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Interaction | August 2015

India´s sunshine states can be major investment destinations

A phased-out approach and aggressive focus towards implementation is what is required to meet the desired outcome and deliver more than the proposed capacity, believes Sanjay Agarwal, Managing Director, Fortum India.

Talk about growth in the sector over the last two years?
Globally, the success of solar energy deployment has been completely dependent on certain external factors. India is no different. With an encouraging 2013, the industry was more confident about the next couple of years. However, with issues like key administrative changes and anti-dumping concerns, the investment decision was stalled by some international players.

But, with the present government´s aggressive push towards solar, the Indian solar market has again rejuvenated and shown tremendous growth potential for the upcoming clean energy eco-system ´ a priority for the nation.

The momentum around solar upliftment in the nation has been inspired by the country´s 100 GW solar PV target by 2022 ´ a move that has prompted a series of multi-GW trade announcements, majorly driven by international players putting India back into the solar business.

Over the last couple of years, India has made impressive progress in developing its abundant solar power potential.

It has added capacity at a commendable pace, and successfully reduced the costs of solar energy, making India amongst the lowest cost destinations for grid-connected solar power in the world.

How much have initiatives and policies pushed this sector? Have you witnessed any significant improvement?
When GoI revised the earlier solar energy target of 22 GW by 2022 to 100 GW, the intent became crystal clear and no further proof is required to show that India is on the right track. Political will and support has been amply demonstrated by this push.

As seen and experienced world over, RE efforts, require strong political push in the beginning, but as the scale increases, electricity prices have moved quickly towards grid parity. In fact, if we create societal costs analysis or P&L, all conventional energy sources are already higher than solar.

The revised 100 GW number reflects the aggressive focus on RE, especially as the installed solar capacity in India is approximately 4 GW currently. The 100 GW number looks aggressive, but with time and various bid announcements, India is moving step-by-step and may reach its plan in the next 5-7 years.

GoI has followed up the revision of its targets with actual intervention at the Centre and state level by allocating resources for development of solar parks and allocating monies to various government agencies involved. However, a lot more thrust and the right business model is awaited for the solar rooftop segment.

Which policies have made significant contribution? How well are they implemented?
India´s new progressive government certainly inspires confidence among the earlier promoters of solar in the country. We believe that India´s solar eco-system is gaining momentum and over 2,000 MW of solar energy is likely to be added in 2015. With GoI´s intent to boost the solar energy space, the eco-system is moving in the right direction. Initiatives like Jawaharlal Nehru National Solar Mission (JNSSM), changes in the Electricity Act, RE obligation etc. are proof of the government´s solar focus.

Achieving grid parity in 2022 will not be a tough ask, however, the eco-system needs to elevate its approach -in order to ensure better momentum and aggressiveness The RE Invest summit saw huge amounts being pledged towards RE in India. How many of these do you think will be realised?
Commitment has been shown by various solar players, on basis of the growth projection this country has to offer in the long term. We do need to consider that this commitment has been given for a longer period and the industry has started moving in this direction. However, implementation will take longer, as it requires strategic decision-making like investment and geographical inclination etc.

What is a realistic target of projects that can be fundable for 2022, as opposed to the GoI´s RE target of 176 GW?
India offers a unique opportunity with exponential need for sustainable and clean energy. Solar energy is still an under-utilised energy source as the country has access to sunlight for more than 300 days every year. States like Madhya Pradesh, Andhra Pradesh and Tamil Nadu can be major investment destinations due to their natural inclination as RE sources.

The National Solar Mission has been designed to address the country´s power need through solar energy. We have taken a phased out approach to meet the desired outcome and hence believe that India has the capacity to deliver more than the proposed capacity´ provided we accelerate the process and have aggressive focus towards implementation, which is starting to happen.

What financial options are available for funding of RE projects in India?
There are various options available GoI is investing heavily into RE in order to meet the electricity demand. However, this may not be enough and they should instead also encourage investment in captive power generation, which will add to the national grid.

Asset finance (RE finance projects) and the public market are still dominant forms of RE financing in India; However, venture capital and private equity transactions are also happening.

The government, bilateral and multilateral organizations are offering grants at favorable rates to promote RE project development, which supports deployment at all scales. Three main financing options for implementing solar PV captive power plants are debt financing, asset financing and corporate financing.

Banks have pledged support to RE projects, but how many of these are actually bankable?
Riding on India´s favourable geographical location, solar investments are gradually becoming a potential proposition for financial institutions. We believe solar financing should also be treated on par with conventional power project financing i.e. solar financing, in every form and be considered under priority sector financing with long term debt options.

Where do you see the future of RE in India over the next 3-4 years?
RE sector and specially solar would be a game changer and transformational for India in the years to come. With potential of more than 700 GW to be harnessed, today solar is at an inflection point.

We have an installed solar base of less than 4 GW, while China alone installed around 13 GW in 2013, followed by Japan adding around 7 GW and USA adding around 5 GW. The world has seen how positively disruptive solar economy is and within the last decade, global solar capacity has leapfrogged from 3.7 GW in 2004 to 139 GW in 2013, along with which, costs have also rapidly decreased.

India, with its high solar insulation and average of 300-330 sunny days per year, is rightly poised to exploit solar potential. Land acquisition and evacuation challenges will be mitigated by creation of solar parks with evacuation facilities. With erstwhile roadblocks removed, developers need to have technical, project management and financial capabilities to harness this opportunity.

What measures or policies would you suggest need to be adopted or implemented for India to meet or exceed these expectations?
With PM Modi setting an ambitious target of adding 100 GW of solar power in the country by 2022, there is an estimated need for more than 1 million full time employments to successfully operate and manage these power plants. There is a dearth of good, qualified manpower, and the industry needs to address this on priority, or else, the shortage of efficient resources may have a significant dent on the nation´s solar dream.

Presently, university courses and curriculum do not meet specific skill requirements of the solar energy industry. The curriculum must focus on technology and design, and institutions should provide extensive training with appropriate exposure on latest trends and technologies in the industry. There is an immediate requirement to encourage industry-academia eco-system and nurture manpower suitable to the industry.

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