When the UPA II government launched the Jawaharlal Nehru National Solar Mission (JNNSM) in early 2010, the target of 22GW by 2021-22 was considered unrealistic by most solar experts. Solar energy was considered too expensive for large-scale deployment. However, the last few years have seen a dramatic decline in solar power costs, from Rs. 20 per unit to nearly Rs. 5.5 per unit. This has made the government perceive solar energy as an economically rationale choice. It has raised the solar targets to 100GW out of the proposed 175GW of renewable energy. If these targets are met, India will join the ranks of the world’s solar powerhouses in terms of installed capacity.
he solar targets have been divided into grid-connected solar parks and large plants, Rooftop PV (RTPV) systems, 5-10MW ground-mounted projects and off-grid installations. Is this a good move? The increased solar targets have positive economic implications for India. They envisage an investment of around $100 billion in the sector over the next seven years. This opens up the space for foreign investment (especially from China, Japan, Germany and the US) and encourages indigenous manufacturing of solar components.
With 100GW of capacity installed, around nine per cent of India’s electricity requirement will be met by solar alone (currently 0.5 per cent). India would then surpass Germany, where solar energy currently accounts for six per cent of the total power. This highlights India’s seriousness in reducing its carbon emissions by increasing the share of renewables in its energy mix. Showcasing this kind of commitment to climate mitigation will give India a strong position at the upcoming 21st Conference of the Parties (COP 21) in Paris.
The broader benefit of solar energy is its contribution to increasing energy security by reducing reliance on fossil fuel imports. Additionally, off-grid plants under the new solar scheme can help India achieve its goal of universal electrification. This will be a big advantage as currently 300million Indians still lack access to basic electricity services. However, increasing India’s solar capacity from 3.3GW to 100GW in seven years will be a challenge. Such tremendous growth can only be accomplished with a strong policy framework.
Currently, large solar PV plants make up more than 90 per cent of the installed capacity in India. This is because established developers get easy access to finance, security of payment and simple operation and maintenance (O&M). Despite these incentives, certain technical and economic barriers still need to be addressed. Owing to the intermittent nature of solar energy, large-scale deployment will require the development of grid management and load balancing mechanisms in co-ordination with State Load Dispatch Centres and R&D institutions. Green bonds and public financing need to be promoted to reduce the cost of debt and increase loan tenures. India’s good global credit rating will allow the government to leverage low-cost finance (with lower hedging rates) from developed countries to commission large solar projects. To ensure that state utilities have an incentive to deploy solar energy, Renewable Purchase Obligations (RPOs) need to be stringently enforced.
RTPV is a decentralised technology, which is being encouraged due to its low land footprint and ability to reduce transmission and distribution (T&D) losses. Weak local distribution infrastructure, lack of economies of scale and poor social outlook have prevented RTPV systems from penetrating the Indian market. These challenges need to be suitably tackled.
To counter variability and fluctuations, utilities need to strengthen their distribution transformers. Relevant stakeholder interactions should be held in every state to assess the financial health of utilities, project annual capacity addition targets and establish guidelines for utilities to upgrade their existing infrastructure. This will lead to the formulation of appropriate net-metering and Feed in Tariff (FiT) rates.
Major restructuring is required in the off-grid sector. These projects should be linked with value added services such as rural industries, cold storage units and pumping irrigation water. Streamlining the subsidy disbursal mechanism via one ministry and providing incentives such as tax holidays and minimum return guarantees can encourage private investment.
To ensure long-term sustainability, rural entrepreneurs and public-private partnerships can be encouraged. Local communities should be trained in system O&M. If these challenges are addressed in a structured and phased manner, then India’s ambitious solar target of 100 GW for 2021-22 is achievable and certainly desirable.
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