By Aedan Kernan, Greenwell Consulting
India set an ambitious renewable energy goal of adding 12.4 GW capacity between 2007 and 2012, and is now poised to exceed that goal by 1.8 GW according to Bloomberg New Energy Finance.
Much of this success has to do with the first phase of the country’s National Solar Mission, says Professor VVN Kishore of The Energy Resource Institute in Delhi, a visiting Fellow at Harvard University and a consultant on renewable energy to the World Bank. The ultimate goal of the National Solar Mission is to install 22 GW of PV and concentrated solar power (CSP) generation by 2022.
The first phase of the Jawaharlal Nehru National Solar Mission called for a total of 1,300 MW to be installed. Installations would be comprised of 500 MW of utility scale PV, 500 MW of CSP, 100 MW of grid-connected PV in small rooftop installations, and 200 MW of off-grid PV. During 2011, some 277 MW of solar projects were connected to the grid (compared to just 18 MW in 2010). In 2012 up to 750 MW of solar are expected to be connected.
According to Professor Kishore, the National Solar Mission was successful because of its widespread support. The federal government, Central Regulatory Commission, state governments—particularly in the insolation-rich states of Gujarat and Rajasthan—and local regulatory commissions are highly committed to the success and implementation of the National Solar Mission.
Sustainability Follows Profitability
The performance of the installed solar projects over the next two years will be an important factor in the continuation of the capacity building boom. "During 2012 and 2013 we will see if the developers are making really good money or not," says Professor Kishore "If people see good profits coming from these investments there will be another rush into the sector."
A number of factors could stall the momentum. The auctions to win power purchase agreements were extremely competitive with some bidding 30% below the auction ceiling price. Unless developers were able to acquire PV panels well below expected prices, it is difficult to see how they can make a profit, says Professor Kishore. There may be some bidding at a loss to prevent competitors getting a foothold in the market, he suspects. It is unclear whether or not the use of inexpensive solar panels will generate the level of electricity expected. Furthermore, solar radiation levels in India can fluctuate by 15% to 30% annually with major implications for electricity generation and earnings.
Ashish Sethia of Bloomberg New Energy Finance set out four factors he believes are necessary for the surge in solar to continue: transmission line development; investment in the grid to handle this increased flow of renewable energy; the proper enforcement of utilities’ renewable energy purchase obligations; and prompt payment of project developers for their power.
Despite potential future issues, says Professor Kishore, the performance of the solar sector in 2011 was very impressive. Bloomberg estimates that investment in the solar sector increased from US$ 600,000 during 2010 to $4.2 billion during 2011.
Manufacturer Protection in Phase 2
Part of the National Solar Mission includes job growth in India to support the expansion of solar. By encouraging domestic manufacturing as well as installation, operation and maintenance, the Indian government hopes the sector will employ 100,000 people by the end of the mission.
To achieve those levels of employment, India plans to restrict imports of solar power equipment during the second phase of the National Solar Mission, from 2013 to 2017. The restrictions will protect Indian manufacturing from international competitors, according to Renewable Energy Minister Farooq Abdullah, speaking at a solar industry conference. Representatives of the Indian solar industry claim that foreign companies who manufacture in their home countries have been receiving subsidies that give them an unfair advantage in tariff auctions in India. Requiring manufacturing in India would level the playing field, according to a representative of an Indian solar company.
Professor Kishore says that he would like to see greater emphasis on expanding energy access in future phases. Around 25% of India’s population has no access to power and, because of the remoteness of their communities, it is not economically feasible to connect at least half of that number to a grid.
Solar power has become competitive with diesel generation for remote Indian communities, but the capital costs of solar mean that it requires some kind of government financial support mechanism to be cost competitive. "The government has to think of channeling the higher tariffs it is paying for large PV to smaller projects," says Professor Kishore. "Mechanisms need to be put in place. Then we will see what happens."