100GW by 2022: Behind India’s big solar numbers

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Just over a year into Narendra Modi’s tenure as Prime Minister of India, huge growth targets for the solar sector continue to attract publicity, but the sheer scale of ambition may not be enough to convince the doubters. India’s budget in February confirmed the Ministry of New and Renewable Energy’s (MNRE) target of deploying 100GW of solar energy by 2022, a five-fold increase from the previous government’s target of just 20GW. As the Indian government prepares to finalise details of how the target will be met, PV Tech examines some of the huge numbers being proposed and what it will take to realise them.

In the midst of all the big claims and headlines, it is easy to forget that India has suffered from major energy shortfalls for years so there is genuine need for solar capacity to come online. The imminent announcement will also come in the wake of a deadly heat wave, which has killed scores of people in the country, highlighting the need for widespread air-conditioning and managing all the pitfalls of energy spikes from such systems.

There has been a string of memorandums of understanding (MOUs) relating to solar projects, but they fail to give real confidence to investors. Joint secretary of the MNRE Tarun Kapoor told PV Tech that government approval and finalisation of the 100GW plan is pending for mid-June, which should give more certainty.

To understand the sheer scale of India’s ambition, it should be noted that current installed capacity in the country stands at just 3.8GW, with around 7.3GW under development, according to the latest quarterly update from Mercom Capital Group. Meanwhile, according to Jasmeet Khurana, senior consulting manager at analyst firm, Bridge to India, if the country reached its 100GW solar target within less than seven years, solar power would account for 10.5% of all energy consumed within the India, which is clearly an enormous proportion within a country holding more than one billion people.

Under the latest announcements, the 100GW would be made up of:

  • 40GW of utility-scale solar (between central and state governments)
  • 40GW of rooftop solar
  • 20GW under the ‘entrepreneur’ scheme (20,000 projects of 1MW)

The government plans to set up 25 mega-solar parks of around 100MW each (2.5GW). Already 17 of these have been finalised, with just under 13GW capacity, according to Mercom’s update.

Meanwhile the central government will auction multiple solar power projects. India’s armed forces and national companies including the Indian Railways, one of the world’s largest employers, have been earmarked to set up large-scale plants on surplus land. Furthermore, Modi has incentivised building solar over irrigation ditches and canals in rural areas, to decrease water evaporation. This is expected to account for several hundred megawatts according to Bridge to India. Furthermore, the state-run Solar Energy Corporation of India (SECI) plans to develop 2GW of solar projects ranging from 250-500MW.

Khurana said the first section of 40GW utility-scale was the most realistic target, being driven primarily by India’s renewable purchase obligation (RPO) and renewable generation obligation (RGO), which mandates thermal power producers to generate a certain amount of power from renewable energy technology. Central government will also allocate 15GW of this target by 2019.

The second part of the 100GW target comprising 40GW of rooftop PV was described in the latest Mercom report as a “lofty goal” considering there are only 100MW of current installations. Furthermore rooftop subsidies are being cut in half to 15%, down from 30%, which the MNRE claimed offsets a recent lowering in price of panel components. However, Khurana said a net-metering policy is due to be brought in by almost all Indian states, which is a policy the central government has been pushing for.

The case for commercial and industrial rooftop deployment is clear after the utility TPDDL revealed plans to generate 400MW of rooftop solar in Delhi by 2022, but industry members talking to PV Tech disagreed over the potential for residential rooftops. Ashish Khanna, chief executive and executive director, Tata Power Solar Systems, said policy around residential rooftops has made them financially viable and a major focus for Tata, whereas Reinhard Ling, business manager at IBC Solar Projects Private, IBC Solar’s Indian subsidiary, said the market for residential solar is very small in India and he claimed there is a lack of awareness about the difficulty of installing rooftop solar compared to ground mount in India.

The third section of the 100GW target is the yet-to-be-finalised entrepreneur scheme. The MNRE’s Kapoor told PV Tech this programme was currently set at 10GW, but had yet to be finalised. But in an earlier announcement power minister Piyush Goyal said the scheme would aim to encourage unemployed youths and farmers to set up 1MW solar installations to aggregate up to 20GW of capacity. The government will provide 50% of the equity to get started, but chosen entrepreneurs will be responsible for forming partnerships and generating the rest of the required equity and debt.

Further detail awaited

Several weeks ago Goyal said detailed plans on how to reach the full 100GW target would be finalised in “a few days”, but no announcement came. Reports have speculated that the release has been delayed because of uncertainty over the entrepreneur scheme.

Indeed Bridge to India said it is “not clear” how MNRE will fund the aggregate grant of INR47.5 billion (US$741 million) needed for the entrepreneur scheme, adding: “This scheme is fundamentally flawed and will be difficult to implement. The government is trying to mix two very different policy goals – more employment and more power – in a very unimaginative manner and it will fall short on both accounts.”

Looking closer than 2022 to the current financial year, the MNRE aims to allocate 10GW of solar capacity in 2015/16. Bridge to India said: “If India is able to allocate the entire 10GW in this financial year, it will be path-breaking from a global perspective.” However, the consultancy was again sceptical citing land availability and the willingness of off-takers (distribution companies) to procure power from solar developers.

Khurana said the 10GW would be a mix of private sector investments, public sector investments and public-private partnership projects, but forecast that just 4-5GW would be allocated. Meanwhile MNRE’s Kapoor said: “We may not commission 10GW, but we will tender out big capacities.”

In terms of completed installations, Mercom’s latest report also forecast that a total of 2GW of solar PV would come online this year, up from 1GW in 2014.

Policy and regulation

While Kapoor claimed that there is enough land available and plenty of entrepreneurs for the MNRE’s ambitions, he identified three key barriers to reaching the 100GW targets:

  1. Distribution companies having to buy the solar power
  2. Poor transmission infrastructure
  3. Financing availability

Khurana warned that state distribution companies in India “have huge losses on their books” so they are unlikely to be interested in buying solar power, which is more expensive currently than traditional fuel-produced electricity.

He added: “The only remedy around it is to make the state discoms (distribution companies) viable financially, which means larger power sector reforms in India mostly on the distribution side and tariff reforms for customers to pay for normal electricity. There are a lot of transmission, distribution and commercial losses which need to be removed.”

Khurana also said investment in the grid is critical to allow it to handle more intermittent sources of power. Similarly Victor Thamburaj chief executive of iPLON, a German technology firm supplying automated solar power equipment to Indian projects, said there needs to be a “flow report”, explaining to developers details of grid connection and stability.

To address issues around sharing energy, India's Ministry of Power has proposed abolishing interstate transmission charges for renewable energy sources. It has also proposed increasing the solar RPO to 8% by 2019 from the current goal of 3% by 2022. Still, Raj Prabhu, chief executive and co-founder of Mercom Capital, said the percentage was negligible without strict enforcement of the RPO.

There were encouraging signs recently, however, when the Supreme Court dismissed an appeal challenging RPO regulations in Rajasthan, which is pertinent given that there are several similar cases pending in other state high courts, according to Mercom.

Goyal has also proposed a dollar tariff, allowing bidding for solar projects in dollars, in order to facilitate more lending from outside India. However, Mercom’s analysis found that developers believe it will take a while to implement the minister’s proposal. In a speech Goyal said it would “encourage foreign investment to come in and hedging against their debt or capital in dollars, which will help us keep the cost of solar power very reasonable”.

Ashish Khanna praised the government for allowing the industry to stand alone without subsidies. He said solar prices will compete with power produced from imported coal in a few years and a subsidy regime would not help on a long-term basis – adding: “I think that is critical to achieve targets like this.”

Industry members were jubilant when the Reserve Bank of India answered calls to add renewable energy under priority lending, which would make financing easier and affordable, only to find it capped at INR150 million (US$2.5 million). As India’s solar market is mostly large-scale at present, Mercom’s report said the policy’s impact would be “minimal”. Nevertheless rooftop solar would benefit from this scheme.

Physically reaching the target capacity has also been cited as a problem, with both Thamburaj and Ling claiming that there are only around a dozen solar companies in India capable of installing up to 500MW a year. Therefore it is essential to attract foreign companies into India. Kapoor agreed, adding: “The investment required is huge and it has to come from foreign sources as well as Indian sources. We will tender out at least 15GW and we are inviting foreign companies to participate and we will allow imports.”

Modi’s recent visit to China ended in three Chinese companies signing significant MOUs with Indian companies to build manufacturing capacity within India:

  • Canadian Solar with Sun Group (5GW of solar plants and manufacturing solar modules)
  • Trina Solar with Welspun Energy (park for 500MW of PV cells and 500MW of PV modules)
  • JA Solar with Essel Group (solar cell and PV module manufacturing facility)

Ling said there have been many other announcements, MOUs and letters of interest, with big names such as SunEdison, First Solar, Adani Enterprises, Essel Group and Welspun Renewables all bidding for multiple gigawatts of solar projects earlier this year. But Ling warned of a stark difference between the number of announcements compared to what will actually be realised.

Ashish Khanna also noted: “If you look at the target and do some simple calculations it is more than 1,000 square kilometres of land that is required for these projects (100,000 hectares) for 100GW. To acquire this land in a short time and then develop it is a challenge.”

Khurana said a policy for the government to secure land and leave it for private development, has already been implemented, on top of a proposed Land Bill, which aims to make tenure of land more secure. He said: “Land space will [become an issue going forward], but it is not an immediate bottleneck.”

There are clearly a huge number of hurdles for India to clear before it can truly see the 100GW in its sights, but underlying all this is a delicate balance between India’s coal ambitions versus renewable energy deployment in a country expecting an immensely increased energy demand.

Arguing in PV Tech last month, Bridge to India founder Tobias Engelmeier said that a coal-heavy scenario in India going forward, as opposed to a solar-heavy scenario, “would be a terrible and indefensible choice from the point of view of the global climate.” India’s 100GW target may stupefy the doubters, but it is clearly a necessity to aim high, and quickly.

Welspun's Neemuch project, India's largest PV power plant. The country is targetting 100GW of PV by 2022. Image: Welspun.
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