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Sun shines on India

Venugopal Pillai ,  Saturday, December 03, 2011, 14:39 Hrs  [IST]

Untitled - 25The Jawaharlal Nehru National Solar Mission has brought the Indian solar power industry into the sunshine. Thanks to the mission, India has at least taken a good start with respect to its multifarious solar power ambitions. This special story by Venugpal Pillai reviews the recent developments in the Indian solar power industry and attempts to look at the challenges ahead.

Just before the National Solar Mission was launched, India's grid-connected solar power capacity was negligible—estimated at just around 2 mw. Now, in less than two years into the policy regime, India's solar power capacity has appreciated sharply. As of July 31, 2011, India's grid-connected solar power capacity, coming from plants of capacity 1 mw or above, was estimated at 45.5 mw. More importantly, under the two rounds of bidding held under the first phase of the National Solar Mission, projects aggregating over 1,000 mw have been approved. Here is a brief chronological summary.

Round 1 of Phase 1: The process of selecting developers began in August 2010 with nodal agency NTPC Vidyut Vyapar Nigam (NVVN) embarking on selecting 150 mw of solar PV and 470 mw of solar thermal power projects. The response was tremendous with bids received exceeding 5,000 mw. Capitalizing on the demand-supply mismatch, shortlisted applicants were asked to quote a discount on the CERC-approved rates, as a secondary selection criterion. This was done in consultation with all stakeholders and pre-bid meetings held by NVVN. The process, apart from ensuring transparency also resulted in lower tariffs, bringing the solar mission closer to its gridparity objective.

Bundling Scheme

In order to facilitate grid-connected solar power generation in the first phase, a mechanism of "bundling" relatively expensive solar power with power from the unallocated quota of the Ministry of Power) generated at NTPC coal-based stations, which is relatively cheaper, was proposed in the JNNSM.

This "bundled power" is being sold to distribution utilities at prices determined by Central Electricity Regulatory Commission (CERC). JNNSM also provides for NTPC Vidyut Vyapar Nigam Ltd or NVVN to be the designated nodal agency for procuring the solar power by entering into a power purchase agreement with solar power generation project developers who will be setting up solar projects during the next three years, i.e., before March 2013 and are connected to the grid at a voltage level of 33kV and above. For each mw of installed capacity of solar power for which a PPA is signed by NVVN, Union power ministry shall allocate to NVVN an equivalent amount of mw capacity from the unallocated quota of NTPC coal-based stations and NVVN will supply this "bundled" power to distribution utilities. This scheme is referred to as the 'bundling scheme'.

Considering the fact that some of the grid-connected solar power projects were already at an advanced stage of development, the guidelines for migration of projects from their respective existing arrangements to the ones envisaged under JNNSM were issued in February 2010 and thereafter guidelines for selection of new-grid connected solar power projects (photovoltaic and solar thermal) were issued in July 2010 by the Union ministry of new and renewable energy.


In December 2010, a total of 704 mw of grid-connected solar power projects were selected. This included 16 projects of 84 mw capacity under the "migration scheme" at CERC-tariff. Another 37 projects of 620 mw (seven projects of 470 mw solar thermal and 30 projects of 150 mw of photovoltaic projects) were selected by NVVN on the basis of discounts offered on CERC-approved tariff. The average discount offered by developers was Rs6.06 per unit on the CERC tariff of Rs17.91 per unit for solar PV projects and Rs3.95 per unit on the CERCapproved Rs15.31 per unit on solar thermal power projects. (The migration scheme refers to solar power projects under development before the advent of the National Solar Mission and which moved under the mission guidelines.) NVVN entered into PPAs with 36 developers in January 2011 and they were supposed to achieve financial closure by July that year. Out of these 36 projects, 35 projects aggregating 610mw could achieve financial closure, and were finally approved under the first round of Phase 1.

Round 2 of Phase 1: The second round of bidding under Phase I also drew a very encouraging response from developers. Bidding that closed on October 3, 2011, saw over 150 companies evincing interest in developing largescale (mw-sized) projects. As against the indicative 350 mw of capacity put on offer, nodal agency NTPC Vidyut Vyapar Nigam Ltd received applications for 218 projects (including multiple projects submitted by a single developer) aggregating over 2,500 mw.

Like the previous round, NVVN expects to shortlist bidders on the basis of discounts over CERC-approved rates. Some experts believe that the average discount that NVVN could stand to earn would be even higher than that in the preceding round. Some of the companies that have submitted their bids (requests for selection) include Anil Ambani (Reliance) Group, Lanco, Moser Baer, Tata Power, Hindustan Petroleum Corporation, GAIL (India), etc. NVVN expects to shortlist bidders by end of November 2011.

A very striking progressive step taken by the Centre in the second round was encouraging the setting up of large solar power plants, thereby bringing in cost efficiency. In this round, the minimum size of the project was set at 5 mw and in multiplies thereof. In the previous round, this was 1 mw. Secondly, it allowed developers seven months from the date of signing of the power purchase agreement for attaining financial closure, as against six months earlier.

In the second round of selection, the government stipulated that total capacity of projects to be allocated to a company, including its parent, affiliate or ultimate parent or any group company shall be limited to 50 mw. They can submit applications for a maximum of three projects at different locations, subject to a maximum aggregate capacity of 50 mw.

The Technology Factor: Currently, solar power is very capital intensive resulting in the cost of generation of solar power is much higher than conventional forms like thermal energy. Although there is zero cost of inputs—sunlight is freeand it is inflation-proof—the capital cost of a solar power is quite on the higher side. The National Solar Mission envisages the technology aspect as a long term objective. It stipulates India to become progressively self-sufficient in solar power equipment, aiming at a manufacturing capacity of at least 4 GW per year by 2020.

Untitled - 26In all this, one must admit that making India a technological base for the solar power industry will be a tall order, however noble the intentions might be. Currently, all primary equipment, be it solar photovoltaic cells or solar thermal collectors are imported. An industry expert noted that today India is barely equipped to be an "assembler", it would take a very long time for the country to create a fully-integrated equipment base, which would span from silicon wafers to solar photovoltaic modules, in the context of SPV plants at least. If India seeks to create an integrated equipment manufacturing base for solar photovoltaic plants, it would have to begin with a national semiconductor policy, a solar power producer observed, requesting anonymity.

MW-SIZE GRID-CONNECTED SOLAR PLANTS IN INDIA
(As of July 31, 2011)
Developer Location, District State Capacity
      (MW)
Sri Power Generation (India) Varadayapalem, Chittor Andhra Pradesh 2.0
Reliance Industries Thyagaraj Stadium Delhi 1.0
North Delhi Power Keshavpuram Delhi 1.0
Lanco Infratech Charanka, Sabarkanta Gujarat 5.0
Sun Edison Gandhinagar Gujarat 1.0
Azure Power Khadoda, Sabarkanta Gujarat 5.0
C&S Electric Ltd Nandha, Bhiwani Haryana 1.0
Karnataka Power Corporation Yelasandra, Kolar Karnataka 3.0
Karnataka Power Corporation Chikodi, Belgaum Karnataka 3.0
Mahagenco Chandrapur Maharashtra 1.0
Tata Power Co Mulshi, Pune Maharashtra 3.0
Dr. Babasaheb Ambedkar SSK Arvindnagar, Osmanabad Maharashtra 1.0
Raajratna Energy Holdings Sadeipali, Bolangir Orissa 1.0
Azure Power Ajanal, Amritsar Punjab 2.0
Reliance Industries Khimsar, Nagaur Rajasthan 5.0
ACME TelePower* Bherukhada, Bikaner Rajasthan 2.5
Sapphire Industrial Infrastructure Iynarkulam, Sivaganga Tamil Nadu 5.0
B&G Solar Mayiladuthurai Tamil Nadu 1.0
RL Clean Power Marakathoor, Sivaganga Tamil Nadu 1.0
West Bengal Green Development Seebpore, Asansol West Bengal 1.0
Total for 20 projects     45.5
*Based on concentrated solar technology, rest are all photovoltaic systems (Source: MNRE)

In terms of solar collectors (used in solar thermal plants), India has the technology for low temperature applications. The same would need to be extended to medium and highheat applications, where the reliance on imports is currently absolute.

As years go by, India would need to take very brisk steps in at least creating an enabling environment for an equipment manufacturing base evolve. India's sprawling micro, small and medium enterprise (MSME) sector can play a very critical role. MSME entities need to be encouraged to manufacture components and systems for solar power plants. R&D activities and gradual capacity expansion should also be incentivized and supported through soft financial loans. As envisaged in the JNNSM, Indian Renewable Energy Development Agency (IREDA) will play a supportive role to this effect, through refinance operations. An international solar power producer observed that if India hopes to have an efficient equipment manufacturing base for solar power, it should be ensured that equipment can be locally produced at low cost. In this reckoning, creating a large base that would bring in the benefits of economies of scale is crucial.

Off-Grid Rural Opportunity: Perhaps the biggest opportunity—as also the biggest challenge—of the JNNSM is being able to provide affordable off-grid solar power for rural applications. It is here that technology can come to the rescue. Currently, reaching grid power to far-flung rural areas is very costly, regardless of the source of power. Even distributing conventional (say coal-based) power is not cost effective given that there is no rural grid for transporting power. Hence, lowcost off-grid solar power can be a technological solution to the rural populace that can now transit from darkness (absence of electricity) to off-grid affordable solar power, without engaging in the intervening stage of conventional grid power. However, as some experts point out, off-grid solar power for rural application can also succeed if it is affordable and continuous. Low-temperature solar converters, for which technology exists in India, can be gainfully used to provide power for at least most parts of the day. Currently, off-grid solar applications in rural area predominantly include domestic and street lighting and solar cookers.

WORLD SOLAR POWER INSTALLED CAPACITY*
(MW)
  2000 2005 2009
European Union 189 2,341 15,943
Japan 318 1,422 2,633
China 19 68 305
USA 139 479 1,650
Rest of the world 763 1,051 2,347
World Total 1,428 5,361 22,878
*Relates to solar photovoltaic plants only
Source: www.epia.org

THE RAY FORWARD
On purely technical grounds, the sun can meet the entire energy needs of a tropical country like India. In a year, over 5,000 trillion kwh of solar energy is incident over India's land surface, which is several times the electricity consumed in the country. However, as a solitary source of electric energy, it is not feasible to think solar—not just in India but in any country endowed with and advocating solar energy. In the best scenario, solar power can only progressively substitute and balance the use of other forms of energy. The National Solar Mission is only the first step in the direction of tapping the sun for gainful socio-economic use. However, it should be admitted that the all-important first step has indeed been taken, and the initial results are very encouraging.

Solar energy has distinct advantages but also limitations. The foremost advantage lies in the eternity of the energy source and its zero cost. The biggest limitation is the high capital cost and therefore the high cost of generation. While technological advancements and widespread deployment are certainly bringing down capital costs of solar power equipment, there is a limit to this efficiency. It is estimated that if worldwide deployment in terms of installed solar power capacity doubles from its existing levels, there will be a 22 per cent reduction in capital costs. However, even if solar power capacity were to increase 16 times from its current level, the reduction in capital costs would be only 60 per cent. Furthermore, what is more important from the Indian point of view is that in order to avail the benefits of global expertise, there should be a quick transfer of technology to enable domestic product at low capital costs.


Untitled - 28India has envisaged that solar power will attain grid parity with coal-fired power by the year 2030. At this juncture, it is difficult to say if this would happen in India, or anywhere else in the world. It depends on solar power deployment, emergence of new technologies and a host of other factors. It may also be noted that parity between solar power and coalbased power could be possible by the sheer fact that coal prices are moving up. Coal has traditionally been the cheapest form of power generation for India, reflecting in the fact that over half of the country's installed power capacity is from coal-fired plants. However, cost of power generation from coal is on a definitive uptrend. The growth in India's domestic coal production is not keeping pace with demand, and the reliance on imported coal is proving unsustainable. Hence, experts feel that grid parity between solar and coal- based power will be attained through a combination of forces. Firstly, technology will bring down cost of solar power generation, and secondly, sheer demand-supply mismatch will increase cost of coal-fired power.

Whatever be the impact that technology and deployment will have on solar power generation, it should be accepted, at least in the foreseeable future, that solar power generation cost is high in absolute terms. The mw-sized power plants that are being built under the National Solar Mission are based on power purchase agreements signed at CERC-approved rates that are in tune with the cost of solar power generation. Hence, the development of solar power projects will depend on feed-in tariffs and other subsidies-much like the case in developed nations. Government support will therefore be critical to the solar power industry's growth in the coming years.

Untitled Document
Jawaharlal Nehru National Solar Mission: An Overview

Launched in November 2009, the Jawaharlal Nehru National Solar Mission, commonly referred to as the National Solar Mission, is India's biggest step towards harnessing its huge solar power potential. The mission has set a target of attaining 20 GW of solar power capacity by 2020 and also achieving grid parity by that year. The mission also envisages India to have 20 million solar lighting systems and over 20 million sqm of solar thermal collector area, by 2020. JNNSM, in its goals, also envisions India to be a global leader in the manufacture of solar power equipment with a target of around 4 GW of manufacturing capacity by 2020, apart from building dedicated manufacturing capacities for poly-silicon material to annually make around 2GW of solar cells.

JNNSM has been divided into three phases. The first phase ending 2013 envisages 1.1 GW of cumulative gridconnected solar capacity. At the end of the second phase, the cumulative capacity targeted is between 4 GW and 10 GW. By end of 2020, the overall capacity is projected at 20 GW.

Out of the 1.1 GW of grid-connected solar capacity envisaged by 2013, around 100 mw (or 0.1 GW) is expected to come from rooftop and other small solar power connected to the electricity grid, below 33kV. This component of the mission was designed essentially as a state-driven scheme to encourage the states to declare their solar policy for grid connected projects focusing on distribution network and to strengthen the tail-end of the grid. This would also help to create a database of performance of solar plants under different climatic and grid conditions. Keeping this in mind, a cap of 20 mw per state was introduced in the guidelines with individual projects capped at 2 mw.

The ongoing feed-in tariffs and other fiscal concessions announced by the government relate to the first phase. Modalities for the second phase will be formalized in due course.

The guidelines for implementation of the JNNSM were announced on July 25, 2010, after extensive consultation with various stakeholders, including the states, manufacturers, financial institutions, and project developers/investors. The guidelines provide for deployment of both Solar PV projects and solar thermal technology projects in a ratio of 50:50 in capacity terms.

NATIONAL SOLAR MISSION: PHASE-WISE TARGETS

Phase 1
Phase 2
Phase 3
  2010-13 2013-17 2017-22
Grid-connected capacity (GW) 1 - 2 4 - 10 20
Off-grid applications (MW) 200 1,000 2,000
Solar thermal collector area (mln sqm) 7 15 20
Domestic mfg base (MW/year) ---   4 - 5
Solar lighting system (numbers)     20 million
Solar RPO (% to total) 0.25   3

Renewable purchase obligations (RPO) introduced by the Centre have inspired investment in clean energy sourcesmainly wind and now solar. Currently, the RPO stipulated is 5 per cent, which means that at least 5 per cent of the total electricity purchases made by power distribution utilities have be from renewable energy sources. Trading in renewable energy certificates have also resulted in a better demand for RPOs. Some experts are of the opinion that the government could do well by introducing solar RPOs that will stipulate mandatory purchase of solar-based power.

While there is much in favour of solar energy, it must also be appreciated that solar power is land-sensitive, and in the Indian context, this could be detrimental to the solar industry's growth. While land will have to be procured for mw-sized plants, the government could provide incentives for roof-top plants in semi-urban and urban areas. This could displace predominantly fossil-fuel based grid power, at least to some extent.

In summary, the National Solar Mission is a concerted effort to develop the entire solar power industry, and not setting up solar power plants in isolation. Solar power cannot entirely substitute coal-based power, but it can certainly reduce the dependence on scarce fuel resources like coal, oil and gas. The future of the Indian solar power industry—both in terms of installed capacity and domestic competence in equipment manufacturing—depends much on what can be achieved in the next four-five years under the aegis of the solar mission. The future penetration level of solar energy in India cannot be foretold, but it is here to stay—just like the sunshine.

Showing the light

The current cost structure of solar energy is very high therefore no matter how high the domestic demand, it is not feasible. Therefore we need the domestic subsidy like JNNSM to get plants up and going. It cannot survive without government support, nowhere in the world. I think that if the industry does not drive the cost down, it is dead.
James Abraham, MD & CEO, SunBorne Energy

Technology has to improve furthermore and economies of scale have to be achieved so that prices can be brought down further. New markets like India, South America and South Africa can help create these economies of scale.
Christopher Winter, Country Manager-India, Gehrlicher Solar AG

Continuous advancements to system components, efficiency gains, optical improvements and reduction of overall power losses will continue to increase performance. In addition to performance upgrades, controlling manufacturing costs will allow solar to be cost-comparable to traditional forms of energy generation. As the solar component supply chain matures, manufacturing processes become more efficient and volumescaling cost savings will occur.
Brian Robertson, CEO, Amonix Inc

It is absolutely clear that India has to develop a base for solar PV cells to fulfill the Solar Mission objectives. India has missed the bus in semiconductor manufacturing and can ill afford to do so for the solar PV manufacturing. The lack of semiconductor manufacturing industry should motivate India to ensure that the nascent manufacturing market for solar PV develops and provides the energy security that the country needs.
Kai Vogt, Director-International Business, centrotherm photovoltaics AG

Economies of scale across the value chain right from silicon manufacturing to module production and a conscious effort of lowering margins at every step would further bring down prices. This definitely is a much needed advantage which India should capitalize particularly when it is at the nascent stages of promoting this industry. If large industrial, financial and technology partners come together and build large capacities from upstream to downstream, it would result in large reduction in prices and enable to bring solar power at grid parity much earlier than predicted.
Gaurav Sood, Managing Director, Solairedirect Energy India Pvt Ltd

(Extracted from exclusive interactions with Electrical Monitor in the recent past)

 
                 
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