India’s Solar Excitement: Proceed with Caution

It’s a beautiful sunny day in Los Angeles, Calif., yet the Hollywood hills are practically invisible due to a hazy fog that rolls in and out of the area. For some visiting Hong Kong, the peak of summer is mistaken for the rainy season. These conditions aren’t due to unusual weather patterns, but air pollution. And in many cases, clean air initiatives have been enforced to help reduce the smog that so many residents despise. But imagine pollution so heavy that it becomes a critical life-threatening environment.

India was ranked as having the world’s unhealthiest air pollution in a recent Yale study. And its overall environment fell to position 125 out of 132 nations, only slightly healthier than Kuwait, Yemen, South Africa, Kazakhstan, Uzbekistan, Turkmenistan and Iraq. Pollution not only centered around large cities, but ebbed into smaller communities, as well. This is largely due to the ever-increasing population, energy needs, and vehicles. India’s emission standards are 10 years behind European standards, said Anumita Roychowdhury, executive director of India’s Centre for Science and Environment in the study. 

With its population already more than 1.2 billion and on track to surpass China by 2030, India is in dire need of energy. Though the government set an initiative to power the entire country by March 2012, nearly 300 million are still living without electricity.  

A logical fix for this issue is to use its massive coal reserves – the fifth largest in the world. According to a recent report in The Economist, fossil fuels will likely be its main focus, which means that emissions are expected to more than double by 2030. If this practice follows though, India will contribute to about a tenth of the global rise in emissions during this period. “We need to take big steps or the problem will overwhelm us,” said Roychowdhury. 

Incentive Encouragement 

India made strides to curb its hazardous emissions by putting a significant focus on renewables in 2011. It received a record $7.2 billion in clean energy investments in the first three quarters of 2011, which exceeded the $5.2 billion invested in 2010, according to a recent report by Bloomberg New Energy Finance – a 52 percent growth rate. The solar sector was a major player in this growth and accounted for $2.4 billion in the first nine months. Much of this investment has been due to favorable policy incentives. Ashish Sethia, head of India research at BNEF, commented: “The surge in installation of renewable energy shows that it is becoming cost competitive and scalable, at a time when India is struggling to meet its targets for conventional power capacity.” 

During the second phase of India’s National Solar Mission in late 2011, which aims to put 1,000 MW of solar on the grid by 2013, the government put 350 MW of PV projects up for grabs. The NSM is planned in several phases: 

“In order to prevent bunching of large capacities and the difficulty that may arise in achieving financial closure, it is proposed that selection of PV projects be done in a phased manner. The allocation of capacities would be done in two batches and over two financial years of phase one in 2010-2011 and 2011-2012. 

“The total capacity of solar PV projects to be selected in the first batch in FY 2010-11 shall be limited to 150 MW. The projects for remaining capacity for solar PV projects will be selected in second batch in FY 2011-12. However, given the longer gestation period of solar thermal projects, selection of projects for entire capacity of 500 MW, less capacity of migrated projects, shall be done in FY 2010-11.” 

Developers registered for the auction had strict parameters with regards to the size of the projects and total capacity each developer can claim. The government increased these numbers from the first solar mission to attract larger developers. Bidders were allowed to vie for projects up to 20 MW and acquire a portfolio of no more than 50 MW, with a seven-month timeline to close financing. 

The government set additional parameters in the second round that limited developers to use India-made crystalline silicon cells and modules. However, there were no restrictions set on foreign-made thin film modules. In an effort to discourage speculators from these favorable projects, the government requires that all developers must retain a 50 percent ownership in the project for one year after it starts producing electricity. The final bids went to 28 companies and totaled $770 million, with most development centered in Rajasthan mainly due to its strong transmission network. Rajasthan is likely to become the “hub of solar power generation in India,” according to the report Bridge to India. 

The government seems keen to spur PV development along, even after threatening to fine 14 first-phase projects that total 70 MW of capacity for missed commissioning deadlines. Though this may seem detrimental to the industry, the moderate 2 million-rupee ($40,600) fine may represent the government’s eagerness to spur slow projects along without crippling business. 

Various states throughout India have also introduced programs to promote solar power based off of the centrally developed National Solar Mission, according to Ernst and Young.  Rajasthan has issued a goal to install 10 to 12 GW of new capacity by 2022. The state has released bidding documents for up to 250 MW of solar for the first phase to reach its goal. Tamil Nadu has announced an ambitious $7 billion plan to develop 10 300-MW solar parks. Gujarat released a solar policy with an ambitious target of installing 1,000 MW of capacity by the end of 2012 and 3,000 MW in next five years. The state has already signed PPAs for about 934 MW. “We see Gujarat as the best solar destination due to its progressive solar policies,” said Ratul Puri, chairman of Moser Baer clean energy in a statement.

Growing Confidence Equals Growing Capacity 

The solar sector has made a major impact on private investment growth. A significant example of this activity is the recent announcement form the US Export-Import Bank – it expects India to be its largest clean energy-funding recipient in the next year. According to Ernst and Young, total funding for solar projects is estimated to be $575 million, with $75 million already approved and the rest in the project pipeline. In 2011 alone, the bank approved $1.4 billion in new deals, and total lending reached $5.5 billion: “The results are particularly impressive given that rupee borrowing costs are among the highest in Asia – in October, the Reserve Bank of India raised the repo rate for the 13th time since the start of 2010, to 8.5 percent.” 

KfW Entwicklungsbank, the German state development bank, announced in late-2011 that it has agreed to loan $334 million to fund one of the world’s largest solar PV plants, a 125-MW facility in Maharashtra. Total financing for the Shivajinagar Sakri solar project is $495 million, with the remaining amount to be funded by the state. 

The project has brought excitement to the local tribal residents of Dhule, who experience 12 to 14 power cuts daily. The community also hopes that the project will put them on the map for industrialization and bring economic life and employment to the area.  “The plant will generate direct and indirect employment for around 1,000 to 2,000 people,” said area Member of Legislative Assembly (MLA) Yogesh Bhoye to DownToEarth, “which would mean those many families can be freed of the compulsion to migrate. And once the plant becomes functional, there will be more industrialization, which means further employment.” The project is expected to go online in late this year. 

A 25-MW solar PV plant in Gujarat commissioned by GMR Energy in January was one of the first to be connected to the grid with a 25-year PPA (power purchase agreement). GMR Energy now plans to expand its renewable portfolio to more than 100 MW in the next two years due to favorable policies and the success of the project.

The Asian Development Bank (ADB) and Reliance Power Limited are joining forces to take advantage of Rajasthan’s high solar irradiation by building the 40 megawatt (MW) Dahanu Solar Power Project located in the Jaisalmer district. Reliance Infrastructure Ltd. signed a long-term PPA, which marked the first fully private solar transaction. Project completion is expected by the second quarter of this year, which will make it the largest operating PV project in India. “India’s solar energy potential is one of the highest in the world and this plant will help kick-start large-scale, private-sector solar electricity generation in the country,” said Michael Barrow, Director in ADB’s Private Sector Operations Department in a statement.

Proceed with Caution 

Clean power in India becomes increasingly realistic as renewable prices continue to drop – but many warn that development must be structured with a keen eye. To ensure that Indian development is successful and moves forward, federal and state governments will have to ensure four things, said Sethia. 

“First, that transmission lines are available for projects; second, that the grid can handle an increased flow of renewable energy; third, that renewable purchase obligations are enforced; and, fourth, that project developers are paid on time for the power they produce.”

No posts to display