India's Solar Energy Program- All Set for Lift Off

September 23, 2009
Analysis by: Gerson Lehrman Group (GLG) Expert Contributor
Analysis of: India warms up to Solar Energy
Published at: www.upiasia.com

Summary

The Indian government has unveiled the National Solar Plan and this promises to be the start of an fast and exciting ride into Solar energy for the country. It is blessed with abundant Solar Insolation as well as a power starved economy. The National Solar plan touches upon the right levers to galvanize the players and solar markets.

Analysis

India is a "Sunshine" country with most of the parts of the country enjoying more than 300 days a year of sunshine with an energy density between 4 to & Kwh/Sqm/day. This translates into 5000 trillion Kwh. Even if 1% of the Insolation falling on India is harnessed, it can meet most of India's power requirement. India is currently a power starved country with peaking demand exceeding its current installed capacity of 146000 MW by about 10 to 15%. Even worse, the growth in installed capacity(projected at 7000MW/year) will continue to fall short of the growth in demand for power due to high GDP growth rate of 6 -9% .Thus the gap between demand and conventional sources of power is bound to increase further.

India has seen some activity in the Solar PV area with companies like Tata BP Solar, Moser Baer PV, Titan Industries etc setting up solar module & Solar cell (Moser Baer) manufacturing plants. However, most of their production has been export oriented as there were no large scale in-country requirements. The government of India has also been in the wait, watch ,experiment mode with regard to Solar energy and had announced a pretty small, capped(Total 50MW) incentive program for Solar PV generated power. Certain states, like West Bengal, Karnataka, Maharashtra etc have utilized this opportunity and have set up or are in the process of setting up MW scale power plants.

The Government of India has recently unveiled the Draft National Solar Plan which lays down the road map for achieving Solar energy generation of 20,000MW by 2020 in 3 phases : Phase 1(5GW by 2012-13), Phase 2(6-7 GW by 2017), Phase3(20GW by 2020).

The following are the concrete steps that will enable this to happen :

1. Government mandate of Roof Top Solar PV power for all sizable government controlled
buildings throughout India.

2. Actively promote commercial scale Solar PV plants.

3. Mandate 5% of all new thermal power plants (Coal, Gas,Oil) to generate solar energy.
This will straight away add about 350MW per year of Solar energy.

4. Make necessary regulatory changes to enable net metering from Solar Plants.

5. Government will install a few "Technology Demonstration" Concentrated Solar Power plants
in the 50-100 MW capacity range.

The following incentives will be available :

1. Feed in Tariff (FIT) will be announced by State Electricity Regulatory Authorities based on
guidelines by the National Solar Mission & power purchase agreements for 20 years will be on.

2.10 year Tax Holiday

3. Exemption of Custom duty & Excise duty on Capital equipment.

Funding

About $25 billions will be required over the next 30 years. Government will levy cess on Coal($0.5/T),Petrol & Diesel to fund Solar program. Currently there is an installed capacity of about 20-25 GW of Diesel generated power (mainly privately owned) to meet the peaking power shortage. The cost of electricity generated from these DG sets is about $0.3/Kwh and Solar PV power is already in that range. With all the incentives and net metering etc, these polluting and uneconomic DG sets will be utilized less.

Clearly, this approach is modeled on the Wind Energy program that India adopted some time back and which led to India becoming one of the leading wind energy players with giants like Suzlon emerging from India. Watch this space for the Suzlon of Solar Energy to emerge from India

This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
Contributed by a Member of the GLG Energy & Industrials Councils