India yet needs to travel a long way to achieve its solar dream of 100GW

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To achieve the target of providing electricity for all by 2018, the country needs to electrify about 38 million more households. This is a sizeable number given the pace at which electrification has been going on in the country, and people in position know that a lot more needs to be done to get around it as well.

In several ways solar power is presently being looked at as a major option to fulfill this target, as the new national electricity plan doesn’t propose to make coal-fired plants any soon. A Coal India study released this week went one step ahead. The study says no new coal mine needs to be allocated or auctioned beyond what is already there in the pipeline.

The situation, however, is likely to become tough when there is a shift in focus from cost-effective coal to costlier renewables. The process ideally could have more dimensions than what is so easily perceived. In simple terms, for now, it is almost like swapping a dairy cow with a calf.

On the one side there is a well established process that the country may continue without worrying too much about its staggering economy.  For it doesn’t need many more capital-intensive schemes in to push it ahead from where it is, currently.

While the country may have to continue with coal for some more decades for technical reasons, the decision makers also know any hasty decision that will hurt the sector beyond a certain limit will be a doomsday for the financiers who have lent trillions of rupees to it. No country can afford to disturb its economy in such a fashion and manner without taking into account the likely negative consequences.

Beyond all its rosy looks the other side is just a testing ground, at least for now. Issues are several and so many tricky situations need to be tackled with utmost caution. Devising a clear perspective that will fine balance the need of the hour without losing sight of a long-term goal alone will decide the success of the programme here.

Thus, giving an impression of viability to renewable investors over the conventional coal-fired power sector might require much more homework, especially to make solar power look like a viable option, technically, technologically and economically.

The distance the country needs to travel in this direction at present is a long one. While a predominantly sunny India can comfortably have a 750GW of solar generation capacity, our plan as of now is only to take the number up to 100GW, that too by 2022. Yet this has all the ingredients of a tall dream given the speed of solar projects in the country.

What here gives room to hope is the way things moved in the last one year. India this January completed 20GW of installed capacity, long four years ahead of its actual schedule. It is now going ahead with its programme of adding 11GW more capacity in FY 2018-19, which is certainly a remarkable jump on the scales.

The growth of installed solar capacity from 2.5GW to the current level in last three years shows the proactive approach of the current dispensation. Plans are afoot to streamline the processes so that the project takes a major part in lighting every home of the country as envisioned.  The government is serious and is taking all efforts it can to achieve it.

Union Minister for Power and New & Renewable Energy RK Singh announced at International Solar Alliance (ISA) forum in Abu Dhabi in this January: “India has one of the fastest growing renewable energy plans in the world and would achieve 175GW target of installed renewable energy capacity well before 2020.”

In the forum Mr Singh also announced the government setting up a US$350 million (Rs 2,250 crore) solar development fund that will enable financing of solar projects in the country.

Solar power majors such as Greenko Solar, Refex Energy, Vyonarc Development, Shakti Pumps, Amplus Solar, Tata Power, Jackson Soalar and Zodiac Energy, have also reportedly signed letters of intent with different banks there.

Despite all challenges on the ground, FY 2017-18 also will sign off as a year that marked a difference in India’s renewable sector for several of its structural changes.

However there are finicky areas that need more attention. 

The total fund requirement for attaining the 100GW solar generation capacity is estimated at US$100 billion (Rs 640,000 crore). This is a huge amount of money by any standard, and attracting global investors to partake in the game is one of the essential steps to take it to a final success.

Volatility of rupee, weaker financial situations of the power distribution network across states, poor end-user recovery levels are all problems that may compel an investor to stay away from making investments in the domain.

The power ministry said that Yes Bank has committed to financing projects worth US$5 billion (Rs 32,000 crore) to ISA fund, while NTPC has agreed to contribute US$1 billion (Rs 6,400 crore). Industry experts believe that to attract major foreign investors the proposal need to be drawn in a much more convincing way.

Replacing the country’s age-old power grid with smart grids, so that they can smoothly handle the volatility of power from renewable sources such as solar, could be another challenge to deal with. Although a great amount of work is underway along this line, how quickly the government can go around this is yet a pertinent question. 

Another important area that needs attention is promotion of decentralized solar generation, which is proposed to be 40% of the 100GW plan. While there are several subsidy schemes in operation for grid-based solar generation, not many or none in effective for decentralized one. There is consensus among experts that the success of India’s solar programme will depend much on the success of decentralized schemes. Completion of rural electrification without involving these micro-grids is a nearly impossible thing and urgent attention is required to throw light on the ambiguities existing here.   

There will be many more things for the government to deal with alongside of its solar journey.

For instance, a recent recommendation of Directorate General of Safeguards Customs and Central Excise for levying a 70% provisional safeguard duty on solar modules imported from China, Malaysia and Taiwan (since stayed by Madras High Court) can cheer the local manufacturers. But the same will negatively affect several such projects, construction of which are underway.  A Crisil report suggests that implementation of such duty is likely to affect project worth Rs 12,000 immediately.

India will require about 18-20GW module manufacturing capacity annually to meet its ambitious solar plans. While the installed manufacturing capacity of the same as of now is for about 10GW, the total manufacture is only for 3GW capacity.

A clear and strategic approach that, while addressing the concern of both groups will formulate an equation that will take the solar plan ahead undisturbed, is the need of the hour. 

Put simply, for transpiring its goal on the ground what is required for India, more than anything else now, is clarity and cohesiveness in its solar policy. Synchronizing the interest of various stakeholder groups could perhaps be a first right initiative in this direction.

The intent of the government is clear, yet it looks it has a long way to go before it can fulfill its dream completely.