the solar sector has created a new area spilling over with business opportunities, it also requires an ecosystem for entrepreneurs. There is movement here as well, as experienced workers in the field have taken to mentoring budding entrepreneurs. Harish Hande, recipient of the Ramon Magasaysay award in 2011 in the field of social entrepreneurship, had demonstrated in 1995 how energy is related to poverty reduction when he established his for-profit organisation SELCO. Hande, an IITian and alumnus of the Massachusetts Institute of Technology, is mentoring entrepreneurs.
Solar energy price is reaching parity with conventional energy when pitted against good quality and imported coal. While its future course depends on several factors, not always predictable, its recent growth makes it a strong contender for a large part of India's energy needs. Here is the story so far, told by the recent participants in the growth.
Solar energy makes business sense for small entrepreneurs as well as big corporate houses such as Tata and Adani. The dwindling cost of producing energy from the sun has made a compelling case for big companies to start up businesses. The government has plans of installing 100 GW of solar power in India by 2022, instead of an earlier target of 20,000 MW, which itself looked ambitious once upon a time. Thus, solar energy has transitioned from being merely corporate social responsibility to opening up a sea of opportunities within a span of four to five years.
Ratul Puri, chairman of Hindustan PowerProjects, will add 2 GW of solar power over the next two years by investing Rs 12,000 crore, adding to his portfolio of thermal and hydroelectric power. In fact, according to Puri, more conventional power producers like him will in the next few years start investing heavily in renewable energy. The solar revolution, meanwhile, is not confined to setting up megawatts and large solar parks. It finds its best application in the remotest Indian villages where transmission lines and government agencies haven't reached in almost seven decades.
In such areas, social good and profits go hand in hand. When Tarun Singh — an electrical engineer working in the US for eight years — came back to India to start his own venture, the renewable energy sector was a 'no-brainer'. He realised power was still as scarce in his home state Bihar for the rural poor as he remembered from his childhood days. In June 2010, he started Veddis Solars, bringing solar energy solutions to villages of almost all districts in Bihar. Another large area of growth includes decentralised or rooftop solar power for commercial buildings.
Installation of solar energy in the country, whether it is large-megawatt parks or local solutions, cannot fully take off without having adequate domestic manufacturing. The government's new target has speeded up production as well. Tata Power Solar CEO Ajay Goyal in 2014 increased module manufacturing capacity by 60% taking it to 200 MW a year. Depending on further government policies, his company is prepared to make the additional necessary investments.
The promising business prospects of the solar energy also made Sumant Sinha, the owner of Renew Power, which was originally a wind energy company, diversify into this business in 2013 December. Soon after, ReNew Power bagged the largest tender in Telanagna of 140 MW, taking its total solar projects to 250 MW in a year's time. The company aims at installing 100 MW every year for the next three to five years.
Future bright for a shining industry
MW-scale projects
The ‘large, MW-scale projects’ will happen this year. Look at what has happened this year. At the end of January, the total solar capacity in the country was 2,206.75 MW. By the end of March, this figure rose to 2,631.9 MW — as much as 425.2 MW were added in February and March. (Incidentally, the story of ‘wind’ is also similar, when the capacity increased by about 800 MW in these two months.) As much as 948 MW were added to the capacity in 2013-14.
This year will see solar power crossing the milestone of 3,000 MW. The large-scale projects fall into one or the other of four buckets.
The first is projects coming up under government schemes, where the tariff is determined by a competitive bidding process and project developer will sell the power to electricity distribution companies.
Under the Phase II of the Jawaharlal Nehru National Solar Mission, 750 MW of projects have just been awarded. Several State governments have come up with their own schemes — Madhya Pradesh 100 MW, Karnataka 50 MW, Andhra Pradesh 60 MW.
Momentum to continue
Then there are projects that come under ‘REC scheme’, where a solar power producer will sell the electricity at the specified ‘average cost’ to the distribution company and will get ‘renewable energy certificates’ which can be sold in the market to those who are obligated to buy either solar power or the certificates.
About 200 MW of projects came under ‘REC scheme’ last year and this momentum is expected to continue.
The third is projects being put up by the public sector companies. A six-PSU joint venture is planning a 4,000 MW project in the Sambhar district of Rajasthan, which will be the world’s largest single location solar plant. Two more such joint ventures have been formed by oil companies — one of the upstream companies (ONGC, OIL and GAIL) and another of the downstream (IOC, HPCL and BPCL).
The recently-formed PSU, Solar Energy Corporation of India (SECI), meant to develop solar power in India is a partner in both these ventures, as is the government-owned funding company, IREDA. Most other PSUs are planning or executing solar projects. Neyveli Lignite Corporation has just given the mandate for putting up a 10 MW project at Neyveli to its fellow public sector company, BHEL.
NLC, incidentally, wants to put up 300 MW, for which it has sufficient lands in its possession. Companies such as SAIL and Nalco are planning solar forays.
Of course, the biggest of them all is NTPC, which already has 50 MW and wants to do more. The fourth bucket is projects being put up by a solar power developer and where the power will be sold to consumers, mostly industrial consumers, at negotiated tariffs — the ‘captive model’. SunEdison is planning a 18 MW project in Tamil Nadu and is building solar plants in a modular fashion. Industrial consumers could buy electricity from SunEdison, or buy chunks of plants, say two 1 MW plants or three 500 kW plants, or, just buy electricity from SunEdision.
So we have four lines of large-scale solar activity running in parallel and by the looks of it, all are likely to succeed.
A strong reason why the long-term future of these large-scale plants is secure is the fact that the cost of generation is expected to come down. SunEdison’s Pashupathy Gopalan, who heads the company’s operations in India, Asia-Pacific, West Asia and Africa, says that cost of modules is coming down and efficiency levels are going up, which, with some policy-driven reduction in capital costs, could see solar projects viable at a tariff of ₹4 a kWhr by 2016.
When prices drop, there is little need for government support. Engineering major L&T, which has built solar projects of over 300 MW for other companies, believes that a solar sector that doesn’t depend on government’s crutches is just around the corner. "With the true cost of solar power accelerating towards grid parity, the open market is going to be the next big revolution where projects would be viable without any financial incentive or subsidies,” says SN Subrahmanyan, Member of the Board and Senior Executive Vice-President and Head, L&T Construction.
Rooftop projects
Solar plants on the rooftops of factories and office complexes and shopping malls are happening briskly. There is practically no day without the announcement of a 100 kW or a 150 kW plant commissioned on the roof of a factory or an office or an educational institution. Businesses are attracted to this because of the ‘accelerated depreciation’ benefit — a tax sop which enables a company to write-off 80 per cent of the cost of the plant as depreciation in the first year while calculating profits for tax purposes. The AD is an attractive benefit because companies put into a solar asset the money they would have otherwise paid to the Income Tax Department. Profit-making companies have been putting up even large-scale plants so as to avail themselves of the AD benefit, but the large plants are being put up mostly by the independent power producers. But commercial rooftops are almost without exception AD-driven.
Unattractive option
Industrial and commercial rooftops are happening, and will happen with even more gusto, even without any further intervention from the government. But when it comes to residential rooftops, the story is not so nice. It is still not attractive for individuals to put up rooftop plants and consume the electricity, though there are arguments in their favour — like ‘do you look for return on investment when you buy a car or an air-conditioner’? The emphasis here is on comfort and assurance of power, rather than returns, but this line of thinking has not found much favour from individuals, because the ‘comfort’ factor is counter-weighted by the fickle nature of electricity generation (unless you have a battery, in which case it becomes very costly), and the hassles of maintenance.
Here is where some intervention from the government is required. While businesses get ‘AD’ benefit for their solar investments, individuals get nothing, which many feel is unfair, because the activity is the same.
Mini and micro grids
This is the true story of solar in the country. Put up a solar plant in a village, develop a local grid that can carry the solar power to the houses in that village, the result is a ‘hey, Presto!’ kind of a thing. The lives of villagers become easy, children study, women work during the pleasant hours of the evenings, and sometimes people get into income-generating activities — the social transformation is huge, as has been seen in the case of Meerwada. The only problem here — the cost of the systems — is getting solved. Now that CSR spending has become mandatory, many companies are looking at solar plant with micro grid as a CSR activity. To sum it up, all the three sub-sector of solar power — large-scale plants, rooftops and micro grids — are poised for major growth.
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