For millions of Indians, the onset of dusk marks the end of the day. All work must get done in the daylight. Children in houses that can afford some kerosene squint into their books under the dim light of the lamp. During the day, families that cannot afford diesel, irrigate their lands manually. Heatwaves, uncontested by fans, sap life and many times kill. Here, even if cell phones are affordable, there is no way to charge them.
Estimates vary but anywhere between 200 to 300 million Indians live without any access to electricity. Of the 18,000 plus un-electrified villages as of April 2015 (government data), more than 50% have been ‘electrified’ as on date. While electrification of villages is a vague indicator at best (given data impurities and only-on-paper accounting), it shows a broad direction of the attempt to shrink the base of off-grid Indians. It appears that the quest to address one of India’s top challenges – ensuring power security for millions of Indians – has begun in earnest.
In the next few years millions of new consumers will be connected to our grids. At the same time we will see a surge in consumption itself as India’s per-capita power consumption (a paltry 1000 units against 13,000 units of United States and 4000 units of China) propels upwards on the back of rising incomes and a promise of 24/7 power. Having enough power to fulfil this demand will make or break our growth story.
India’s current power needs (300 GW of power capacity) have been largely fuelled by coal. While rising demand and an inability to meet it through domestic production caused a surge of expensive, imported coal in the last several years, India is now looking at 100% self-reliance with aggressive growth of domestic production of coal. Ironically, India’s power plants today operate at 2/3rd their capacity because state electricity distributors, already reeling under losses, prefer to keep citizens under blackout rather than buy power from producers. This leaves us with enough headroom to grow in the short term.
Yet, the health-costs of a coal-based power future cannot be ignored.
China, which met its growing power needs by burning coal, is left facing the costs today. Lung cancer is the leading cause of death due to cancer in the country (an estimated 2.8 million die from cancer) and it is now looking to spend billions in an attempt to tackle the health-hazards that the fossil-fuel led power created. It is not surprising that it is now taking an aggressive approach to replace its power infrastructure with cleaner sources.
For India, however, coal remains an increasingly attractive for option in the short to medium term (as global prices remain low and domestic production scales to fulfil needs) to meet the growing power needs. It may also provide the fastest and easiest way to add power capacity to emerging needs. Still, it is important for India to focus on cleaner sources of energy.
India’s robust nuclear program and its favourable political manoeuvrings opens up nuclear power as a viable option. However, it is a long term play. With a current capacity of 5.3 GWe, nuclear power is expected to contribute to 25% of all power capacity only by 2050. It is around this timeframe that India is betting on cracking thorium-based reactor technology and exploiting its vast reserves of thorium. Its dependence on imported uranium and post-Fukushima worries will not help in scaling up current nuclear deployments.
This opens up renewables as the most promising option.
India’s plans to add an ambitious 175GW of renewable energy capacity (more than 50% of today’s total installed base) by 2022. Solar power is at the front and center of this ambition with a planned 100 GW of capacity. And why not? With 300 days of sunshine a year, India lies in the high irradiation zone which makes it a perfect candidate to tap into solar power. Having woken up late to the game may be actually benefitting India as solar power technology is on the verge of mass-adoption and its economics are starting to look attractive.
The Solar Virtuous Cycle
While governments around the world have recognized solar (along with hydro, wind and bio-mass) as an important renewable source, it has so far remained economically unviable for mass adoption. However, since the 1980s, the prices of solar panels (one of the key components of the solar power infrastructure) have dropped by 10% year on year. In 2004, China started setting up its massive manufacturing infrastructure for panels (supported by rising local demand) and scale built, the prices began to plummet.
India itself may be on the cusp of being a solar-power positive economy where the price of solar power can be competitive to traditional coal-based power. Today NTPC’s (India’s largest power generator) average rate of thermal power was Rs 3/unit. In contrast, just three years back, the cost of solar power ranged between Rs. 10-12/unit making it infeasible as a leading power source for a country looking for cheap power. But since then the prices have plummeted. In 2015, SunEdison, a US based solar power company, won a solar project in Andhra Pradesh with a bid of Rs. 4.63/unit. stunning the global solar industry. In just a few months, solar tariffs hit another new low at Rs.4.34/unit for a project in Rajasthan.
The economic attractiveness compounds when you layer the potential health costs of using coal on top. Among all the renewable sources, the rapidly falling prices and India’s inherent resource abundance, makes solar power the most attractive area to invest in. This offers India an opportunity to build scale to not only meet domestic needs but also the rising global needs and become a leader in the space. The International Energy Agency estimates that India will drive the global solar energy market in the next 25 years. Recognizing this, India has launched the “Solar Alliance” including 120 countries that lie in the high solar irradiation zone.
For India to truly leverage this opportunity, there is an urgent need to build a strong solar manufacturing industry. As on date, India does not have the manufacturing capacity to support the ambitious growth of solar installations it has planned. Total Solar Cell manufacturing capacity in India is 1.2 GW. Even top manufacturers such as Indosolar, Moser Baer Solar, Websol Energy Systems, and Tata Power Solar Systems have capacities only in the range of 200 MW. Solar panel manufacturing (many cells make a panel) capacity is a little higher at 5.6 GW with only three players — Waaree Energies, Vikram Solar, and Goldi Green Technologies — having capacities in the 0.5 GW range.
On the other hand, China’s PV capacity on the other hand is in the upwards of 25GW and accounts for 70% of global capacity. This scale and concerted effort to grow has given it significant pricing advantages (in the order of 20 – 25% cheaper) in the expanding global market.Therefore, it is not surprising that India imported solar panels worth $2.3 billion last year with China accounting for more than 80% of those imports.
Reliance on imports will not only increase the cost of power but also restrict our ability to be energy independent. India’s large demand (planned solar power growth) in the coming years is the perfect opportunity to build a domestic manufacturing base for equipment (panels and cells) and scale them up much like China did. This will also enable India to become a strong participant in the emerging solar economy and break into an emerging value-chain.
It is not an easy task. India’s attempt to provide a leg-up to local manufacturers was thwarted when WTO overruled the local sourcing requirements on imports. In a classic chicken-and-egg case, India’s manufacturers will not be price competitive unless they reach scale and to reach scale they need to be in demand. This necessitates aggressive government subsidies and investments. A quick step-up to scale can be through large hubs / SEZs that focus on manufacturing solar modules, cells and assemblies to supply the domestic need. Only this will truly bring local manufacturing efficiency and quality on par with international markets and enable us to play an important role in the future.
The Footprint Challenge
While India has several advantages when it comes to leveraging solar energy, there is one key resource that is at a premium – land. Between India’s complicated land ownership policies, ownership fragmentation and an overall constraint on available space, this is likely to become a deterrent to massive growth of installed solar capacity. Here, the government can look to solve this by enabling a solar power ecosystem that is fed into by several distributed sources rather than few large setups by:
- Leveraging large government owned lands and deserts for massive solar farms that would form the basic backbone for installed solar capacity: Not surprisingly, massive solar farms are coming up in Gujarat, Rajasthan and arid areas in other states. While these would provide the large initial thrust, the government may need to look at other innovative solutions to keep expanding the capacity. Here, the government’s ownership of land infrastructure around highways, railways and waterways (canals and dams) can be put to good use. With some innovative thinking, these can add significantly to the capacity and may even provide an ongoing sustainable way to keep building solar power in concert with other infrastructure development.
- Enabling smaller, localised power generation and usage grids: There is immense potential for thousands of small-scale solar farms to come up and contribute to localised grids that create self-sufficient communities. Any excess capacity from these micro-grids can then be fed into the national grids. Industries, commercial centers, airports and apartment complexes offer perfect candidates thereby reducing their power usage costs while even finding an additional source of revenue. Here, having clear and smooth regulations and enabling easy setup (by creating local ecosystem) is essential.
- Taking it to the rooftops: India’s high population density in urban areas creates a perfect setup wherein the combined contributions from rooftops adds up to a significant share of total solar power. The government recognises this; nearly 40% of the ambitious 100GW of solar power target is expected to come from micro rooftop installations. Enabling smooth access to information, better policies, net metering (that rewards producers of excess power) and access to loans for investment and creating a fast, easy setup and operation is critical for this to take off.
The Off-Grid Edge
One of the biggest advantages of solar power is its ability to be viable at a consumer level and offer numerous off-grid applications. Decentralized solar water heating applications have immense potential to power a significant energy need without getting to grid. Here again, China leads the way with a massive 290GWth of installed capacity accounting for 70% of the world’s total installed capacity.
Karnataka and Maharashtra lead the way in terms of solar water heating. While India is making the push towards growing this capacity (recently, Maharashtra made it mandatory for all new buildings to have solar water heaters), domestic suppliers struggle once again against the onslaught solar water heaters from China priced at least 20% cheaper. Here again, it is imperative that the government through subsidy support (until such time as the manufacturers scale up and can match international prices competitively) and policies encourages building local scale and industry.
Off-grid applications also have immense potential to rapidly bring power to rural areas little to no grid connectivity. Solar lanterns are lighting up thousands of homes in villages in India. Solar water pumps are powering irrigation across rural fields. Several NGOs, self-help groups, individuals and small organisations are currently leading grass-roots innovation ranging from solar powered refrigerators and air-coolers to solar powered cookers. Incentives and favourable regulations to attract investors will provide the push towards scale that this segment requires.
It is important to treat solar power industry as an emerging one that is likely to see rapidly technology and cost disruptions. Taking a static view of current technology and making continued investments or long term commitments may not be prudent. Today India is betting on the globally popular class of photovoltaics technology. Yet, the other emerging technology – Concentrated Solar Power (CSP) – is also expected to be a significant contributor by 2025. While it is in its infancy, this technology offers a key ability to store and distribute power consistently (much like thermal) and during phases when the sun isn’t available. Even within the photovoltaics, it would be prudent for India to consistently evaluate and consider the two variants: thin film vs. wafer based crystalline silicon. Given the diversity and vastness of the country and the rapidly changing dynamics of the industry, it would be beneficial for us to invest in multiple technologies that can serve varying purposes.
More importantly, to seed innovation, India needs to take the lead in R&D around these technologies to fit its local needs. The Ministry of New and Renewable Energy spent a total of Rs. 260 crore in R&D for solar energy through its key institution, National Institute of Solar Energy, between 2012 to 2015. Considering that this is going to power millions of Indians and provide India with energy independence, this is a paltry amount. More funding has to be spread around research of storage technologies, material sciences and emerging receiver systems. Part of this funding also needs to be funneled into top institutes driving interest into related engineering areas. The industry should be brought in to work with researchers and academics. In short, the government should create a platform for innovation to bring out competitive advantages for the country.
The Path to a Solar Superpower
Solar energy offers India one of the key elements in its quest to become a developed superpower – energy independence. More importantly, it has the ability to democratise power generation and distribution economy into a shared one where consumers become producers too. It offers millions of Indians independence from grid (even if for specific applications) and enables them to better control their destiny. More importantly, it offers an option that can scale up to meet India’s growing demand for power without harmful side-effects.
Our country has been gifted with loads of sunshine to help shape a cleaner, greener future of growth. We’ve made a few bold moves towards leveraging it. It is important that we recognise any investments into this industry as being on par with food and water security. That kind of strategic focus is necessity if we are to become a solar superpower.
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