The government is tweaking policies to encourage solar power capacity addition, but the increasing equipment cost is threatening to spoil the party.
India, with more than 14,000 MW of installed solar power capacity, is one of the fastest growing markets in the world. In September 2017, the country crossed 60,000 MW of renewable energy capacity, which includes mainly wind and solar energy. The installed capacity of renewable energy crossed the land mark 50,000 MW in December 2016. Though, the capacity addition for both wind and solar energy are on a slower path in comparison to the previous year, the solar segment still managed to keep up the momentum in the current year as well.
As on September 30, 2017, the total grid-connected renewable capacity in the country clocked 60,158 MW. Of which, wind power contribution was 32,701 MW, solar plant capacity was 13,982 MW, and rooftop accounted for 790 MW. The Ministry of New and Renewable Energy's (MNRE) target for renewable energy capacity this year is 14,550 MW, but in the first half of the financial year, it added only one-fifth of the target. It is believed that the major portion of the capacity would come up in the second half of the year. The breakup of the said target would be 10,000 MW from solar and about 4,000 MW from wind.
The country has set the goal of achieving 175 GW of renewable energy by 2022 which includes 40 GW of rooftop solar power. When this target was announced, it appeared to be a Himalayan task. But at the current pace, and with 14,000 MW in the generation kitty, this target is so very near.
So now all eyes turn to solar power, and the view there is amazing. The growing swing towards renewable sources of energy and favourable government initiatives have increased the stake of solar power in the country's total energy generation sector. Under the Jawaharlal Nehru National Solar Mission (JNNSM), a capacity addition of 20,000 MW has been envisaged by 2022. Then, there is the US$ 90 million investment plan between GE Energy Financial Services (GEEFS) and Rattan India Group to develop a solar power project of 500 MW. Add to this the fact that India's solar power capacity addition is forecasted at 9.4 GW this year, which is even higher than the previous estimates of 8.8 GW. Moreover, the Government of India is taking various steps and initiatives like a 10-year tax exemption for solar energy projects, etc, to achieve India's ambitious renewable energy targets of adding 175 GW including addition of 100 GW of solar power, by the year 2022. All this would undoubtedly require production and usage of solar cells and modules for power generation. The second phase of JNNSM solar development programme, which mandates 50 per cent local equipment sourcing, comes in handy as it will most definitely boost the country's solar equipment market.
Over the next five to 10 years, around 293 global and domestic companies have committed to generate 266 GW of solar, wind, mini-hydel and biomass-based power in India. This initiative will entail an investment of about US$ 350 billion. The 2026 forecast for India's non-hydro renewable energy capacity has been increased to 155 GW from 130 GW on the back of more than expected solar installation rates and successful wind energy auctions.
In a recent report published by the global solar energy consulting firm, Bridge to India, projects in India would cross 20,000 MW of solar capacity by the end of the current financial year. It says, 'About 10,000 MW of capacity allocated to developers was in various stages of development.'
If we go by the analysis and statement from the government, the ambitious target of achieving 100 GW of renewable energy by 2020, in all probability will be achieved. Solar in the next three years will play a crucial role in achieving this target.
However, the increasing price of the solar panels in the recent past is casting a shadow over the solar power segment. This, according to the sector experts, is a growing concern that will escalate the cost of setting up solar plants.
In the past couple of years the segment had registered over 80 per cent growth. But the future of solar looks bleak as the demand is slowing down when the tariff has hit an all-time low. Experts are of the opinion that the utility level solar capacity addition may get limited to 5GW per annum.
Let us analyse how the solar power has been in India. The last five years paved a strong way for the solar power. The cost of components have come down considerably, that resulted in the tariff dipping to as low as Rs.2.44. The tariff has dropped almost 80 per cent in the last six years, a decline that was never witnessed in any part of the the world. Remember, when launched, at a tariff of `18/unit, solar power was considered non-viable proposition in India. However, the dip in components, technology advancement, volumes and the competitive bidding had made this possible.
Traffic wise, renewable energy segment in India recently had gone below the thermal power tariffs. Solar is the cheapest source of energy in India with the lowest tariffs.
India currently meets 89 per cent of its power needs by thermal power. Though growing in numbers, renewable energy's contribution, especially that of solar power is still not sizable enough to be considered big in the country's energy basket. In the current scenario, it is expected that the yearly capacity addition would touch 2,000 MW in 2019 and by 2020, it would cross 3,000 MW. The large sized commercial and industrial customers (C&I) will continue to be the main customers of solar.
Sanjeev Aggarwal Managing Director and CEO, Amplus Energy Pvt Ltd, says, 'For India to achieve the aggressive target set by the government, the policymakers and off-takers need to ensure a steady pipeline of projects and continued work on maintaining an enabling policy environment. There is enough and more private capital available to flow into solar sector provided the risk-reward remains balanced. India has the potential to achieve and surpass the 100GW target offset by the government. In particular, the government needs to encourage rooftop sector as the target of adding 40,000 MW in rooftop is far lagging behind as compared to the grid-scale projects.'
The foremost driver of solar power capacity addition at this juncture appears to be the hunger for cheaper power. With a sizeable dip in the tariffs and growing capacity addition in the segment, solar and wind put together may be able to realise country's dream of cheaper power. De-centralised power distributions or off-grid solar power will continue to drive the market in the near future. Power for All and rural electrification scheme also will form a part of the driving forces.
Roof-top solar installations are another segment that will see significant traction in the coming years. According to industry experts, the roof-top segment registered close to 81 per cent growth in the last financial year (FY16-17).
Aggarwal pointed out the effect the falling tariffs could have on the upcoming bids. 'Project cost being the biggest value driver, falling project costs have driven tariffs lower. Recent increase in the module costs is yet to manifest itself in terms of tariff since there have not been any major bids to come out after the price increases. It would be interesting to see how the bidders behave in the upcoming bids in the backdrop of increasing equipment costs. Probably, with this upwards blip in the module prices, the bidders will be much more careful not to bid on razor-thin margins.'
But he elaborated on by putting his opinion on the role of technology. He said,'As tariffs fall developers will look at technology improvements that either enhance yield or lower maintenance costs. Any such improvements would be acceptable provided the cost benefits stack up.'
Aggarwal signs off by saying, 'We remain optimistic on the prospects and expect even larger capacity installations and bids. The government seems to be committed both for solar as well as storage technologies. With new initiatives like International Solar Alliance (ISA) and the Government of India's push on Make in India, we expect increasing domestic manufacturing for solar equipment and components that will find a large international export market in the years to come.'
And that seems be the opinion of the industry, optimistic and bullish for solar market in the coming years. Inconsistency input of renewable energy calls for solutions that can address the challenge and make sure the output is stable. So it is imperative that the solar power gets storage as its real ally. Though developers looked at supplying to the grid directly off late, there are developers who are looking at battery-based energy storage solutions. This will enhance the country to address the energy requirements when required rather than when it is generated. That means along with solar energy developers, there is a big opportunity waiting for the storage solution providers.
-Renjini Liza Varghese
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