Over the last couple of years, there has been very little talk of India becoming one of the biggest markets for concentrating solar power (CSP). Today, however, many factors are coming together which show me that the country will start to lead the industry.
Having lived in India for 2 years, it is difficult for me to be impartial when assessing the opportunities in the CSP industry. I believe very firmly in the great capacity of Indians to learn fast and reduce costs – they are specialists in making things cheaper while maintaining quality standards. I can´t think of anything that the CSP industry is more in need of.
From an economic development perspective, India’s economy is performing very well, averaging 8.5% growth this year. Its growth rate could overtake China’s by 2013 – if not before – according to a recent article by The Economist.
While China’s growth has been largely state-directed, India’s is driven in large part by its 45 million entrepreneurs. Private firms have had to compete with the world´s best – and many have discovered that they can.
Some of India’s largest companies have already taken an interest in CSP and have been working aggressively to understand the technology, to set partnerships with the right companies and to drive down costs. Consequently, India is emerging as a key market for CSP industry development, holding immense potential that concentrating solar thermal companies cannot afford to ignore.
Serious and dedicated local developers like Cargo Motors, Coramandal, Enam Infrastructure, Electrotherm, Entegra, Lanco Solar, SunBorne, Suryachakra, Welspun and Acme have emerged in last two years. These are promising, financially stable companies, that have long-term growth plans with land banks at their disposal.
Similarly, large domestic construction companies are picking up the pace in CSP. These include publically-traded EPC companies include like BGR, Essar, Gammon, GMR, GVK, Jaypee, Lanco, L&T, NTPC, which have robust balance sheets and large order books.
New Solar Mission
Last year, the Ministry of New and Renewable Energy announced its National Solar Mission, which aims to generate 20 GW of grid-connected solar power by 2022, of which 50% will be CSP electricity.
The target for the first phase (up to March 2013), under the Mission is to set up 1,100 MW of grid-connected solar power plants.
The Indian power trader NVVN will procure solar power from PV and thermal project developers under the Mission at a tariff set by the Central Electricity Regulatory Commission (CERC) for the first 3 years. NVVN will bundle 4 units of traditional power with each unit of solar power to bring down the final cost. The tariff rates notified by the CERC for 2010-11 are Rs 17.90 ($0.39 USD) a unit for PV and Rs 15.40 ($0.34) for CSP.
The implementation process has started and during the first phase, 500 MW of power will be developed. Around 55 requests have been received for CSP, five of those for combined thermal and PV projects.
Concentrated Solar Power the Indian Way
There is a buzz word that you often hear in India – indigenization. Indians use this word to refer to establishing local manufacturing facilities, and in doing so, to achieve cost reductions. The mobile communications sector provides a good example of this.
In mobile telecommunications technical know-how, supported by local enterprise, paved the way for industry to become the fourth largest network in the world within a short span of 10 years. The sector has been doubling in size every second year and now boasts a subscriber base of over 165 million. India's mobile phone tariff is currently the lowest in the world, at less than 1 US cent per minute.
With very low capital costs enabled via the National Solar Mission, there is no room for expensive components profiting from a tight bottleneck of supply. The first phase will pull the trigger for India's CSP industry to seize the opportunity in manufacturing components. Indians are expecting to commoditize the whole solar field – and to export it in due course.
There are, of course, a number of financial and environmental challenges to address if the Indians are going to scale up this sector.
One major challenge is project financing. Equity and debt funds first need to be organized if developers are to cash in on the new opportunities. Selected projects run a fair chance of ultimately finding funds; however, the rules for raising debt (roughly 6 months, with penalties for delays on financial closure) are stringent. Banks have yet to get comfortable with some of the clauses in the model PPA, and to study the yet-to-be released payment security mechanism.
As such, Indian financial institutions must first gain experience and become familiar with the project appraisal techniques. Meanwhile, debt seekers have little knowledge of the yardsticks to be applied by the financial institutions on the processing of financial sanctions.
The other challenge is the availability of water. While India’s state governments have committed to providing the required quantities of water, their commitment will be put to the test during summer months. Uncertainty and adhoc policies concerning water allocation threaten to compromise the viability of solar thermal plants.
Alternatives such as dry cooling and hybrid wet/dry cooling systems are to be considered in the long run in order to mitigate the risk of limited or non-availability of water. But at present, cost constraints render these options temporarily unviable.
Although reservations based on past experiences are understandable, India is a key market for industry development and holds immense potential. India is a key piece in the puzzle that will change the industry going forward; it is absolutely instrumental to CSP industry growth and development.
So for all you CSP folks – add the words Namastei and Shukrya to your vocabulary. Now is the time to take advantage of this opportunity and move swiftly to turn the Indian dream into a global reality.
CSP Today is the leading business intelligence, news and events company focused exclusively on the concentrated solar thermal power industry. For more information on the conference in India or other conferences around the world, visit www.csptoday.com
For readers interested in learning more about the opportunities for CSP in India, CSP Today has prepared an India Country Profile Info. Pack download, including in-depth papers & materials.