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Solar Development in India: The Expanding Market

published: 2011-09-07 8:37

India is perceived as a developing country, but they have experienced significant economic growth. Still, that economic growth is constrained by a lack of energy supply. But with an October deadline looming for yet another Request for Proposals for both PV and CSP projects in India, global solar firms are lining up to enter this emerging market to supply that energy.

There has been an impressive increase in installed electric power capacity, from about 1,350 MW at the time of India’s independence in 1947, to about 160,000 MW today. It is estimated that another 90,000 MW of new capacity is required in the next seven years, according to Dr. Farooq Abdullah, India's Minister of New and Renewable Energy.

India’s lack of electric power has become a boom for PV manufacturers for both utility-scale and remote, decentralized installations.  Because only 44 percent of rural households have access to electricity, India’s Central Government has initiated an ambitious mission to bring power to everyone by 2012 by adding at least 200,000 MW by 2012 from the present level.  A recent study published by the consulting firm KPMG forecasts that solar power can meet 5 to 7 percent of India’s total power requirements by 2021.

India’s TotalGrid-Connected Capacity

A total of 45.5 MW of grid-connected solar power has been installed in India as of July 2011, with another 20 grid-connected solar projects of more than 1 MW already commissioned, according to the Minister of New and Renewable Energy. During 2010-11, about 800 MW of grid-connected PV and CSP projects were allotted by the government, most of which are being developed by the private sector on a build, own and operate basis. The average cost of a megawatt of utility-scale of these solar power projects is in the range of $2.6 to $3 million per megawatt.

Of the total capacity of 45.5 MW of PV projects, the states in the forefront are: Gujarat 11 MW, Rajasthan 7.5 MW, Tamil Nadu 7 MW, Karnataka 6 MW, and Maharashtra 5 MW. Andhra Pradesh, Punjab and Delhi have 2 MW each, while Haryana, Orissa and West Bengal have 1 MW each.

Presently, the state of Karnataka has three solar PV projects with 3 MW capacity each commissioned by state-owned Karnataka Power Corporation Limited (KPCL) and located at Kolar, Belgaum and Raichur. Its fourth project with a capacity of 5 MW is under construction at Shivasamudram in the Mandya district. At present, the government of Karnataka says that 27 percent of the installed capacity in Karnataka is renewable energy.

India’s National Solar Mission

India’s government launched the “Jawaharlal Nehru National Solar Mission” in January 2010, an ambitious program to establish India as a global solar leader by creating policy to develop solar as quickly as possible with a goal of 20,000 MW of grid-connected and 2,000 MW of decentralized solar power by 2022. Under NSM, PV and CSP share a 50/50 stake in total solar power production. There are presently very few CSP installations in India, but several are in the process of getting financing. By June 2011, 200 MW of grid-connected PV and 500 MW of CSP plants had been allocated for development under NSM, with an additional 300 MW of PV expected to be allocated soon. The three-phase plan targets 1 to 2 GW by 2013, 4 to10 GW from 2013 to 2017, and 20 GW by 2022. Energy Alternatives India (EAI), a renewable energy consulting firm, predicts India will actually achieve 75 GW by 2022.

Attracting Foreign Private Investments

About $3.2 billion of projects have found it difficult to get loans from commercial banks, so the Central and State Electricity Regulatory Commissions have announced a preferential tariff for purchase of solar power from solar developers. The National Solar Mission has earmarked $335 million to invest in solar over the next two years. By leveraging domestic and foreign investments with enhanced funding, renewable energy certificate (REC) mechanism, payment security mechanism for grid-connected solar, and policy support and state schemes, NSM will provide the foundation for the private sector to participate in R&D, manufacturing and deployment. This is the largest and the most ambitious program of its kind anywhere in the world and India’s long-term bet on foreign solar invest­ment has already received investments of nearly $1billion between 2008 though June 2011.

U.S. Export-Import Bank Commits $575 million

Indiais expected to be the U.S. Export-Import Bank’s biggest recipient of funding next year, led by loans of $575 million for solar projects that will generate an estimated 315 MW. The U.S. Congress authorized the EXIM Bank to lend as much as $100 billion to help finance projects that buy U.S. goods and services and has already approved $1.4 billion for India this fiscal year, which includes $75 million for four solar projects. Its overall lending to the country is now at $5.5 billion. Among the projects are two, 5 MW PV power plants in Rajasthan, which have received a total of $25.2 million in financing to purchase thin-film solar modules from Arizona-based First Solar and Colorado-based Abound Solar.

European Union Commits $285 million

The European Union announced on August 29, 2011, they were loaning $285 million to finance private sector renewable energy resources in India. The assistance is part of the EU's "strategic partnership" with India and is the first-ever cooperation between the European Investment Bank and the ICICI, India's largest private bank. The EU loan is intended to provide long-term financing, especially for PV projects by private companies, and is being provided under the “Energy Sustainability and Security of Supply Facility,” a program designed to reinforce the EIB's goal of promoting renewable energy in non-EU countries.

Joint U.S.-India Research Funding

As part of the “Partnership to Advance Clean Energy” announced by U.S. President Obama and Prime Minister Singh of India in November 2010, the U.S. Department of Energy announced in May 2011 it was committing $25 million over the next five years to support the U.S.-India Joint Clean Energy Research and Development Center (JCERDC). Scientists and engineers from both countries will focus on research in energy efficiency, biofuels and solar energy. DOE will provide awards under each of these three initial priority areas that will be matched by the grantees to support $50 million in research conducted at U.S. institutions, private companies and individuals. The Indian Ministry of Science and Technology will provide an additional $50 million in Indian public and private funding to support research in India.

Karnataka’s RFP for Thermal and PV Projects

Karnataka Renewable Energy Development Limited (KREDL), the state-owned agency for promotion of renewable energy, is currently floating a Request for Proposalsfrom power-producing companies to develop up to 80 MW of grid-connected PV and CSP power projects. Under the Karnataka State Solar Policy 2011-2016, the state is looking to generate 200 MW solar power in five years.

KREDL has allocated 30 MW for CSP projects and 50 MW for PV projects. In the case of CSP, bidders can propose projects having a minimum capacity of 5 MW and a maximum of 10 MW. For PV projects, bidders can propose a 3 MW minimum capacity and a maximum of 10 MW. The power generated by the selected projects will be purchased by the state through a power purchase agreement. The last date for submitting RFP documents is October 20, 2011, the KREDL said in its notification. The KREDL also has a fixed period of 30 months from the date of signing a PPA to complete the CSP projects and 18 months to complete PV projects.

India’s Solar Developers

Solar developers based in India are initiating projects on their own and many are seeking outside contractors to supply the equipment:

  • Tata BP Solar Ltd., a joint venture between India-based TATAand UK-based BP Solar, has completed a 1MW PV project in the eastern part of the country. The project uses 4,400 crystalline silicon PV modules spread out over 5 acres. Tata BP is also developing other projects in different parts of India, including Tamil Nadu, Andhra Pradesh, Maharashtra, Chhattisgarh, Orissa, Jharkhand and Uttarakhand.
  • Earlier this year, Tata power partnered with Australia-based Sunengy to build the first floating PV power plant in India, a “Liquid Solar Array” (LSA) invented by Sunengy. The construction of the pilot plant is expected to be completed by the end of 2011
  • The largest planned investment in solar projects in India isIndia-based Reliance Power’s plan to invest $1.8 billion to add 500 MW of solar power projects in Rajasthan over the next three years. The first phase is to complete a 40 MW PV plant by March 2012 with the help of an $84 million loan from the EXIM Bank. The company has already placed equipment orders with a U.S. supplier. A 100 MW CSP project is set to be completed by May 2013 and the company has already signed a PPA with NTPC Vidyut Vyapar Nigam Ltd.
  • India-based SunBorne Energy closed financing in August 2011 for the debt component of $30.6 million to build a 15 MW PV plant in Gujarat following India’s first auction of solar development permits. China’s Suntech has already begun delivery of the PV panel equipment and the plant is scheduled to be completed as early as November 2011. SunBorne is backed by billionaire venture capitalist Vinod Khosla, as well as U.S. venture capital firm General Catalyst Partners, and International Finance Corp.
  • CPL Energy, an Indo-Italian joint venture, is also searching India for renewable energy investment opportunities in Gujarat, Rajasthan, Madhya Pradesh and Karnataka.


With the increasing interest in developing solar energy in the country, India continues to add more capacity and is expected to invest about $7.2 billion to add grid-connected renewable energy capacity of 3,530 MW in the current financial year. More RFPs, like the one due October 20, 2011, will probably continue to emerge from India.

The exploding solar development in India means not only a market for PV and CSP developers, but also for equipment suppliers. German-based SMA Solar Technology, the world's largest manufacturer of inverters, announced in August 2011 it was setting up of a wholly-owned Indian subsidiary, SMA Solar India Pvt Ltd, in Mumbai. The company has already developed 200 MW of business in India since 2010.

The U.S. Export-Import Bank’s recent announcement of $575 million in new loans to companies building in India if they purchase solar equipment from U.S. firms is clearly aimed to help the American economy. India-based Azure Power has received a $16 million loan from the EXIM Bank for the 5 MW project it is developing, which it said it plans to put toward purchasing PVs from U.S.-based First Solar. But other U.S manufacturers that have Asian factories do not qualify for EXIM funding.

Indiais also poised to be a huge market for less-efficient, thin-film applications. Nearly 72 percent of India’s population lives in villages where transmission and distribution of utility-scale energy becomes difficult due to the lack of infrastructure. Many current PV technologies that are considered to be low in energy conversion efficiency are suitable for these remote and decentralized applications, such as home lighting, PV lanterns and PV water pumps. This means some thin-film companies shut out of certain PV markets may have found a new one.

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