Industry Insight
Power hungry: India is on a solar mission
4 December 2009
Just how feasible is the world’s most ambitious solar plan?
By Giles Parkinson
It is hardly surprising that international solar thermal developers are making a beeline for India. Globally-speaking, India boasts the most ambitious solar energy development plan in the world.
It is a plan driven by the country’s desperate need for energy (India faces an estimated peak power shortfall of up to 60GW by 2020 and is currently reliant on its expensive diesel generation capacity of 25GW); and made feasible by its access to excellent solar resources, particularly in the northwest.
A simple set of numbers illustrate the enormous potential of India’s solar energy industry: its current capacity of just 5MW, and its 20,000MW target for 2022.
The 2022 target comprises 2200MW of off-grid capacity, 20 million squared metres of solar thermal collectors and the development of a vibrant solar thermal manufacturing capability.
The scale of India’s ambitions were underlined in the final release of the country’s National Solar Mission in late November, which confirms a three-stage approach to reaching its goals. The first phase will comprise 1,100MW of grid-connected power and up to 200MW of non-grid capacity by 2013.
Attractive FDI opportunity
In November, as India’s New and Renewable Energy Minister, Farooq Abdullah, was unveiling India’s solar mission, the CEO of California-based BrightSource Energy, John Woolard, was in India negotiating with potential local joint venture partners.
“India is one of only a handful of countries where there is good sun and rapid growth in demand for electricity,” says Brightsource spokesman Andrew Dyer.
Others have already made inroads into the local market. India has been one of the first international stops for another California-based group e-Solar, which has signed an agreement with local construction group ACME for the development of 1GW of solar thermal capacity over the next 10 years.
Its first 2.5MW plant is under construction in Rajasthan and the installation of a 46MW plant is likely to begin in 2010 for completion in 2011.
“Conditions in India are very encouraging to do a lot more [than 1GW],” says Raed Sherif, e-Solar vice president of international development.
Sherif says it is impossible to predict at this stage how the market share of CSP and solar PV will be split. “But let’s say for arguments’ sake that it goes 50-50, then we think we can get 30-40 percent of that 10GW market share.”
Australia’s Wizard Power, an Adelaide-based solar dish technology developer, is also looking at a number of opportunities in India, according to its head of business development, Artur Zawadski. One is a series of seven projects comprising six 50Mw plants and one 25MW plant to supply water to a new major agricultural region near Puna.
“The plan was to build the grid into the region to pump water between new dams which are being built. But the grid never made it into the region, so solar becomes a good option,” he says.
Elsewhere, Singapore based Delta Power has tied up with local engineering and construction group Punj Lloyd; Germany’s Solar Millennium has struck an agreement with Indian energy group Suryachakra Power; and US-based Abengoa Solar has signed a “strategic tie up” with Maharishi Solar Technology, although this will likely focus on industrial applications.
Domestic market gearing-up
Local utilities are also planning CSP projects. India’s largest utility, National Thermal Power Corp, has announced plans to install two 50MW solar thermal plants in Gujarat and could extend this to 300MW. It is also building 5MW and 1MW installations on the Andaman and Nicobar islands.
Pune Gadhia Solar, an original equipment manufacturer, has announced plans for a 100 MW plant in Kutch, Gujarat and is also in discussions with the Maharashtra state government to install 1.0 - 1.5 MW CSP systems to extend power to rural areas.
According to India’s government, the first phase of the solar mission will be funded by power purchase agreements made through NTPC. However, the availability of commercial financing remains uncertain, which developers warn could be a stumbling block in coming years.
“Financing is a major issue,” says e-Solar’s Sherif. “That’s why the performance of first power plants will be critical. That will determine the ease or difficulty in financing projects after that.”
Other issues include space (particularly in populated areas) and manufacturing capability, along with transmission issues. But Shirish Garud of the Energy and Resources Institute in New Delhi downplays these issues. “The major challenge will be in mobilizing the financing,” he said in a recent interview with Bloomberg.
Wizard Power’s Zawadski says the company is attracted by 100 percent depreciation in the first year on installation of large-scale solar plant. Other incentives created by the Indian government include the removal of customs and excise duty on the import of capital equipment; the training of 1000 engineers; and the creation of a venture capital fund to promote start-ups.
The government says that if the first two phases of the mission up to 2017 are successful, it could lead to grid-competitive solar power. It also says the target could be up-scaled, depending on the availability of international finance and technology.
Arun Srivastava, a New Delhi-based executive director at Ernst & Young, says viability of CSP plants in India will depend on factors such as technological innovation, the scale of operation and the cost of conventional energy. But he adds that renewable energy obligations and other national and regional government measures, particularly in states such as Punjab, Gujarat, Rajasthan, Orissa, Chattisgarh, Haryana and Tamil Nadu, will provide a platform for CSP.
“The [Solar Mission] is viewed as a step to provide the right signal on the market size in the country to the project developers and the technology providers,” says Srivastava.
At this stage, it is too early to say whether there will be a technology preference in the race to achieve India’s Solar Mission. “Since both the technologies for solar power generation - PV and Solar Thermal - are new to this country, the policy makers are not too certain at this stage on the relative merits of these technologies and their respective commercial sustainability for the developer as well as the power procurer. The Government program is essentially technology neutral at this stage,” concludes Srivastava.
To comment on this article, please write to:
Giles Parkinson at: gpfreelance@optusnet.com.au
Or write to the Editor, Rikki Stancich: rstancich@gmail.com
