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Cover Story | April 2017

Reflection Time

Despite dedicated solar policies with well-defined targets, there is barely any focus on CSP, India thus needs to seriously re-think and regenerate to get the sector up and running.

India has a very promising solar resource, with tropical and sub-tropical regions. The DNI map of India depicts that several states in India are suitable for solar thermal projects. Therefore, theoretically, India has a good potential for CSP technology. The Jawaharlal Nehru National Solar Mission is a major initiative of the Indian government as well as state governments to promote sustainable growth and address India's energy security challenges.

However, in the past two years, Indian CSP projects have faced numerous difficulties. DNI data is not accurate, financing costs in India are high, banks are hesitant to lend (refer to our report on financing solar power in India), government support is waning, gas water and land are in short supply. Timelines are too ambitious and margins too low.

The resulting cutting of corners has backfired. The complexity of setting up CSP plants has been systematically underestimated. Around 500 MW of the NSM Phase 1 capacity is still under construction - all of it with significant delays. Much will likely never get built.

At the same time, solar PV has taken the limelight. There have been hick-ups in PV as well, but because the technology is simpler, faster to build and projects come in smaller ticket sizes, the learning curve has been faster. In addition, the cost reduction of PV globally has outperformed that of CSP.

According to Bridge to India, CSP power plants retain a key benefit over PV in that they can produce better quality (more stable, predictable) power. This is crucial for a country with a fragile power grid infrastructure such as India. However, this advantage over PV might become less pronounced as policies start to shift from grid-connected, Feed-in-Tarff (FiT) driven to encouraging de-central solutions as in Tamil Nadu and Kerala.

Challenges posed
One key reason is the sluggish deployment and CSP is perceived risky, compared to PV which has a successful track record of deployment in India. There have been numerous such instances with CSP projects, be it ACME solar or Cargo Solar. Even for that matter, power giants like NTPC are also lagging in their commitment towards developing CSP projects, with latest being a 15 MW project in Anta, Rajasthan. All these examples clearly highlight the fact that a major revamping is required in this sector.

But there isn't much India can do about it as it has never been a driver for CSP. Lack of accurate DNI data and forecasting techniques, leading to changes in project component specifications, including additional land requirements can also be attributed as one of the major roadblocks faced by developers today.

However, India's solar potential clearly indicates that CSP makes sense for India. However, there are challenges that can be broadly divided into three categories û technical, market and environmental.

Technical challenges
No reliable DNI data: In the first phase of JNNSM, MNRE could not provide accurate DNI data to the project developers at the time of bidding.

No successful demonstration project: Though there are successful international projects, India did not have any plant that tested the project's techno-commercial feasibility during JNNSM Phase-I bidding.

Market challenges
High capital and operating expenditure: The cost curve of CSP technology has been unable to compete with that of PV.

No non-recourse finance: CSP as a technology has been proven in the world, but it is still in the initial stage of the technology maturity curve. The governmental thus needs to build an environment that promotes investment.

No local manufacturing: According to a World Bank report, the lack of local manufacturing facilities for some critical components, were a major hindrance for the growth of CSP technology.

No skilled manpower: Lack of skilled manpower is another reason why CSP faced several challenges during JNNSM Phase-I, which in turn caused delays.

Competition from PV technology: The SPV technology is very mature as compared to that of CSP. It is also cheaper, technologically advanced, has lower water requirement, and lower gestation period.

Environmental challenges
Water requirement:
Water is a crucial resource required for the successful operation of solar thermal plants. But areas with high DNI, such as Rajasthan and Gujarat, suffer from acute water shortage.

Land requirement: Land in India is scarce and heavily contested. The land requirement varies widely and the country has not developed any benchmark for land uses for CSP.

Financing woes
Considering the current scenario, CSP doesn't seem a much viable option. Most of the CSP projects in India are installed with support from German and Spanish players, with hardly any strength with Indian bankers, regarding it to be a 'too riskier proposition' to invest, with failure of many recent projects.

This was also true for the 100 MW CSP plant in Rajasthan (based on Fresnel technology); foreign development banks and an export credit agency provided debt with substantially longer maturities than local financial institutions, making the project appealing to the local developer even at a very competitive power tariff for CSP. Hence, GoI needs to re-vitalise the funding options available to the CSP sector and come up with investor friendly schemes for project developers to mitigate any risks related to financing.

At the bidding level also, significant barriers do exist which require further relaxation. A probable solution to this problem, can be introduction of Viability Gap Funding (VGF) based bids for firm power to create more favourable domain for CSP.

Globally, public financing from national governments has been the key driver for such development in the last few years. In order to make national policies more effective in encouraging deployment, GoI should provide sufficient financial support to drive deployment and ensure that support can be sustained over time to avoid boom and bust.

GoI needs to install demand instruments and promote feed-in-laws as the most powerful instrument to push generation. Long-term and stable FITs have proven as the most efficient financial instrument for sustainable renewable market penetration. FITs also need to be stable and comprehensive in order to achieve concrete targets, minimise investment risks and provide investor confidence. There should also be consideration for a period after which the tariff is lowered, for example, after projects are paid-off, so as not to have an unnecessary effect on the price for electricity. Another requirement to provide greater access to investment funds would mean new loan guarantee programmes via existing windows at multilateral banks, existing national lending programmes and global environmental programmes such as GEF, UNEP, and UNDP.

The way forward
The Centre for Science and Environment, outlines the following ways in which India can set the ground right in the first place:
Build data, capacity and confidence by measuring DNI data on the ground - Since the Indian context solar monitoring stations have been commissioned very recently, the DNI data should be measured for at least one to two years to be compared with satellite-based model data to arrive at a correlation.

Build and develop solar thermal applications in stages - The applications should be promoted by MNRE. This would act as a perfect transitional phase for the technology, it would reduce cost and develop skills and expertise in this technology rather than remain theoretical knowledge at the research level.

Promote local manufacturing - The country can be the hub for CSP manufacturing in the world, if the government encourages local manufacturing of CSP components in India through a domestic content requirement clause and a host of incentives to set up manufacturing facilities. It also buys into the government's idea of ôMake in Indiaö. Implement demonstration project before scaling up - Successful CSP demonstration projects are vital not only for building the experience curve but also for developing skilled manpower in the country. It is important that there are projects on the ground which would illustrate that the technology is performing as per expectations.

Use advantages of hybridisation - As it helps CSP integrate with other thermal-power-generating sources very easily and allows availability of solar power on demand even when there is no sunlight. It will contribute to reduction in capital expenditure as well as increase in overall efficiency of any power plant.

Reworking existing projects - Existing projects that have not yet been commissioned be cancelled and penalties be levied. The guarantees should be encashed and used for development of demonstration projects. The plants should be divided and re-auctioned.

Resource efficiency is critical - Government should declare available lands for CSP projects well in advance in the public domain based on DNI data actually measured on the ground, land slope, and groundwater availability for such projects. CSP might yet still stage a comeback in India.

And if it does so, it will be on its own terms, increasingly de-hyphenated from PV. Moving forward, with technological upgradation and increasing thrust of government towards grid stability, the prospects for CSP are likely to improve.

The take-off of CSP technology in Indian markets is directly dependent on how quickly the best practices from international arena penetrates the country. Tower CSP is most likely to be the CSP of the future because it is the most economical technology to incorporate storage. And increasingly, storage is becoming a requirement of CSP.


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