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Narendra Modi’s India Facing Unique Solar Challenges

Narendra Modi's India Facing Unique Solar Challenges

Currently Solar Energy fulfills about 0.5% of earth’s energy needs, however, as per several reports, Solar Energy is on the way to become one of the largest sources of energy. It is expected to supply 16% of energy requirements by 2050. India alone has set up a target of 100 GW solar by 2022. Out of which, 40 GW is to come from rooftop solar. Nonetheless, this journey doesn’t seem easy. There are obstacles at every step.

One of the biggest market for solar energy is the distributed rooftop segment. This is a game-changer segment. Advantages of rooftop solar PV plant are multifold. It aids DISCOMs by reducing the peak demand during daytime and leads to decreased transmission and distribution losses as the power is consumed at the point of generation, it reduces land and interconnection costs, it has minimum government intervention as there is less involvement of government infrastructure, it can also be set up in remote places, and it also produces considerable savings for the consumer over its lifetime because of the increasing costs of grid electricity.

All the other energy solutions, wind energy, thermal energy, utility scale solar, nuclear, hydro and many others, require huge setups and investments. Then, these also require deeper and troubling government intervention. Hence, solar rooftop segment presents a huge opportunity for countries like India.

Despite the obvious advantages, rooftop Solar has not really taken off. In India, Rooftop solar has maintained a 10-12% share of overall solar capacity1. This is much lower than other key markets such as US, Germany, China, Spain and Australia. Please refer figure 1 for a better understanding. Currently, India’s focus is to build more capacity and raise awareness about the technology in the market. At this stage, few topics which require attention are mentioned below.

Upfront capital cost

The capital cost required for such a project is too high for savings it generates. The general payback period is 7-10 years which is considerably long. Hence, residents don’t want to undergo this hassle for meagre savings and commercial/industrial establishments don’t want to direct away the capital from the non-business activities.

Lack of trust about the performance

Despite the numerous benefits provided by the government such as subsidies, direct and indirect tax benefits etc. consumers are not ready to invest. This is because there are huge doubts and lack of data about the performance of plants in India. Moreover, majority of the companies in the area have little or no experience, hence the gap in trust exists. To add to this issue, banks are reluctant to lend to rooftop solar projects because there are high risks and limited information on the track records of rooftop solar investments. Even when banks lend to rooftop solar projects, the high-risk perception has led to excessive costs of borrowing (up to 14.5%) for rooftop solar installations negatively impacting the IRR of the project.

Incompetent home players

Indian solar panel manufacturers are being squeezed out of the solar market. Indian players have a bucket of challenges which they need to overcome in order to be competitive in this cut-throat market. Few challenges posed to their existence include:

  • Inferior Technology and Quality – The efficiency and quality of solar panels produced by the Indian players is not able to compete with its global counterparts. This is because of the lack of technical expertise and intellectual property with Indian players. An earlier ban of silicon wafer fabrication, which was removed in 20132, is one of the examples of setback which the Indian panel manufacturers have had to face in the past. This ban has considerably set back the developments in the Indian semi-conductor industry. Another major issue is of dust in our environment. India being a highly populous developing country, literally lives in a dust storm. And, as a matter of fact, even a single grain of sand can affect the performance of a solar PV cell/module. These challenges have had an overtly deep impact on the abilities of Indian Solar Panel Manufacturers.
  • Higher Pricing – The global counterparts, backed by Japan’s Softbank and Goldman Sachs, are quoting ever low prices to win big projects while Indian players are still competing for grid parity. Panels produced domestically face multiple challenges which lead to increase in their price. First of all, inferior technology is used to manufacture these panels and most of the technology available, along with raw materials, are imported and not generated within the country. Then Indian players are also not able to take the full benefit of economies of scale. In fact, most of them are operating at below full capacity. Moreover, limited access to cheap loans because of the high-risk environment further raises the cost of manufacturing panels. Also, the government’s policy to impose duties on solar panel sourced from other countries has been ruled as against the global norms by WTO, further cornering the Indian manufacturers. All these factors combined make it impossible for Indian manufacturer to compete in the global market.

Incompetent home players

Indian solar panel manufacturers are being squeezed out of the solar market. Indian players have a bucket of challenges which they need to overcome in order to be competitive in this cut-throat market. Few challenges posed to their existence include:

  • Inferior Technology and Quality – The efficiency and quality of solar panels produced by the Indian players is not able to compete with its global counterparts. This is because of the lack of technical expertise and intellectual property with Indian players. An earlier ban of silicon wafer fabrication, which was removed in 20132, is one of the examples of setback which the Indian panel manufacturers have had to face in the past. This ban has considerably set back the developments in the Indian semi-conductor industry. Another major issue is of dust in our environment. India being a highly populous developing country, literally lives in a dust storm. And, as a matter of fact, even a single grain of sand can affect the performance of a solar PV cell/module. These challenges have had an overtly deep impact on the abilities of Indian Solar Panel Manufacturers.
  • Higher Pricing – The global counterparts, backed by Japan’s Softbank and Goldman Sachs, are quoting ever low prices to win big projects while Indian players are still competing for grid parity. Panels produced domestically face multiple challenges which lead to increase in their price. First of all, inferior technology is used to manufacture these panels and most of the technology available, along with raw materials, are imported and not generated within the country. Then Indian players are also not able to take the full benefit of economies of scale. In fact, most of them are operating at below full capacity. Moreover, limited access to cheap loans because of the high-risk environment further raises the cost of manufacturing panels. Also, the government’s policy to impose duties on solar panel sourced from other countries has been ruled as against the global norms by WTO, further cornering the Indian manufacturers. All these factors combined make it impossible for Indian manufacturer to compete in the global market.

Incompetent home players

Indian solar panel manufacturers are being squeezed out of the solar market. Indian players have a bucket of challenges which they need to overcome in order to be competitive in this cut-throat market. Few challenges posed to their existence include:

  • Inferior Technology and Quality – The efficiency and quality of solar panels produced by the Indian players is not able to compete with its global counterparts. This is because of the lack of technical expertise and intellectual property with Indian players. An earlier ban of silicon wafer fabrication, which was removed in 20132, is one of the examples of setback which the Indian panel manufacturers have had to face in the past. This ban has considerably set back the developments in the Indian semi-conductor industry. Another major issue is of dust in our environment. India being a highly populous developing country, literally lives in a dust storm. And, as a matter of fact, even a single grain of sand can affect the performance of a solar PV cell/module. These challenges have had an overtly deep impact on the abilities of Indian Solar Panel Manufacturers.
  • Higher Pricing – The global counterparts, backed by Japan’s Softbank and Goldman Sachs, are quoting ever low prices to win big projects while Indian players are still competing for grid parity. Panels produced domestically face multiple challenges which lead to increase in their price. First of all, inferior technology is used to manufacture these panels and most of the technology available, along with raw materials, are imported and not generated within the country. Then Indian players are also not able to take the full benefit of economies of scale. In fact, most of them are operating at below full capacity. Moreover, limited access to cheap loans because of the high-risk environment further raises the cost of manufacturing panels. Also, the government’s policy to impose duties on solar panel sourced from other countries has been ruled as against the global norms by WTO, further cornering the Indian manufacturers. All these factors combined make it impossible for Indian manufacturer to compete in the global market.

Incompatibility and limitations in available technology

In the draft national electricity plan released by the central electricity authority in December 2016, the CUF3of a solar power plants was stated to be around 20%. Hence, A 10-KW solar plant that can power three air-conditioners and is sufficient for a three-bedroom apartment needs around 1,000 square feet of terrace area. Unlike in Europe and America, houses in India do not have standardized roofs and getting the required shade-free area is a big challenge. Hence, there is not enough space for economically feasible solar installations.

Apart from this, most residents do not want to block their rooftops. They use the terraces for various purposes such as drying clothes, installing water tanks and split ACs. A solution such as superstructure on top of rooftops for installation of solar panels can help alleviate this problem, but this solution leads to considerable increase in costs, and makes the solution unviable in most of the cases. For example, a developer might be able to offer electricity at INR 4/unit, but with superstructure, that electricity tariff will rise to somewhat INR 6/unit. In such a case, savings for the consumer will be reduced considerably and the consumer will not be motivated enough to go for it.

Improper on ground policy implementation

Government has instituted multiple enablers such as a 30% capital subsidy on the system cost for systems being implemented on residential rooftops, benefits of accelerated depreciation of 40%, encouraging financing of systems under the priority sector and lower interest rates, net metering regulations in all but one state of the country, however, on ground implementation remains poor.

For example, although there are net metering guidelines in place but because of lack of experience and maturity in the market, participants from 12 states and 6 UT’s mentioned that their distribution licensees are still at a stage of announcing the detailed procedures to grant connectivity to rooftop solar plants. Further, across the states, it may take 3-4 months from the date of application to receiving grant of connectivity even for a residential rooftop solar system. There are further shared approvals and clearances between multiple departments such as the regulatory commission, state nodal agencies, DISCOMs, urban local bodies, etc. which may cause delays. Lack of clarity in model implementation, requiring multiple permissions, untrained utility staff, and lack of awareness stops the country from getting expected results.

There are companies such as Amplus Energy Solutions which tackle the challenge of up-front investment for the project. They set up a rooftop power plant with their own investment and then the electricity is provided to the consumer at a pre-decided tariff, which is lower than the grid tariff. Consumer gets instant savings without any considerable investment in the solar power plant.

However, as the risk of this mode is on the developer, they are not willing to implement systems under this method with beneficiaries that do not have an impeccable rating or previous track record. Systems under such mechanisms are hence typically installed only on big corporate houses and not on smaller consumers. However, the state government/DISCOMS can play a key role in penetration of OPEX model.

Industry players suggest involvement of DISCOMs as a party to the power purchase agreement between the developer and the consumer to reduce the consumer credit risk. In case a consumer defaults on bill payment, DISCOMs may terminate the consumer’s power supply from the grid, thereby ensuring the payment for the solar power on time. These kind of measure can solve the fundamental problem associated with OPEX model and can really help the growth of rooftop solar segment.

Providing information about quality, cost, and benefits of going solar, clearing confusions regarding interconnection with the grid or metering, etc. can help the common man choose rooftop solar. Although, National Solar Energy Federation of India (NSEFI), and MNRE are trying to raise awareness through television and radio media, bringing in State Nodal Agencies to work with consumers can work wonders.

In terms of technology, there are numerous innovations in the pipeline. One of the most interesting development is in the approach of manufacturing solar cells that are inexpensive and highly efficient. These cells are known as perovskite solar cells. A perovskite solar cell is one that includes a perovskite-structured compound, most commonly a hybrid organic-inorganic lead or tin halide-based material, as the light harvesting active layer.

One of the major concerns of perovskite solar cells, toxicity, has also been reduced considerably. Scientists are able to use ‘green elements’ such as Bismuth instead of lead, which is the main source of toxicity. This solar cell, in theoretical stages, has shown an easily attainable CUF of 30%. This change can revolutionize the economics of a solar power plant. In fact, perovskite can be added as another layer over an already existing solar cell and thus, help in improving the economics of existing solar power plants as well.

Another revolution which is about to hit the solar energy sector, the reason because of which this sector has seen undeterred flow of investments despite the inconsistent performance, is the creation of an energy storage solution. A reliable, economically and technically feasible energy storage solution will put the renewable energy market on steroids. We will be able to eliminate our dependence on centralized energy solutions.

We will be able to tackle the intermittent nature of renewable energy and provide a complete energy solution to the world. We already have started seeing implementation of plants with battery storage. It’s only a matter of time before these solutions are implemented in full scale.

With so much activity and motivation at a global level, India and the world is bound to see a revolution. Solar rooftop is a wave and everyone will be swept by it.

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