upgrading of the existing distribution segment. Therefore, the subsidy scheme should be replaced with effective mechanisms of incentives and benefits. This will discourage power wastage and also instill ownership and a sense of pride among consumers.

What are Tata Power´s achievements in the solar power sector?
Tata Power has a strong portfolio of 56 MW of solar generation capacity. The company set up its first solar power plant of 110 kW in 1996 at Walwhan in Lonavla . Since then, Tata Power has commissioned a 29-MW solar power project in Pallaswadi, Maharashtra in 2014, a 25-MW project in Mithapur, Gujarat in 2012, and executed a 3-MW solar photo-voltaic plant at Mulshi, one of the largest grid-connected solar projects in Maharashtra. A 60.48 kWp solar power plant has been installed on the rooftop of one of the company´s offices in Mumbai. The company has a target of setting up about 25-50 MW capacity annually in the next two-three years.

Please share an interesting project developed by your company.
Tata Power has pioneered innovations by conceptualising the floating solar plant. The company has partnered with the Australian company, Sunengy Pvt Ltd to build a pilot plan for low-cost, floating on water, solar technology in India. The company adopted the Liquid Solar Array (LSA) technology, which uses traditional concentrated photovoltaic technology, but rather than mounting the cells on a frame, it is made to float on water, making it low-cost, cyclone-proof, and less tedious as it does not involve any land acquisition. The plant is operating in Pune. Tata Power is now indigenising the floating solar plant technology through a pilot project under progress. It will be commercialised in due course.

Technology Take

Santosh KM, Managing Dirctor -India, Enerparc Energy Pvt Ltd, speaks on the technologies being used in the solar energy segment.

Solar energy is harnessed through two broad technology streams, viz., concentrated solar thermal (CST) and photovoltaic (PV). Globally, the direct normal irradiation needed for CST is limited largely to desert and arid areas. Ironically, CST also needs water to work, which is difficult to come by in such areas .The capital cost of CST has also stayed close to Rs 14 crore per MW and even with a higher plant load factor (PLF), the economics may not often justify. Hence, CST deployment globally is close to 4 GW only.

Photovoltaics, on the other hand, has more than 140 GW installed capacity globally. It has reached close to Rs 6.3 crore per MW capital cost levels, and due to increasing technology refinement, reached close to 19 per cent PLFs in good parts of India.

In Photovoltaics, there are crystalline silicon and thin film-based module technologies. Worldwide, the workhorse of the industry is crystalline silicon-based solar cells and modules, which command close to 90 per cent of the global installed base. Among thin films, Cadmium Telluride commands close to four per cent of the global installed base and CIGS (copper indium gallium selenide) another three per cent. The vintage and now almost phasing out amorphous silicon takes the balance four per cent. Thin films not only have higher energy output in hotter climates, but also higher year on year degradation compared to crystalline silicon. In the past, the industry had witnessed rapid degradations in certain thin film technology after a few years, and in certain climatic conditions. Hence, the deployment assurance of any new technology comes only after a few years of practical application in solar industry, as opposed to trusting mere lab reports and certificates.

In Indian solar market, owing to a policy anomaly in the early days that permitted thin film import but blocked crystalline silicon import, projects started using a higher percentage of thin films. They were mostly imported thin films as they were cheaper than the domestic crystalline silicon then. However, now this policy anomaly has been corrected.

– Janaki Krishnamoorthi