The government, even while abiding by the WTO ruling, is planning a scheme to subsidise both local as well as foreign manufacturers, says R Srinivasan.
The country has set an ambitious 100 GW by 2022 solar target, out of which the rooftop segment target is 40 GW. As per a Bridge to India report, over the past two years, the rooftop solar market in India has grown at a compounded annual growth rate (CAGR) of 90%. As of 31 March 2016 the cumulative installed capacity stands at 740 MW. While Tamil Nadu leads in installations due to high consumer awareness and lack of reliable grid power, Gujarat is in second place since here the rooftop market has been primarily driven by state government initiatives and Maharashtra is third since it is driven by high consumer tariffs across all consumer categories.
In fact the solar rooftop trend has caught on in schools, educational institutions, airports, ports and even online marketplace Snapdeal warehouses. The Ministry of New and Renewable Energy is even roping in religious gurus to ensure that their ashrams are powered by solar energy. In a recent press release, Snapdeal, India’s largest online marketplace, announced plans to utilise solar energy in a big way as an integral part of its daily operations. The green initiative will kick off at Snapdeal warehouses and following this initiative, the centres will decrease power consumption by producing nearly 1 MW at peak through solar panels and generate 1.5 million units per year. Even the V O Chidambaranar Port has inked a Memorandum of Understanding with Solar Energy Corporation of India (SECI) to install a five MW solar power plant at an estimated cost of Rs 30 crore, which is expected to be completed by March 2017. The expected annual power generation would be 7.5 million units and reduction of carbon emissions from the project will be 8,025 metric tonnes per year. A release said that as part of the Green Port initiative, it has already commissioned a 100 KW solar power plant at the port’s administrative building in August.
In view of the increasing rooftop solar trend and queried about whether data centres (huge power guzzlers that usually have large rooftop space) could emulate IBM’s example and adopt solar, Aditya Ravindran, Consultant, Energy Vertical, Feedback Business Consulting Services Pvt Ltd said,
The commercial establishments (including educational institutions, warehouses, supermarkets/malls, banquet halls etc) have large rooftop space and pay some of the highest tariffs (up to Rs 12 per unit in some cases) for power from the discoms. Thus, rooftop solar PV installations which can supply power at Rs 5-7 per unit give them a huge relief in terms of cost of power and paybacks as attractive as 3 years in some of the states. For global companies like IBM, it not only makes good business sense to adopt cheaper solar power, but it also falls in line with their global corporate policy of
Moreover, developers in the rooftop solar PV segment have been very active. There is a good amount of competition and a large area of rooftop space still available in the country giving this business a lot of potential to be tapped.”
Asked to comment on how data centres too could adopt solar, an India Power spokesperson said, “It is a good initiative taken by schools, educational institutions, online marketplace Snapdeal warehouses and ashrams to install solar for their power requirements. This will not only create awareness but also promote solar among local people and children. Data centres have large rooftops which can be used for installation of solar and the power produced by them can be utilised for their own use. The Government of India has set up a target of achieving 40 MW solar rooftops by the end of 2022. If data centres are ready to install, they not only reduce their power consumption but also reduce GHG gas emissions. The data centres can emulate IBM’s example and adopt solar in order to reduce greenhouse gas emissions by using solar power. Due to constrained supply of coal and the poor financial condition of Indian utilities, the price of electricity has been increasing over the last few years. This installation of large rooftops will act as a boon for data centres in order to reduce their consumption of units and billing. The cost of solar power generation has been falling considerably. Commercial and industrial consumers, as such, face the highest power tariffs among all consumer groups. It becomes necessary for Indian IT companies and data centres to take several measures in order to reduce their carbon footprint and switch, at least partially, to clean energy sources.”
In the last few years many multi-national and domestic solar power plant developers have won projects through competitive bidding and are offering electricity tariffs much lower than
Rs 5 a unit. It is felt that these low tariffs have not yet adversely impacted the engineering, procurement and construction (EPC) firms or solar panel makers. Asked if the solar industry will feel the heat of low tariffs in the years to come, Aditya Ravindran said,
Developers have been the community facing a large part of the troubles from the low tariffs as they are not able to successfully ensure the financial closure of projects with low tariffs. Even if they manage to establish financial closure and achieve commissioning, their financial problems, if any, would come to the fore only when they commence commercial operation. Meanwhile, there is solar capacity addition still going on successfully at relatively higher tariffs, and this is keeping the EPC companies busy for now. Larger EPC firms are actively pursuing business opportunities in foreign territories including South East Asia and Africa.”
About whether the solar industry will feel the heat of low tariffs in the years to come, an India Power spokesperson, said, “The solar industry is not going to feel the heat of low tariffs in the years to come. The main reasons are low cost technology and the cost of debt is coming down. India has an ambitious plan to add 100 gigawatts (GW) of solar power by 2022. Most of the big international players such as Fortum, SoftBank, First Solar etc, are looking for an opportunity to invest in solar.”
The Ministry of New and Renewable Energy (MNRE) plans to seek the Union Cabinet’s nod for doubling the capacity of solar parks to 40,000 MW from 20,000 MW. Also the country is to install 700 MW of rooftop PV in 2016 – all of which sounds great on paper. Asked to elaborate on challenges that the industry may encounter along the way and for suggestions, Aditya Ravindran said,
Reducing the target of rooftop solar PV and apportioning it to solar parks has been a wise move. Although, there is good activity in the solar rooftop space, the scale of these projects is too small to help achieve the erstwhile target of 40 GW. On the other hand, solar parks are complete opposites of this. These are large capacity projects, and 40 GW of capacity addition could be done with much less number of projects.
The only challenge before such projects would be to assess and counter the impact of massive variability in generation on the regional power grids.”
Asked to elaborate on challenges that the industry may encounter along the way, an India Power spokesperson said, “India has embarked on an ambitious target of 100 GW of solar power by 2022. The target seems difficult but it can be achieved. In order to achieve it, many challenges will need to be overcome. Some of these challenges are:
1. Lack of policy and regulatory support 2. Issues with respect to grid automation and stability
3. High cost of energy storage
4. Lack of skilled manpower for installation and O&M
5. Manufacturing of low cost solar modules and accessories.”
The World Trade Organisation (WTO) recently ruled against India’s domestic content requirement (DCR) policy for solar cells and modules. The case against India was originally filed in 2013, following the announcement of DCR in JNNSM Phase II policy and after India decided to file an anti-dumping case against US, China, Malaysia and Taiwan. Currently, there is a pipeline of 925 MW of solar works to be auctioned under DCR. Asked about ramifications of the WTO ruling on India, Aditya Ravindran said,
Indian solar space is largely dependent on imports from South East Asia and North America, and it cannot go against the verdict of the WTO. The only options remaining with the government and regulatory bodies is to look for alternative measures to promote domestic manufacturing in the solar industry.”
About ramifications of the WTO ruling on India, an India Power spokesperson said, “The US is of the opinion that India’s domestic content requirements were inconsistent with WTO rules that prohibit discrimination against imported products. Under the solar mission, solar power developers are mandated to use Indian-manufactured cells and modules rather than US or other imported solar technology that the US considered a breach of international trade rules. This result in favour of US will boost sales of American solar modules into India as American solar exports to India have fallen by more than 90% during this period. However, the Indian government wants to boost solar module manufacturing in India and for that reason only they had mandated that solar power developers should use Indian-manufactured cells and modules.”
RE vs thermal?
Power sector analysts have warned that the unprecedented surge in renewable energy capacity in the next few years will affect thermal power plants. At a time when thermal power plants are operating at an all-time low of just
over 50% of their capacities, there is a debate whether the country really needs the planned addition of 175 GW of renewable energy by 2022. Also Partha Bhattacharyya, former Coal India Chairman reportedly said that the solar wind focus has hit low-cost coal-based power production. About whether the renewable energy push will adversely affect thermal power plants, Aditya Ravindran said,
India is pushing ahead for renewable energy capacity addition without any profound emphasis on energy storage systems. Neither does our power system have any significant capacity of peaking power plants. In the absence of storage and quick-acting power plants, generation capacity at base load power plants would have to be kept on standby as spinning reserves. Not only is it inefficient and polluting, but the frequent ramping up and down of the power plant’s output also affects its health and life.”
About whether RE will affect thermal power plants, an India Power spokesperson said, “The renewable energy push will definitely adversely affect thermal power plants. There is variation in the production of electricity from renewable energy sources. On an all-India scale, coal-fired plants provide a steady output in order to meet what is called the base load while gas-fired plants and hydro plants with storage manage to respond to variations in demand. If the addition of renewable energy continues, dependability on the thermal power plant will reduce and it will be forced to run the thermal power plant at a lower PLF.”
Funds, cheap imports
Solar has picked up pace but distribution companies are reluctant to purchase solar in light of low power demand and cheap power availability on exchanges. MNRE is mulling a $400 million World Bank fund to protect clean energy producers from payment delays by discoms. About funding support from banks and on dumping of lower cost modules from China and Taiwan, Aditya Ravindran said,
If we are to look at the energy market from a purely economic standpoint, the demand-supply equation should balance itself out, as the falling prices would bring more demand for power. But because of the annual nature of tariff revisions, a larger reliance on long-term PPAs, and the attempts to recover the losses of the discoms, these falling prices might take some time to reach the bulk of end-users. Only then would the demand bounce back and prices stabilise.
A loan to the developers to stay afloat for this rather long duration would definitely help to retain investment in the sector, but this should only be treated as an interim measure. Meanwhile, this period should be utilised by the government to make strategic moves in the sector to eliminate the root-cause including the long-awaited supplywire business separation
On dumping of modules from China and Taiwan - India is not in a position to ban or regulate the import of solar power equipment from these countries. The country has to go a long way in fulfilling its 100 GW solar power target within the next 6 years, and we do not have an option to deny these imports to give an opportunity for the domestic manufacturing industry to mushroom.”
Governor Brown has committed to having over 1.5 million electric vehicles (EVs) on the road in California by 2025 and Pacific Gas and Electric is proposing to install 7,600 electric vehiclecharging stations over the next three years, the single biggest deployment of plug-in spots in the country. About such large-scale deployment of EVs in India and its benefits, Aditya Ravindran said,
EVs would be really beneficial for cities where the vehicular population is being blamed for air pollution. A large scale migration to EVs could also help in driving down the fuel import bill for India.
But India is a highly price-sensitive market. Till now, the response to EVs and hybrid vehicles has been extremely poor, even after the launch of such vehicles in a wide spectrum of prices. Not even the subsidies and tax waivers have been able to attract a significant number of customers.
Following global trends and on-going developments like Tesla’s Giga factory, the demand for EVs and hybrid vehicles would also gain momentum in India. The vehicle manufacturers need to be ready for this scenario, because when this demand hits, the market would see exponential growth in the sale of hybrid vehicles and EVs.”
About large-scale deployment of EVs in India and its benefits, an India Power spokesperson said, “Governor Brown signed the bill setting a goal of placing 1.5 million electric vehicles (EVs) on the road by 2025. The government will change its clean-vehicle rebate programme to provide an extra credit for low-income drivers who wish to purchase or lease an electric car. It will also provide assistance to car-sharing programmes in low-income neighbourhoods and install electric-vehicle charging stations in apartment