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India must harness its Solar Energy Potential, Shri R V Shahi, Former Secretary, Ministry Of Power

India must harness its Solar Energy Potential
[R V Shahi's Weekly Column for Infraline, March 3, 2008]

Recently the Ministry of New and Renewable Energy (MNRE) of the Govt. of India has notified a very attractive scheme for development of Solar Power. It carries a strong incentive to motivate developers of Solar Photo Voltaic Systems. India's electricity needs are so large that in spite of best efforts on non conventional energy generation, substantial dependence on power generation based on fossil fuels cannot be avoided. And, therefore, there is a certain degree of inevitability in increased CO2 emissions atleast over next 25 years. However our strategy and policies must aim at minimizing the incidence of CO2 increase. What are the options? We are already emphasizing on the need for a much larger capacity through nuclear systems - from presently about 4,000 MW to almost 60,000 MW in next 25 years. Similarly maximum thrust is being given to harness almost entire 1,50,000 MW of hydro electric potential. Shortage of gas has been experienced over last 10 years and the situation is likely to continue. But, as far as the strategy goes, the government as well as the power sector players - both in government and private - are trying their best to develop as much as possible the gas based power generation capacity. India has already emerged as one of the three largest players in developing the power generation systems based on Wind Energy. Thus, responding to the needs for adequately addressing the climate change concerns, every possible option is being explored and being worked with to see that maximum amount of electricity is produced through all such sources of energy which can obviate CO2 emissions. One of the possible areas where we have not been able to make a visible dent is in the field of Solar Energy. This situation is true, as a matter of fact, for the world as a whole. India, alongwith the rest of the world has been working on Photo Voltaic Systems for last several decades but its contribution in the overall electric generation profile has remained negligible. Harnessing Solar Energy to commercial use, and more specifically for power generation, has remained a global challenge for over five decades for researchers and technology developers. We have remained more or less stagnant for now about two to three decades at a level of capital cost which is excessively high. Finally, in last two years, some breakthrough is appearing visible, but we have yet to see the concrete outcome.

The discussion on energy has assumed the center stage in view of the global warming issues occupying summit level agenda. All possible options are being evaluated. India has more than 300 days a year of sunny weather in most part of the country. Therefore, Solar Energy is particularly relevant for us. The Infraline Energy and IDFC organized a Round Table discussion on "Solar Energy : Opportunities and Possibilities" on February, 27, 2008 at New Delhi. I had the job of co-ordinating the discussions, and we had an eminent panel of speakers consisting of Shri V. Subramanian, Secretary, Ministry of New and Renewable Energy (GOI), Shri J.S. Jawa, Director General of Solar Society of India, Shri K. Subramanya, Chief Executive Officer of TATA BP Solar and Shri Harish S. Mehta, Director of Suzlon Energy. Key note address by the Secretary of MNRE was followed by presentations by other panelists which in turn were followed by detailed interactions.

While opening the subject I made the following observations:

  • Global efforts on research and development for harnessing Solar Energy for various uses and more specifically for power generation have fallen short of the expectation. Considerable headway has been made in various other areas of knowledge and technology but in respect of generating power from Solar Energy our effort on making it cost effective has eluded us. And as a result, in spite of sun rays being available in various parts of the world, harnessing of this eternal source of energy has been a lame duck affair. So far, globally only 6,000 MW of power generation has been possible through Solar Photo Voltaic Systems.

  • No doubt, in the recent years serious efforts have been mounted and as a result, the rate of increase in capacity addition through these systems has been radically increased. During the entire 90's, in the world as a whole, only about 1,000 MW could be added, while in the last 5 years (during the period 2000-05) the capacity addition has been of the order of more than 4,500 MW. As per the Renewables Global Status Report - 2006, as in 2005 we had a total capacity of the order of about 5,500 MW of which about 3,600 MW was grid connected.

  • India's energy development programmes, which continue to be heavily dominated by fossil fuel power generation, are already under global pressure and, in coming years it would be viewed even more critically, even though per capita emission of CO2 in India is significantly lower than the world average and far too less as compared to per capita emissions in a number of developed countries. Therefore, power generation through renewables and especially through Solar Energy would be a national necessity.

  • The most recent initiative of the MNRE to provide substantial amount of support and incentive to the extent of Rs. 12 per kwh of generation from Photo Voltaic Systems is laudable. However, the energy professionals and research and technology developers have a challenge to accelerate the process of evolving more cost effective technologies so that under the burden of heavy government support the total capacity to come into the system does not get constrained. After all such supports cannot be sustained, and in fact it is not (it is limited to 50 MW), on a very large scale in any such government scheme. India provides a vast market. With more than 56% of rural households not having access to electricity, decentralized distributed generation through systems based on Solar Energy could provide an effective answer to the challenge that is before all of us to electrify rural India.

In his key note address the Secretary, Ministry of New and Renewable Energy, gave details of the recently notified incentive scheme of the Govt. of India and made the following observations:

  • In spite of efforts from the government as also from various agencies, our capacity on manufacture of Photo Voltaic Solar Systems has remained less than 200 MW. Of this almost 70% goes for export and the balance about 30% for domestic market. Solar system development requires technological revolution of the type that has happened in the telecom sector particularly on cell phones. Paradoxically, cell phones have reached villages but not electricity, and as a result, they need to resort to various means for charging of the cell phones.

  • We need to have grid connected solar power and to let the grid purchase and pay for it. In many of the European countries, particularly in Germany, a lot of push and incentive is being provided for solar power. In Germany there is a separate Renewable Energy Law.

  • System of cross subsidy in generation exists in a number of European countries. Since the quantum of generation through renewable is proportionately low, the impact of higher cost paid for such generation on overall basis is only marginal.

  • In India, in the electricity sector the role of government has been reduced and Regulators have been given enormous authority. But, Regulatory Commissions have yet to create and provide the required momentum for electricity generation and supply through renewable systems.

  • Electricity Act 2003 has prescribed that the State Regulatory Commissions shall prescribe a specified percentage of electricity generation through Renewable Energy sources. Most states have yet to do it. There are states where scope for local generation through such sources is rather limited. For example, in Delhi not even 1% could be locally generated through these systems. The provision should therefore be implemented in a manner that a fixed percentage is either generated locally or procured from outside under this category.

  • Under the Electricity Act 2003, it needs to be examined whether the Central Electricity Regulatory Commission can do it for the whole of the country (this point was subsequently clarified that though the Act provides for each State Regulatory Commission to formulate the policy and fix a percentage, there is a provision under the Act for Forum of Regulators, and the function of this Forum is to discuss and create consensus on such issues. This Forum is chaired by the Chairman of the Central Electricity Regulatory Commission).

  • One of the reasons why the issue has not received the right attention particularly at the state levels is that the Renewable Energy Development Agencies are inadequately structured and staffed. Generally this organization is very weak in every state.

  • To accelerate the process of power generation through Solar Energy, the government has come out with a new policy on Solar Power Generation Projects. The salient features of this policy are as follows:

  1. The Ministry of New and Renewable Energy would support grid connected Solar Power Projects as demonstration projects.

  2. Upto a maximum of 50 MW would be supported under this scheme during the period of Eleventh Plan (2007-12).

  3. The Indian Renewable Energy Development Agency (ERADA) will be the nodal agency in handling of fund and monitoring of projects etc.

  4. Registered companies will be eligible (individuals, NGO's, financial institutions, societies and other unorganized investors are not eligible for direct participation).

  5. The Solar Photo Voltaic Plant of a minimum capacity of 1 MW per plant at a single location will be eligible.

  6. In any state upto a maximum of 10 MW capacity can be developed (this provision has been made with the purpose that projects are developed in large number of states rather than being concentrated in one or two states).

  7. Any one developer can develop as a single or multiple projects with a maximum of 5 MW of capacity.

  8. The projects would be developed on build, own and operate basis.

  9. Captive plants are not eligible for incentive under the scheme.

  10. Projects to be developed and completed by December, 2009, will be eligible for full incentive. Those completed in 2010 would get the incentive reduced by 5%. Those completed in 2011 will have a further reduction in incentive by another 5%, and so on.

  11. Though the generation Per MW is likely to be more than 1.5 million units per year, the incentive structure has been worked out assuming a generation of 1.5 million units only. Considering a reasonable rate of return the tariff would work out to Rs. 15 per kwh. Keeping in view the tariff that the state utilities/distribution companies will pay as per Regulatory Commission's decisions, the incentive provided by the Govt. of India is Rs. 15 minus tariff paid by the utility subject to a maximum of Rs. 12 per kwh.

  12. For the Solar Thermal Power Generation (as opposed to SPV plants) the incentive will be limited to Rs. 10 per kwh (as compared to Rs. 12 in the case of SPV plants).

  13. Only normal depreciation shall be allowed and not the accelerated depreciation.

  14. In the past, most of the incentives were linked to financial support by way of capital. This approach, over a period of time, has been receiving criticism. It is true that in many cases capital incentive was provided but in practice electricity generation did not take place or was not to the level expected. The incentive approach in the new scheme of January, 2008, for promoting Solar Power Generation addresses this criticism inasmuchas the incentive is available only when electricity generation takes place.

  15. The operation of the whole scheme has been kept outside the government. IREDA, based on the certificate of electricity being received by the concerned utility will make the required payment of the incentive to the developer.

  16. In order that state utilities are fully associated and they make full payment on the basis of rate decided by the Regulatory Commission, an incentive of 10 paisa per unit of electricity has been provided for them and they will be paid only after they have paid the bills of the project developer.

Two more presentations were made - one by the CEO of TATA BP Solar and another by the Director of Solar Energy Society of India. A number of points were also made by the Director of Suzlon Energy. Only important points from their presentations are outlined below :

  1. A Solar National Programme with a funding of about Rs. 5000 crores over a 5 year period, if properly structured and administered, can make a significant dent on enhancing the proportion of solar power generation as well as Solar Energy use.

  2. A cess on generation of power through other sources could be considered for mobilizing resources to fund the solar programme.

  3. We may mandate all new corporate and commercial buildings with connected load of more than 500 KW to install Solar Power Generation of atleast 5 to 10% of their requirements.

  4. The nationalized banks could be persuaded to provide priority sector lending at subsidized rate.

  5. An interesting slide in the presentation by TATA BP highlighted that while as of now the cost of electricity generated through Solar PV System is almost five times of the cost of conventional power, the way technological changes are taking place and given the fact that there would be a large scale expansions of generation, by the year 2017, solar power could compete with conventional power. And, in fact, from beyond 2017, as per this presentation, the solar power may be even less expensive than the conventional power.

  6. Another slide from their presentation, giving the source as "EPIA - 2006" highlighted that predominance of coal may go away by 2050, gas may assume a large proportion, almost equal proportion of that of Solar Energy, in the primary energy mix. By the year 2100 the Solar Energy would be the most dominant form of energy in the overall profile.

  7. The potential of Solar Photo Voltaic Systems as per National Electricity Plan of CEA is 50,000 MW out of 180,000 MW for renewable. Only 3 MW has been tapped so far.

  8. Direct Solar insulation for over 10 months is available in the deserts of Rajasthan and Gujarat. Even if 1% of it is used 6,000 MW of electric power will be available.

  9. One of the recent trends is Power Tower System (PTS), in which solar collectors known as Helio Stats are used to collect solar heats. The first power tower was built in Southern California to generate 10 MW during mid 80's.

  10. Some of the well known thermal power plants in different parts of the world are given below :

1.

25 MW Solar Plant in Algeria

Parabolic trough collectors

Under construction. Expected to be completed by 2009.

2.

64 MW in Nevada
Sol 1 Power Plant USA.

Parabolic trough collectors

Electricity supply agreement signed with utility.

3.

50 MW Andasol-I Plant in Spain

Parabolic trough collectors

5,10,000 sq.m. solar field and upto 7 hours of thermal storage. Expected by 2008.

4.

50 MW Andasol-II in Setille, Spain

Parabolic trough collectors

6,20,000 sq.m solar field and upto 12 hours of thermal storage to be completed in 2008

5.

PS1O Abengoa
Plant in Setille, Spain

10 MW Tower Plant with low temperature water storage

Storage is for an hour for half load. Under commissioning.

6.

850 MW Solar Power plants Southern California

Dish System.
Distributed

Construction started for 1 MW. 850 MW to be completed by 2010

Some of the important points that emerged during the course of interactions after various presentations are worth mentioning and are given below:

  1. A capacity of 50 MW as a cap for the whole of Eleventh Five Year Plan as provided in the Scheme of the Government appears rather low. Similarly, a cap of 10 MW for a state, no doubt, aims at disbursal of plants throughout the country, but then if 10 MW is built only in five states the limit is reached. A counter to this is that in the past our track record has not been so good to inspire a confidence that we can do much more. However, it may be reasonable to assume that once the scheme picks up, developers demonstrate the outcome, the government may be forthcoming with revising the limits which have been fixed.

  2. While SPV plants could be viable in the lower capacity range and could be well supported with the incentive that has been provided, the solar thermal plants will have their optimal capacity in the range of 25 to 50 MW. Therefore the eligibility criteria will need to be modified to consider these technical realities. Another school of thought suggested that technologies have developed whereby even in the range of 5 to 10 MW solar thermal plants could provide optimal solutions. What would be necessary is that specific cases are brought out and presented to the authorities so that an appropriate view could be taken for changes required, if any, in the policy. Definitely solar thermal plants with new technologies could deliver much larger capacities in the country and therefore they must be incentivized appropriately.

  3. We do not have a large number of agencies producing and supplying solar systems either for power or for heating. The few that we have need to rework their approach towards marketing as also towards after sales service. On both these fronts there are considerable gaps.

On the whole Ministry of New and Renewable Energy, Govt. of India, deserve to be complimented on this new scheme on solar power notified in January, 2008. Given the need of energy, consideration of climate change, interest and enthusiasm of technology developers, manufacturers, utilities and regulators, the scheme is bound to succeed. As it is, it is understood that Expression of Interests have already been submitted for about 300 MW. This is such an area where constant interactions between the government and other stakeholders will be necessary so that policy changes are moderated in a manner that they are investor and developer friendly and provide support for overall objectives to be fully realized.

Before closing I would like to highlight two more thoughts here:

  1. Major power sector organizations like NTPC, Tata Power, Reliance Energy, BHEL and a few large state government generating companies should come together, mount massive research initiatives and commit to develop about 5,000 MW based on Solar Energy in next 5-7 years. With appropriate regulatory support the cost impact could definitely be absorbed in large amount of conventional power generation. This initiative will help in evolution of cost effective solar technologies including also small decentralized distributed generation systems apart from large solar thermal power plants.

  2. I recall, in mid 2005, during an interaction I had with then President of India H.E. Dr. Abdul Kalam, the President expressed a desire to have a 5 MW Solar Power Plant in the President Estate which is a large complex. About 10 acres of land needed would only be a small portion in a corner in the Rashtrapati Bhavan complex. I did a detailed exercise on this and made considerable progress. A team of engineers, finance experts from PFC, REC and also engineers from NTPC worked on this. Fund could also be organized without financial support from Government as such. In view of multiplicity of authorities and agencies in Delhi, in spite of several meetings and consultations, consents of all concerned could not be secured. I would write a separate piece on this giving the details of the work done and further possibilities. I do feel that this is a great idea and it must be pursued. Coming from Rashtrapati Bhavan, this would convey a strong commitment and message, and the solar power will secure its rightful place.

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