India, in the past two years, has opened up its solar-energy industry to achieving complete power-empowerment. As the country pursues long-term goals of 20 GW by 2022, several solar companies from Asia, especially neighboring China, as well as Europe and North America, are becoming invested in the sector aiming at successful completion of the Indian Government’s mission.
Global giants such as First Solar Inc from Arizona, already has a firm Indian footprint while Suntech Power Holdings Co. Ltd looks to be part of the scene to improve the capacity from 30MW, to help the country to reach 20GW generation capacity. Areva SA the French group’s renewable Energy Unit too, is looking positively towards this market. Taiwan’s Motech Industries Inc. has been also tied-up with India’s Solar Semiconductor to supply cells. Included in the lineup is eSolar Inc., solar-thermal developer from California.
Present solar power policy Pro-foreign investment
As late as Nov 2011 government, in a statement made by the Minister for New and Renewable Energy Farooq Abdullah, clarified that ‘local content’ or ‘domestic content’ provisions would come into force only if purchase of solar power was made through NVVN (National Vidyut Vyapar Nigam).
The minister has also clarified that, there are no general import restrictions and the Government has already made solar products import tax-free commodities.
The minister reiterated that guidelines were applicable to photovoltaic modules made from silicon technologies in duration of Phase-I of projects. Solar cells were to be classified as domestic content for the second batch of Phase-I.
There is no restriction on foreign investment, import on thin film, Concentrating Photovoltaic (CPV) equipment.
JNSSM only tip of Indian Solar Market
Recent reports by leading solar analysts of the country reveal that the JNSSM would only be a tip of the solar market and there is a massive opportunity for off-grid solar generation.
While government backed solar mission has allowed countrywide solar program to commence, there is a vast market space for off-grid solar market that looks attractive to foreign participants. First, off-grid manufacture does not make ‘local content’ necessary.
Secondly, off-grid captive systems for commercial usage will be individual PPAs (Power Purchase Agreement) between consumer and EPC (End Power Consumer) without bureaucratic rules.
Thirdly, several states—Gujarat, Rajasthan (western Indian states, with the Thar Desert located in the latter state; and Karnataka, the state of which Bengaluru is the capital) – allowing firmer rates and long-terms for investing companies to back off debt loans.
Foreign participation easier in off-grid Commercial Solar generation
Another very important aspect with off-grid solar investment for foreign investors would be lucrative considering that 1GW of installation is expected by 2016, in three major segments- captive power plants, rural electrification and telecom towers.
The solar captive power plants payback period is expected to be between 2 to 7 years.
The Telecom Tower potential installation capacity is expected to be 6.2 GW and has a lower payback for PV systems between two to four years.
Rural Electrification has high liquidity barrier and is therefore cross-financed/ subsidized by MFIs and micro-finances.
JNNSM the key to India’s Mass Solar goals
A brief background on how the current participation of solar companies is poised in the Indian solar market begins with the visualizing of the ambitious National Solar Mission in June 2009 (later renamed after the first Prime Minister of the country and a great visionary on India’s development – Jawaharlal Nehru, as Jawaharlal Nehru National Solar Mission (JNNSM)). The Indian administration aims to achieve a total solar capacity of 20 GW of by 2022 through its principal agency Power Corporation of India.
PCI (Power Corporation of India) in turn constituted a special government agency, Vidyut Vyapar Nigam (NVVN), to handle the bidding processes and become nodal agency for purchasing of power from the solar vendors. It would also be involved in commissioning purchased power to Central Electricity Regulatory Commission (CERC).
3-phase development to reach 200 MW of off-grid and 100 MW of small-grid solar power
The government had proposed the development of the policy in three phases: 2010-13 – 1000 MW of grid-connected power plants. The government had initially proposed FIT (feed-in tariff) for 2010-11 at INR 17.91 for a kilowatt-hour for utility-scale older programs now migrated to NSM. CSP are offered FITs of INR 15.40.
Oversubscribed First Phase
JNNSM Power Purchase Agreements (PPA) is applicable for 25 years. At the start of the project in June 2010 CERC tariff estimations were poised at internal rate of return (IRR) on equity between 12 to 16 percent after tax deductions.
At the time of the bid in September 2010 400 bids were placed for 1,815 MW as against 150 MW of PV with the maximum bid of 5MW.
This over subscription led to the government adopting a competitive bidding. Projects were awarded to project developers who offered highest discount on the government fixed initial price of INR 17.91 for each kilowatt-hour. The top thirty projects that offered maximum discount on the CERC-determined price were selected to produce 620 MW in the first phase, with 150MW for PV and 470MW for Concentrated Solar Power (CSP). The top discount offered was INR 6.96 per kilowatt-hour, being the highest, and the lowest INR 5.15 per kilowatt-hour.
Successful bidders were not established names in the industry as the low-price-drive remained uneconomical to them. Only lesser-known companies such as Mahindra Solar One, IOC Ltd and Azure Power Rajasthan were successful.
Latest Phase of bidding sees fall in rates, low cost of production opens up domestic solar market
The second batch of phase-I bidding in Dec 2011 for 2,500 MW saw a dramatic fall in rates dipping drastically to 7.49 per unit. A total of 218 companies participated oversubscribing again by seven times as the allocated capacity was just 350MW. These rates have fallen from INR 18 for a unit, in 2010 to INR 8.5. The requirements as per Renewable Purchase Obligations (RPOs) range from 0.25% to 3% of energy required by states across the country. This implies at even conservative rates, the sector should expect an infusion of $50 billion.
The lowering cost of production has led to the opening of massive off-grid segment, which opens out the market for overseas participation without the requirement of ‘local content’.
This has led to global companies such First Solar, Abound Solar, and MiaSole to enter Indian markets overcoming the Local Content policy since they do not use polysilicon, First Solar and Abound Solar panels are made from cadmium-telluride; while MiaSole’s cells use copper, gallium, indium, and selenium.
First Solar Inc strikes rich with largest supply-deal
First Solar Inc, in Nov 2011, has committed to supplying 100 megawatts of solar power to India’s Reliance Power. As per the deal, First Solar will deliver 40MW of thin film modules at Jaisalmer in Rajasthan, the desert region of India. The project delivers electricity to the Mumbai population. The second installment of 60MW will be available later this year.
First Solar’s India sales for 2011 will constitute 10% of its total earnings for the year.
Meanwhile Reliance Power, is building India’s largest solar photovoltaic power plant and is the first venture into solar energy generation. This is to be funded by ADB $48 million for the 40 megawatt solar power project. Another investor to the project is Export Import Bank, the US Bank.
Fall in Global markets affect solar companies in India
The dovetailing of solar energy business has had its latest victim, as BP Alternative Energy Holdings’ sells its 51percent stake in India largest solar company—Tata BP Solar India—to Tata Power Company. This would in effect mean, Tata Power will hold 100% stake in the company.
Indian Solar Market welcomes foreign Investments
The present solar market atmosphere in India is right, for foreign investments, joint ventures as well supply, especially in commercial consumption sector. Minimal government processes; lucrative, firm-and-balanced prices will help investors achieve long-term supply associations and profits.
India is aiming to be the world’s largest solar energy aggregator-and-consumer and has therefore, instituted powerful and effective policies. The pro-foreign investment government has provided lucrative platform for foreign investment while capably addressing domestic needs to achieve a ‘100% solar energy optimization’ to power the country’s explosive economic growth.
About Author
Manjula Venkatram is a freelance writer, passionate about sustainable environment and renewable energy resources. Manjula lives and works in Bangalore, Karnataka, India
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