Intro to Solar in India

Source: Financial Express

Narendra Modi won the Indian election by a landslide this weekend. While his Hindu nationalist leanings make him somewhat of a controversial figure, he has little patience of the bureaucracy and corruption that has plagued the Indian government in the past. 

His ardent believer in solar power is represented by its explicit mention in the PJB’s party manifesto. His solar policies and his improvements to the business climate in Gujarat has been instrumental in the deployment of 850 MW of solar PV power - half of all solar PV in India. 

My research in India has just begun, but I wanted to jot down some initial observations. A few days ago I met with President of the Solar Energy Society of India (SESI), Mr. Jagat Jawa, and he gave me a picture of the PV landscape in India. 

First a few numbers. As of mid 2013, solar made up around 0.75% (1.7 GW) of the generation capacity in India; whereas wind power, the largest renewable source,  makes up ~8% (19 GW). Given India’s enormous solar resource and chronic electricity shortages, solar has enormous potential to provide inexpensive power to India.

Since Gujarat has its own solar power policies and makes up half of all solar in India, there are really two separate solar industries in India - Gujarat and everything else. The separation is really based on policies. All solar in Gujarat has been installed under the state policies and almost all projects being constructed under the national policies are outside of Gujarat. 

A 1 MW Solar Power Plant above a canal in Gujarat. It reduces evaporation and generates clean energy!

The main industry organizations in the solar industry are the Solar Energy Society of India (SESI), the Ministry of New & Renewable Energy (MNRE), and the Solar Energy Corporation of India (SECI). The SESI is an industry group and is the Indian branch of the International Solar Energy Society. The MNRE’s main solar policy is the Jawaharlal Nehru National Solar Mission (JNNSM) that was launched January of 2010. I won’t get into the details of the JNNSM yet, but one of its goals is to reach grid parity by 2022. However, a report from KPMG predicts grid parity will be reached around 2017-2018. 

The SECI is a not-for-profit government enterprise administered by the MNRE that is responsible to assist the MNRE in executing the JNNSM. It can own, operate, and mange both grid-connected & off-grid power stations as well as promote R&D in solar.  It is also responsible for the deployment of the 750 MW of PV projects under phase II of the JNNSM, batch I. The main incentive mechanism for solar deployment is a 30% of capital subsidy called viability gap funding (VGF). The 30% subsidy is the maximum support and developers are award the subsidy based on a reverse auction where the lowest bidder wins. Currenlty, VGF can be as low as 12%.

The Indian central government is going to pass new policies governing solar power, but the change in government makes the policies about  4-5 weeks away. The largest possible change would be from the capacity based subsidy to a generation based tariff. Still, it is uncertain how a FIT can be payed for as current politicians have little appetite for electricity increases. This may change with the new government, but utilities will still be in poor financial states, which may complicate the roll-out of a FIT. 

Some of the main issues holding up the deployment of solar PV is financing, land acquisition, and grid connections. Project financing is a particular problem because interest rates in India are overall quite high and banks are still wary of investing in solar projects.

Thar Desert in Rajasthan. It really does looks like a desert...

While India has a high population density, there is still ample unproductive land, especially in the deserts of the northwest in Rajasthan and Gujarat. Land availability isn’t a constraint, the acquisition of land is. When developers are looking at a particular piece of land, the land price will often increase suggesting someone inside the company or a government official has leaked information to the land owners. One possible solution is to have federal and provincial governments buy land for solar power development and lease the land to developers. 

Securing grid connections is the final major issue. I don’t know many details about this yet, though. 

Most solar deployed in India is ground mounted and it seems like growth in the rooftop segment will be several years away. Policies like net metering, a FIT, and issues over rooftop ownership aren’t established yet. There has been PV deployed on rooftops, but that has primarily been on government buildings. Gandhinagar, the sister city of Ahmedabad and home of Mr. Modi, has a policy to install 5 MW of solar on rooftops - 4 MW on government buildings and 1 MW on private rooftops. This is one of the main pushes to make Gandhinagar the “solar city” of India. 

My plan was to focus on the rooftop market as that has been my focus throughout my fellowship; however, given the nascent state of the rooftop market, I will let the existing industry guide my research. That’s politician talk for I’m going to change my focus to the ground-mounted segment.

It was really exciting to be researching rooftop PV in China just as the government was making a substantial pivot to favor that segment. Rather than sticking to rooftop PV, I would rather focus on the most exciting segment, which appears to be the ground mounted segment.