India has one of the fastest growing economies in the world. The country depends on fossil fuels-- coal (40%), oil (24%) and natural gas (6%) to meet nearly 70 percent of its energy needs, according to theInternational Energy Agency. In the midst of growing its economy, (seven percent growth predicted in 2011), the country has experienced significant electricity shortages due to the poor quality of coal and shortages in coal and natural gas.
In the last ten years, India has more than doubled its crude oil imports. Imports of coal, for electricity production, increased 18 percent in 2010.
In June 2008, the India Prime Minister signed into effect the National Action Plan for Climate Change (NAPCC). NAPCC is a national policy initiative, which addresses energy efficiency, forest conservation, climate change, and producing a greater share of the country’s energy from renewable energy like solar.
In January, India enters into the second year since launching the Jawaharlal Nehru National Solar Mission (JNNSM)—a vital component of the NAPCC. JNNSM guides the development and deployment of solar energy systems across the country. The solar segment of NAPCC expects to attract $23 billion (US) in investments. It focuses on increasing both the central and decentralized installed capacity of solar systems used for energy generation.
Source: C.R.E.D.A.
India’s tropical climate and abundance of sunshine make it an ideal location for the development of a solar infrastructure for energy generation. Depending on the area of the country, the average daily solar irradiation ranges between 4 to 7 kWh per square meter. India has anywhere from 250 to 300 days of sunshine a year.
Nation Solar Mission (NSA)Objectives
NSA has the mission of establishing India as a global leader in the solar energy industry. It plans to create, monitor and modify policies, which fuel the installation of small and large solar energy generation plants across the country.
The main scheme behind the solar power is theRenewable Purchase Obligation (RPO). The RPO requires utility companies to purchase a minimum amount of solar energy and other renewable energy, to meet mandatory of 0.25 percent in the first phase. The utilities’ obligation increases to three percent by 2022. The tariff currently assessed on solar power purchases declines over time.
A $1.00 per ton tax on coal mined domestically or imported into the country also provides funding for research and deployment of solar and other renewable energy.
The Nation Solar Missionplans to focus on “solarising” applications that requires temperatures 80 degrees or lower, including like cooking, hot water, drying farm produce, water pumping or streetlights. Other uses include decentralized solar electricity generation for schools, hospitals and villages.
In addition, NSA makesthe installation of solar heaters a mandatory part of the National Building Code. It will design a system for certification and rating of solar thermal equipment. This initiative takes place in three phases.
Phase I covers the period up to 2013 and focuses on “low-hanging” thermal solar systems and installing off-grid system in region without centralized commercial energy. This includes 1000 MW of grid-connected systems 33 kV, 100 MW of rooftop and small systems tied to low tension grid (11 kV), and 200 MW of off-grid systems.
By 2017, Phase II ramps grid-tied capacity up an additional 3000 MW, primarily through RPOs and a preferential tariff. This stage has the potential of deploying 10 GW or more by the target date. Phase III evaluates Phase I and Phase II, and completes the last leg of installations required to reach the 20000 MW objective, between 2017 and 2022.
Fifty percent of the installed capacity will consist of concentrated solar power. The Nation Solar Missionhas a goal of 100,000 MW of installed capacity by 2030.
Making Solar An Attractive Investment
Coal and natural gas-fired plants in India have low profit margins. Incentives make solar energy a more attractive investment compared to fossil fuels and other renewable energy power plants. Rules allow solar energy producers to sell power back to the utilities at a rate 7 to 8 timesthe price paid for wind or coal/natural gas-based plants. Regulations require developers to employ domestic modules, parabolic reflectors and other local equipment in their projects.
Central and state government agencies provide subsidies for imported equipment purchased by companies’ for solar cell manufacturing and electricity production. The country’s revenue codes allow firms tax break, for up to ten years, on plant infrastructure. Developers also have the option of selling generated electricity on power exchanges for an even higher price.
In 2010, India’s central government set up the solar energy securities fund. The $70 million fund reimburses solar energy project developers if the power distribution company does not pay the high tariff rate for electricity production in accordance with power purchase agreements.
The central government also allows developers of grid-connected solar power plants to enter into agreements with transmission companies, which gives developers flexibility for selling the electricity they generate.
The Special Incentive Package (SIP) policy promotes building integrated manufacturing facilities, which includes silicon to solar panels manufacturing and thin-film solar panel production.
Manufacturing
India manufacturers have exported solar panels to European and other markets for a number of years. However, manufacturers have complete reliance on imports of the raw materials like silicon wafers, encapsulating material, high transmission glass for manufacturing solar panels. NSA also intends to build capacity for the domestic production of polysilicon material for making a minimum of two GW of solar cells annually.
Currently, India produces about one GW of solar modules a year-- the equivalent of just one Chinese module manufacturer. The solar initiative will panel production to 4-5 GW by 2017. In addition, India will invest significant resources into facilities to manufacture low-cost, high quality balance of system parts, and advanced solar collectors.
Ultimately, NSA’s the primary goal is to build a solar industry, which competes in the domestic and global marketplace, by investing in indigenous companies, promoting industry innovation and reducing costs. K. Subramanya, chairperson of SEMI’s India PV Advisory Committee and CEO of Tata BP Solar states:
“India has a great role to play in solar manufacturing— and manufacturing must increasingly become the backbone of the country’s growing economy and the engine of job creation. Established industry leaders have been committed to solar manufacturing in India for decades and are increasing their investment further. It would be most appropriate to extend the purview of the domestic content requirement to apply to projects addressing state solar RPOs.”
Research & Workforce Development
A JNNSMcommittee,called the Solar Research Council (SRC), has the charge of guiding strategies, concentrating research capabilities and managing resources. The SRS will also collaborate with international research and industrial partners.
India has a shortage of the technically skilled workers needed to conduct research and development and automate manufacturing facilities. Most manufacturers along the solar energy value chain face the challenge of recruiting and keeping experienced workers and professionals. This has led to a number of solar workforce development programs, sponsored by SEMI India and in partnership with the National Centre for Photovoltaic Research and Education (NCPRE). The strategy includes training 1000 engineers and scientists to learn and train on various aspects of solar energy technologies.
Increase Off-Grid Capacity
The plan has a strong emphasis on bringing power to the people in remote locations who currently do not have access to light and power and grid-tied systems are not cost-effective. They admit that the challenge lies in the development of a financial strategy to fund the significant upfront cost of such an initiative. One aspect of the plan calls for the electrification of 10,000 villages and small towns with solar lighting systems. In most of the isolated remote project areas, NAS will provide 90 percent subsidy.
Source: Azure Power
Developers will install standalone solar power systems on outlying borders and remote areas, such as Lakshadweep, Andaman and Nicobar Islands. In addition, solar energy will power computers for schools.
Challenges for India’s Solar Industry
Financing is a major challenge for India’s solar industry. Even with the government incentives, investing in solar energy plants is expensive and risky. Financing is costly and difficult to obtain for solar projects. The industry must deal with concerns regarding “bankability of documentations” solar project developers must submit to lenders. The Government payment schemes have mitigated the situation.
Subramanya said, “If interest rates may be brought down, through priority lending to the solar sector, the Indian solar industry will see huge growth avenues.”
Some non-conventional means of financing large-scale project in India includeEXIM, which is the United States export-import bank and foreign lenders.EXIM offers financing for solar projects that imports a major portion of components from U.S. manufacturers. International lenders may provide financing at lower interest rates for large-scale solar energy plants.
Like many countries that have increased solar energy generation, transmission of electricity from solar power plants in remote region creates a distribution challenge, which may require the installation of costly new transmission lines. Water allocation for large CSP projects also call for innovative policies on the part of state government.
Conclusion
A strong national policy and abundant solar radiation makes solar energy systems profitable investment options, which can earn developers equity returns in the neighborhood of 15 to 20 percent, according to Emergent Ventures India Pvt Ltd. EVI Internal. Various states have also set up regulations, apart from the policiesof the Nation Solar Mission, which supports solar energy development.
India represents a key market for the solar industry. As the solar energy industry expands, it can play a pivotal role in helping the country meet its energy needs, while contributing to the nation’s economic growth.