Solar, Utility Scale

India – A Vast Market for American Solar PV Companies?

With the U.S solar market for medium to large-scale photovoltaic (PV) power production just on the brink of an explosive growth, one may wonder why should one care about the market possibilities in other parts of the world? Once the economy flips around, we should see U.S. PV installation contracts grow to impressive proportions. That is the easy part. But like the wise monkey in Disney’s Lion King 1½ advises the meerkat — “Look beyond what you see!” As solar companies rev their engines waiting for the race to start in the U.S., this is the time for businesses to think about potential markets beyond the current one. I suggest they look at India.

Although the per capita power consumption in India is 20 times less than that of the U.S., India’s biggest hurdle to current and future economic growth is lack of sufficient and reliable electricity.

The total installed capacity in India barely meets electricity demand. Planned and unplanned power outages of 4 to 1o hours a day for households and business are common. Upwards of 40% of electricity is “stolen” in India — not paid for — thereby increasing the cost of electricity for the paying consumers.

The total installed capacity of 146 GW in India can be broken down by source as:

 


 

Solar-based energy today accounts for only 0.5% of that number with a grid-interactive (grid-hybrid) solar power totaling only 2.12 MW from just 33 such installations.

Despite the fact that these energy challenges in India are well known and severe, global corporations continue to invest heavily in India primarily because of the abundance of highly skilled workers especially in the high-technology sector. This is because of India’s focus on high-technology education and also simply, because of a sheer staggering population of 1.15 billion that grows at 1.58% annually.

The Gross Domestic Product (GDP) in India is targeted to grow at 8% over the next ten years. At this rate, power demands may rise from the present 120 GW to 315-335 GW by 2017. Consumer demand is growing at 14% over the next 10 years — faster than the GDP rate!

Another factor is the increasing social awareness in India about its own villages. A full 77% of the Indian population lives in rural India and about 80,000 villages have no electricity at all. Because of such social awareness and the inertia and difficulty in providing power from the electric grid to these villages, India is already starting to see an increase in rural solar power installations — thanks to some great social enterprises.

Some experts say that India is likely to run out of its 60-70 billion tons of coal reserves by 2040 if the demand continues to grow at the present pace. With the high reliance on coal-fired power plants, this is making the Indian government aggressively look for alternatives in renewable energy sources. The government has mandated that 12% of all electricity is to come from renewable sources by the year 2010. The Indian solar power production is slated to grow to 500 MW by 2012.

Making Solar Energy Feasible in India

The price of traditional grid electricity in India is about US $0.08/kWh. The price of solar electricity in India today is still about 3 times that, which makes it a hard sell. However — like the U.S, the solar industry in India today is on the verge of a massive explosion because of change:

The new National Climate Change Action Plan in June 2008 puts focus on eight priorities – the top being solar energy. In January of 2009, the government announced significant programs to promote megawatt-plus size solar power growth in India. These include:

  1. 80% rebate incentive to solar power projects

  2. no import duty and excise tax on materials needed for the project.

  3. loans for solar power installations.

  4. a 25 cents/kWh incentive for net-metering.

  5. mandatory solar dependence for all new government building and multi-story building projects.

Regional Economic and Geographic Factors

So why should a western business look at India as a potential solar market as opposed to, say, China?

The economic landscape of Asia has become massively competitive. India’s big fear is that it will lose the dominance it enjoys in the high-tech and service industry today to China and other countries in the South East Asia. In the last five years, this has led India to make drastic changes in its business practices such as import tariffs and regulations, tax structures and more. It has also become evident in the new world economy that the Indian political landscape, its policies and its advantage of having English as a business language for hundreds of years gives it an edge as a business platform over China.

Fundamentally, having started the influx of Western currency over the last few years, India now wants to keep and expand that influx even more so and is likely to continue policy changes that will encourage businesses to come to India over China.

Another factor in support of solar energy in India is its location. India lies in a very sunny region of the world and at mid-low latitude. Most parts of India receive 4-7 kWh/m2 of solar radiation per day with 250-300 sunny days in a year, equivalent to over 5,000 trillion kWh.

Solar PV Applications in India

The potential customers of solar power installation fall into these categories:

  • Residential clusters — otherwise known as “colonies” in India. There is a strong sense of community among the colonies of urban and suburban India where residents are quite likely to pool their resources together to create a small local grid for the colony.

  • Business office complexes — Companies such as IBM, EMC, Intel, Pfizer, etc. have built immense office complexes in the last 5-8 years that house thousands of employees and huge arrays of power-hungry computer equipment. These businesses cannot afford lengthy power outages common in India and therefore have very heavy-duty generator equipment also at hand.

  • Rural townships and villages — This is an immense market and would typically be government-funded or non-profit funded installations. A target for electrifying 5,000 such villages was fixed for the Tenth National Five Year Plan (2002-2007).

  • Individual Residences — There is quite a significant number of private citizens who are in a position to afford solar power installations and would do so even though today it costs more than traditional grid power because of various personal reasons, e.g. being “green.”

  • Large government power production facilities — With the government putting emphasis on 1- to 5-MW power plant facilities as well as its larger goals for upgrading India’s overall power production, this is truly a significant opportunity for PV companies exploring the Indian market.

  • Water-pumping — The unpredictable and inconsistent costs of Monsoon-based farming is a detriment to farmers in these areas. Providing irrigation and drinking water to rural farming villages could be accelerated by PV technology.

The Current Players

There are some very prominent manufacturers of PV raw materials and arrays in India now. Signet Solar, for example is investing US $2 billion over the next 10 years for manufacturing thin-film PV modules. BP Solar partnered with the Indian Goliath — Tata Industries — to invest $78 million recently. Moser-Baer is an Indian company with a very significant presence as well. It just won a state-government contract to install India’s largest rooftop solar PV system (135 kWp). There are also a growing number of smaller shops.

Much of the activity seems to be focused currently on manufacturing — with the manufacturers themselves possibly offering design, installation and monitoring services as well. But this is likely to change in favor of a growing service industry in 2009.

General Considerations

High capital cost, land scarcity and local competition are some of the challenges that an incoming energy company would face in India. Land is scarce in urban and suburban India, and the politics and logistics of getting access to available land in rural India can be quite tricky. With India’s incredible business evolution, Western companies need to be wary of local Indian competition more so than ever before.

With the Indian economy not being hit as hard as the U.S, there indeed are many investors and companies in India who have the means to and interest in creating a relationship with western companies.

The bottom line is this: The time is ripe for the solar market to take off in India today. Companies with a solid foundation that get in early and establish themselves now will prove to be winners. A year from now may be too late.

Jay Hardikar is a Peterborough, NH based independent consultant with 20 years of experience in environmental consulting and high technology. He helps renewable energy companies set up and manage business in India. He can be reached at [email protected] or at 508-308-8245.