Gandhinagar, 13 May 2013

At a time when India’s total installed capacity in solar power generation is just about 1.8 gigawatts (GW) against the Jawaharlal Nehru National Solar Mission’s (JNNSM) target of 20 GW to be achieved by 2022, a one-day conference on “The Future of Solar Energy in India,” jointly organized today by Gujarat Energy Research and Management Institute (GERMI) and Centre for Science and Environment (CSE) at Pandit Deendayal Petroleum University, Gandhinagar, deliberated various issues related to the solar energy sector and came out with a host of suggestions aimed at developing a policy roadmap for the sustainable growth of the sector.

At the start of the conference, Shree Chandra Bhushan, Deputy Director General, CSE, highlighted the major challenges and issues being faced while connecting the solar power plants with the grid.

Speaking on how Gujarat intends to implement the second phase of developing solar energy sector, Shri D. J. Pandian, IAS, Principal Secretary, Energy & Petroleum Department, Government of Gujarat, said, “Gujarat will now mainly concentrate on roof-top solar power, since it offers enormous potential. If we cover only 20% of the houses, which works out to be about 20 lakh, we can install solar generation capacity of about 2,000 MW, which is a big thing. So we plant to install about 60 MW capacity in next three years through this route. Tenders for 5 MW roof-top solar power generation in each of the five cities namely Rajkot, Mehsana, Bhavnagar, Vadodara and Surat are ready and waiting approval from GERC.”

While asserting that Gujarat will come out with a policy to attract solar manufacturing sector, Mr. Pandian also said that we have been successful in reducing the capital cost of a roof-top solar power plant significantly and Sardar Sarovar Narmada Nigam Ltd is in the process of setting up a 10 MW canal-top solar power plant on SSP canal network near Vadodara.

It is worthwhile to mention that Gujarat has made maximum contribution to the nation in the development of the solar energy segment so far.

The other issues discussed at the conference include the second phase of JNNSM: the road ahead, scaling up renewable energy mini-grids for rural electrification, financing for solar power projects, reforms required in the financial assistance for solar in India, innovation and global deal, auxiliary industries and their impact on solar industry, power storage technologies, human resource development in solar energy and so on.

Addressing the conference, Mr. Arjun Guha, Energy Specialist, KfW, said, “State solar policies have granted installation of projects with capacity of more than 1000 megawatts (MW). The efficiency and the generation capability of these plants can only be judged in years to come. Most of the states used the reverse bidding to grant projects to various developers and helped reducing the tariff quoted. In September 2013, Karnataka received the lowest tariff of Rs. 5.51 per unit. But there is an argument that says that feed-in tariffs (FiTs) extends government support over the entire life-cycle of the project.”

Taking part in the debate, Dr Omkar Jani, Principal Research Scientist, GERMI, said, “While many state-level incentives have sprouted, a central balancing mechanism needs to be in place to ensure the sustenance of such state-wide models to ensure no unfair burden on any state due to the high cost of solar energy.”

On the other hand, Kanv Garg, South Asia Sustainable Energy team at the World Bank said that 3,600 MW of solar only under JNNSM Phase-II would require around USD 6.4 Billion, and have a debt financing requirement of around USD 4.5 billion. Using Capital Subsidy / Viability Gap Funding (as suggested in draft regulations of Phase-II of JNNSM) might help in reducing the tariff as capital exposure for the lenders is reduced.

“Incentivizing only capital expenditure gives reason to deploy inefficient or unproven technology that may not contribute much in terms of electricity. Solar projects should be granted ‘priority lending’ status for banks to allocate funds specifically to solar plants. In addition to this, takeout finance should be established like in the case of infrastructure projects that addresses issues that might arise for the long-term debt financing to core projects,” added Dr. Jani.

“Another reason for the delay of the Phase-II of JNNSM has been the disagreement over the issues of domestic content requirement (DCR) and how to develop the Indian manufacturing sector. Indian Solar Manufacturers Association ardently requests mandating usage of domestically (Indian) manufactured Cells & Modules, irrespective of technology. To the contrary, developers oppose the idea. They think that restricting the sector to domestic manufacturers would only end up in trade wars with other countries,” Dr. Jani further said

“We support the idea of developing an indigenous manufacturing sector. However, any DCR mandating developers to buy Indian modules and cells will not only lead to higher costs for developers and thereby higher solar electricity tariffs but may also encourage a stagnant and protectionist industry with little incentive to invest in improving their product. There is also the risk of any DCR being circumvented through re-branding imported cells and modules and forging documentation. GERMI recommends that a marginally incremental duty be imposed on imports such that some room is given to domestic manufacturers to achieve scales and establish themselves to compete against cheaper imports obtaining undue advantages and flouting environmental norms. Further, innovation has to be converted from a concept for achieving lower price and higher efficiencies into a realizable national practice,” said Mr. Chandra Bhushan,

“It is strongly recommended that a financing package, in the same style as that of foreign Export-Import (Exim) banks should be made available to developers choosing to use Indian solar cells and modules. Right now a developer taking a loan from an Indian bank may pay up to 13 per cent interest on their loan while Exim banks have given effective rates at 5 per cent, including exposure fees. CSE believes loans at 5 per cent should be provided to solar power developers under JNNSM willing to use Indian solar modules and cells,” added Mr Bhushan.

It is worthwhile to mention that Ministry of New and Renewable Energy (MNRE) plans to commence Phase-II of the JNNSM with allocation of 750 MW of solar projects. The launch of phase II depends on when India’s Cabinet approves a document submitted by the Ministry.