Power Today |
 
Advertise Here [728 W x 90 H pixels]
Finance | April 2015

Default over Design:How India will really grow its solar industry

Can India achieve 100 GW of solar in five years? Technically: yes û if politicians are willing to put enough support behind it. Realistically: not likely û there is still no strategy in place for achieving this number.

So does that matter? No. As solar becomes ever more viable and India´s energy demand rises rapidly, the mountain will come to the prophet. However, it will be a market by default, not by design. My conversations at REInvest suggest that most players are aware of that and are willing to use the positive mood created by the government and the event to drive their different business models. I had many very interesting conversations at REInvest in Delhi. It was clear that there is a sense of optimism in the market.

Great optimism from afar, and more cautious optimism, the closer you got to the details. But still: there is an air of possibility that has been lacking for the last years. One immediate achievement of the government´s drum-beating was that there was a new set of players around: large Indian business houses and international investors who now see a chance for projects big enough to warrant their time and efforts. Also, Indian manufacturers have not been so happy in a long time. They can expect sizable and stable orders from public sector companies in the coming years. Another visible change was the presence and active involvement of financial institutions. They finally seem keen to actively develop this market. A fourth positive momentum was provided by the Andhra Pradesh government around Chief Minister Chandrababu Naidu who was beleaguered by developers ready to invest in solar in his state.

Does all this add up anywhere near to the governments 100 GW target? No. There were commitments given by Indian private sector companies to develop 166 GWs of solar, but they have no legal basis and hardly reflect more than a broad, general, and in some cases quite unfounded ambition. At the same time, the big question of: who will be the bankable buyer of these large amounts of solar, remains unanswered. India today is a 1 GW a year solar market. Under the current policy design, it could grow to become a 3 GW a year market in the next three years. That would make it larger than the German market and most existing players would be quite happy.

But take a moment to look at this from another perspective, the perspective of what is needed. Even 100 GW of solar would only provide around 10 per cent of the power India will likely need in five years. The country´s power demand is enormous - and it will grow even faster, if a much-needed process of industrial growth can be triggered. And how will that power be provided? Today, coal is the backbone of India´s energy system. Due to changing economics, environmental concerns and infrastructural bottlenecks, solar has the potential to become that backbone in 10 years time. That would then require much more than 100 GW. It would also require grid management skills, storage and demand management - but that should be feasible by then. A lot of it (as the government already proposes) would be distributed, where power is consumed near to its point of generation.

Such a market would start as a default market. For more and more energy-starved customers, solar will offer the best solutions. While these markets (private PPAs, mostly captive, for industries or telecom towers or appliances) are still small, they will scale up as tariffs rise, as consumer awareness and confidence grow and as sales and maintenance channels become established. They can offer companies a chance to innovate, excel and drive customer value, and by extension provide investors with more attractive returns.

In the meantime, it is important that policy design focus on enabling the market. Net-metering helps at lot, but has to be implemented well. Higher duties on diesel will become very effective when oil prices will rise again.

An environmental tax on fossil fuels like the coal cess is good. Feed-in tariffs, capital subsidies or RECs are not really needed and, if not reliably paid out, are counterproductive. The energy access market will arguably need some support to reduce the share of energy spending in the budgets of poor households. Many of the industry stakeholders I spoke to, left aside the government targets and got on with the business of creating value for their customers and a sustainable business model to service India´s long-term energy needs. That, to me, was the best news at the conference.

Authored by Tobias Engelmeier, Founder & Director, Bridge To India

  • The grid-connected market will be driven by public sector companies; project returns are ok, but unexciting.
  • The distributed and ´solar as a solution´ market is still too small for most larger players and investors, but holds the greatest promise.
  • In the past, faulty market designs (REC, rooftop subsidy) have been counterproductive and stopped the default markets from taking off. This has to be avoided.
Post your comment
Name:  
Email:    
Comments:  
Verification Code:   Change Image

 

Posted Comment
1 .     Yogesh Says:
17 Oct 2016
I wish to start pvc / pp electric wire unit in Delhi. What kind of information I can get if I subscribe for your magazine

2 .     Sarfaraj Bilakhiya Says:
20 Sep 2016
Pls invite me all auction in gujarat

3 .     k.natarajan Says:
20 Jun 2016
we are doing business developing for solar power ,thermal power , customer supporting and we have 45 mw splar power on hand needs investors..... thanks lot pls call +910842559230 +919842753550


Advertise Here [728 W x 90 H pixels]