By Saptak Ghosh, Pooja Vijay Ramamurthi, Vaishalee Dash and Nagalakshmi Puttaswamy
When the previous government launched the Jawaharlal Nehru National Solar Mission (JNNSM) in early 2010, the target of 22 GW by 2021-22 was considered unrealistic by most solar experts. Solar was considered too expensive for large-scale deployment.
However, the last few years have seen a dramatic decline in solar power costs, from Rs. 20 per unit to nearly Rs. 5.5 per unit. This has made the government perceive solar energy as an economically rationale choice for the country. Thus, it has raised the solar targets to 100 GW out of the proposed 175 GW of renewable energy. If these targets are met, India will join the ranks of the world’s solar powerhouses in terms of installed capacity.
The solar targets have been divided into grid-connected solar parks and large plants, Rooftop PV (RTPV) systems, 5-10 MW ground-mounted projects and off-grid installations.
Is this a good move?
The increased solar targets have positive economic implications for India. They envisage an investment of around $100 billion in the sector over the next seven years. This opens up the space for foreign investments (especially from China, Japan, Germany and the US) and encourages indigenous manufacturing of solar components.
With 100 GW of capacity installed, around nine percent of India’s electricity requirement will be met by solar alone (currently 0.5 percent). India would then surpass Germany, where solar energy currently accounts for six percent of total power. This highlights India’s seriousness in reducing its carbon emissions by increasing the share of renewables in its energy mix. Showcasing this kind of commitment to climate mitigation will give India a strong position at the upcoming 21st Conference of the Parties (COP 21) in Paris.
The broader benefit of solar energy is its contribution to increasing energy security by reducing reliance on fossil fuel imports. Additionally, off-grid plants under the new solar scheme can help India achieve its goal of universal electrification. This will be a big advantage as currently 300 million Indians still lack access to basic electricity services.
However, increasing India’s solar capacity from 3.3 GW to 100 GW in seven years will be a challenge. Such tremendous growth can only be accomplished with a strong policy framework which takes into consideration all the potential barriers to the sector.
Currently, large solar PV plants make up more than 90 percent of the installed capacity in India. This is because established developers get easy access to finance, security of payment and simple operation and maintenance (O&M). Despite these incentives, certain technical and economic barriers still need to be addressed for ramping up large-scale plants.
Owing to the intermittent nature of solar energy, large-scale deployment will require the development of grid management and load balancing mechanisms in co-ordination with State Load Dispatch Centres and R&D institutions.
Green bonds and public financing need to be promoted to reduce the cost of debt and increase loan tenures. India’s good global credit rating will allow the government to leverage low-cost finance (with lower hedging rates) from developed countries to commission large solar projects.
To ensure that state utilities have an incentive to deploy solar energy, Renewable Purchase Obligations (RPOs) need to be stringently enforced.
Rooftop Solar Power
RTPV is a decentralised technology, which is being encouraged due to its low land footprint and ability to reduce transmission and distribution (T&D) losses. Weak local distribution infrastructure, lack of economies of scale and poor social outlook have prevented RTPV systems from penetrating the Indian market. These challenges need to be suitably tackled.
To counter variability and fluctuations, utilities need to strengthen their distribution transformers. Relevant stakeholder interactions should be held in every state to assess the financial health of utilities, project annual capacity addition targets and establish guidelines for utilities to upgrade their existing infrastructure. This will lead to the formulation of appropriate net-metering and Feed in Tariff (FiT) rates.
R&D institutions need to perform accurate resource assessments using Geographical Information Systems (GIS) to understand which rooftops are best suited for RTPV systems. Researchers at Bengaluru’s Center for Study of Science, Technology and Policy (CSTEP) are in the process of conducting such studies for India. They suggest that an aggregator system can be implemented for consumers with ideal rooftops who cannot afford the initial investments. Under this scheme consumers can either buy electricity or avail long-term low interest loans from the aggregator. The aggregator can take advantage of the enforced RPOs and sell accrued Renewable Energy Certificates (RECs) to ensure profitability.
Major restructuring is required in the off-grid sector. These projects should be linked with value added services such as rural industries, cold storage units and pumping irrigation water. Streamlining the subsidy disbursal mechanism via one ministry and providing incentives such as tax holidays and minimum return guarantees can encourage private investment.
To ensure long-term sustainability, rural entrepreneurs and public-private partnerships can be encouraged. Local communities should be trained in system O&M.
If these challenges in the three sectors are addressed in a structured and phased manner, then India’s ambitious solar target of 100 GW for 2021-22 is achievable and certainly desirable.