At a recent India Infrastructure conference on “Solar Power in India”, Ministry of New and Renewable Energy’s (MNRE) Upendra Tripathy, spoke about the country’s preparedness for achieving the 100 GW solar power target, the key hurdles and challenges, and the measures taken by the MNRE to address these. Excerpts…
In June 2015, the Government of India announced a target to ramp up India’s solar power capacity target under the National Solar Mission by five times, from 20 GW to 100 GW by 2022. This was initially termed as a very ambitious target by various stakeholders. However, over a period of one year, the tone of the debate has changed from whether it is possible to achieve the target to when it would be possible to achieve it. The point of discussion now focuses on the timeline of reaching 100 GW, possibly by 2022 or before or after that.
In addition to the feasibility of the target, there are other issues being raised by stakeholders, related to land, manpower and finances, which are critical to achieve the target. On the land front, it has been estimated that there is a requirement of 500,000 acres of land for the target capacity. In this regard, a survey was conducted to estimate the available land (unfit for agricultural purposes) that can be utilised for setting up solar projects. The survey concluded that in addition to 200,000 square km of desert area in Rajasthan, there is 3 million hectares of wasteland that can be utilised for this purpose. In addition, innovative ideas such as deploying floating solar projects on big water reservoirs and building small capacity plants near substations also came up. Being close to hydro projects and substations, these projects would not have any connectivity issues. The installation of projects of 1-5 MW capacity near substations has already been undertaken by many states, including Telangana, Andhra Pradesh, Karnataka and Tamil Nadu. Hence, through the survey and various other innovative project models, the government has reached the conclusion that land availability is not an issue for the segment.
On the manpower side, the government has taken an initiative for training 50,000 “surya mitras” through programmes across 138 institutions in the country. The aim is to ensure the availability of the much-needed trained staff to provide pre- and post-sales services for the rooftop segment. They also work as agents for promoting renewable energy and spreading awareness amongst people.
The government has also taken multiple initiatives to address the issue of financing for the sector. For instance, we organised RE-Invest 2015, where we invited industry players and banks to participate. They committed to set up 283,000 MW and 77,000 MW of capacity respectively, much beyond our expectation. Following these commitments, Rs 800 billion worth of loans have been sanctioned by the banks. The government is aiming to organise another such event in February 2017 outside Delhi. It is planned that this time the focus should be on research and development (R&D) and technology display, along with financial aspects.
On the financial side, following the exemplary performance of the domestic banks, foreign banks too are entering the sector. The World Bank has provided $1 billion to the State Bank of India; the Asian Development Bank (ADB) will provide funds to Punjab National Bank; and the New Development Bank (NDB) is planning to give money to Canara Bank. These three domestic banks will then make this capital available to aggregating companies in the renewable sector. It is expected that the rate of interest for these loans will be very competitive and will give companies easy access to capital. We hope that in the coming years other domestic banks also come forward to take up the capital provided by multilateral banks and lend it to companies for domestic projects.
The government is also trying to address the issues associated with further development of the energy sector. Through the International Solar Alliance (ISA) launched in Paris jointly by France and India, we have partnered with the World Bank, which is also a financial partner of the ISA, and are talking about taking three major initiatives. First, we are looking to develop a global hedging mechanism to bring down hedging costs, which are 7-8 per cent at present. We have requested the World Bank to meet with other big financial players like ADB, the NDB, the African Development Bank and KfW to work together and find a mechanism to bring down hedging costs. Second, we have requested the World Bank to create a trust for the renewable energy sector like it does for other sectors. Lastly, we have requested the World Bank to explore, along with other financial actors, whether it can provide a clear credit roadmap for the renewable sector. Such a roadmap laid out by the financing agencies for the corporate sector of the world will help clarify what will happen in the sector in the next five years. In addition, we are discussing the commitment fees and whether there can be some sort of a competitive advantage for the renewable energy sector in terms of getting access to capital from the member countries of the ISA.
The government is also providing an impetus to the rooftop segment to achieve the 40 GW target. We are currently providing 30 per cent and 25 per cent subsidy to the residential and government sectors respectively. As a new initiative, we have divided 84 ministries amongst eight public sector undertakings (PSUs), which get a financial incentive of 4 per cent of the cost for setting up a rooftop solar project. Through this, we are trying to create a new market for rooftop solar. Given that this segment has no connectivity requirement, it has huge potential in the country. In fact, India has moved at a fast pace in this segment. Currently, more than 26 states have adopted the net metering policy.
The past months have also seen a reduction in solar tariffs, which was mainly on account of volume expansion, technology improvements and fiscal incentives from the government. As the technology improves with continuous R&D efforts, the price of modules and panels is expected to reduce. However, it is important to realise that while the technology may improve, stakeholders should not wait for lower tariffs to make investments as the concessions, tax holidays, accelerated depreciation benefits and subsidies offered currently may not continue in the future.
At present, there is skepticism in the industry regarding the financial viability of the low bids. According to our analysis, there are a lot of companies in the Rs 4.34 per kWh tariff cluster. Therefore, we believe that despite aggressive bidding, the prices discovered recently through reverse auctions are actually sustainable. In addition, the competition in the market will correct the situation in case the bids hit rock bottom. Market competitiveness will ensure that bids are sustainable while being aggressive.
In addition to the major issues discussed above, the industry faces two other key challenges. The first is the risk regarding power offtake as the discomsare struggling with their finances. To this end, the Ujwal Discom Assurance Yojana has been brought in to strengthen the financial position of discoms. The second challenge pertains to power transmission and evacuation infrastructure. Globally, the investment in generation and grid expansion is in the ratio of 1:1, whereas in India it is 1:0.4. While our investment in the grid is low, this is not expected to be an issue for the 100 GW target. This is based on the fact that 40 GW of rooftop capacity will not require transmission facility, the 20 GW allocated for solar parks has reserved transmission capacity, and another 20 GW will have transmission access through the Green Energy Corridors project, which is partially funded by KfW. The remaining 20 GW of capacity will be installed in a distributed way, near existing substations or on a small scale such that the present grid can accommodate it. By 2022, if we achieve the 100 GW target, the share of renewables in the energy mix will rise from the current 6.7 per cent to 15 per cent, which is not expected to pose any transmission and evacuation issues. Hence, the problem is not of grid connectivity but of grid balancing, which we need to focus on.
While discussing the issues faced and the measures taken, we have to recognise that renewable energy should not be viewed as a stand-alone energy solution. Behind every government initiative, be it a policy or an incentive, we are aiming for the greater welfare of society. It is imperative to understand that for every MW of solar and wind capacity installed, there are enormous social implications. Studies point out that every MW installed globally saves two lives and reduces 50 vehicles on the road. It has a significant impact on air quality and, therefore, helps in improving the environment. Hence, when we talk about renewable energy, we should not merely view it as an energy source but also consider its added advantages.
