solar power : make hay while the sun shines

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Of late, we have seen some intriguing discussions on the rationale and viability of the proposed five-fold increase in targeted installed solar power capacity from 20 GW to 100 GW by 2022. To achieve the targeted capacity, it is imperative that an environment is cultivated which induces confidence in investors to invest in this sunrise sector. This necessitates development of a prudent policy framework, which is ably supported by regulatory commitments with respect to honouring all the contractual agreements.

The renewable energy Act proposed by the ministry of new and renewable energy (MNRE) is a vivid step in the right direction. Implementation of the framework would be the catalyst for the targeted capacity additions without necessarily adding any significant fiscal burden on the relevant stakeholders.

I would like to bring forth the following points with respect to solar power sector in India.

1. India has vast solar power potential, where sunshine is available for long hours per day and in great intensity. As per an MNRE study, India’s solar power potential is as high as 748 GW, against our country’s cumulative installed capacity from all sources at around 275 GW. Given the country’s present high dependence on imported fossil fuels for meeting its ever-growing energy demand, India has little choice but to harness solar energy for achieving energy supply security.

2. In addition to a perennial power deficit situation faced by the country, around 300-400 million Indians do not have access to electricity. Since solar power has an advantage of permitting decentralized generation and distribution of energy, it, therefore, presents high potential for contributing towards empowering people at grass-root levels in terms of energy access and bringing them in the mainstream of development.

3. Unfortunately, solar power in India is largely viewed as a costly source of power, thereby putting strain on already financially weak discoms and worsening the competitiveness of the domestic manufacturing industry. I strongly disagree with these concerns in view of the following:

a) One of the primary reasons why renewable energy is being termed as an expensive source of power is because there is no system in existence for pricing carbon, pollution, and other environmental damage caused by fossil fuels based on conventional power generation plants. Further, we cannot continue to depend so heavily on fossil fuels for meeting all our energy requirements due to inherent limitations of its availability. Increase in share of renewable energy in the overall energy mix is critical for achieving energy security and resultant sustainable development. Therefore, arguments against solar power purely on economic factors would not be pragmatic.

b) It would be a biased approach to compare solar power with conventional sources without considering the tariff over the life cycle of a power plant. Solar power prices under power-purchase agreements (PPAs) are generally fixed for 25 years (or increases at a pre-agreed rate), whereas, in most thermal power agreements, fuel cost is a pass-through, which results in consumers being left to the vagaries of highly volatile fuel prices. A marginally higher solar power tariff today, therefore, may not necessarily be a higher risk adjusted tariff as compared to other sources.

c) Industrial and commercial (I&C) consumers are actually finding solar power a cheaper source of electricity. Hence, they are already evaluating rooftop solar projects and, of late, are also entering into third-party solar PPAs with independent power producers. Also, more importantly, industry competitiveness today is not being eroded by expensive grid power, but largely by scarcity of uninterrupted power (owing to high levels of aggregate technical and commercial losses and load shedding), which necessitates investment in expensive backup power (diesel power today costs upwards of Rs.15 per kWh).

d) Solar power tariff has been declining rapidly over the years and has almost reached grid parity as is evident from the results of latest round of reverse e-auction conducted by NTPC for 500 MW capacity in Andhra Pradesh under the national solar mission. It saw leading developers competing at tariffs under Rs.5 per unit before the hammer went down at an all-time low solar tariff of Rs.4.63 per unit. The list of recent winners in highly competitive central and state- level auctions covers developers having a sound track record and domestic and international experience to understand the viability of figures bid by them.


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