This necessitates the development of a prudent policy framework that is well supported by regulatory commitments to honour all contractual agreements.
Recent discussions have focused 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 desired capacity, it is critical to cultivate an environment that encourages investors to invest in this emerging sector. This necessitates the development of a prudent policy framework that is adequately supported by regulatory commitments to honour all contractual agreements.
The renewable energy Act proposed by the Ministry of New and Renewable Energy (MNRE) is a significant step forward. The framework’s implementation would serve as a catalyst for the targeted capacity additions without imposing a significant fiscal burden on the relevant stakeholders.
I’d like to make the following points about the solar power sector in India.
1. India has a large solar power potential because sunlight is available for long periods of time and in high intensity. According to an MNRE study, India’s solar power potential is as high as 748 GW, compared to our country’s total installed capacity of around 275 GW. Given the country’s current reliance on imported fossil fuels to meet its ever-increasing energy demand, India has no choice but to harness solar energy in order to achieve energy supply security.
2. In addition to the country’s perennial power deficit, approximately 300-400 million Indians lack access to electricity. Because solar power has the advantage of allowing decentralised energy generation and distribution, it has a high potential for empowering people at the grassroots level in terms of energy access and bringing them into the mainstream of development.
3. Unfortunately, solar power is widely regarded as an expensive source of energy in India, putting additional strain on already financially strained discoms and reducing the competitiveness of the domestic manufacturing industry. I strongly disagree with these concerns for the following reasons:
a) One of the primary reasons renewable energy is regarded as an expensive source of power is that there is no system in place for pricing carbon, pollution, and other environmental damage caused by fossil fuels used in conventional power plants. Furthermore, due to inherent limitations in their availability, we cannot continue to rely so heavily on fossil fuels to meet all of our energy needs. An increase in the share of renewable energy in the overall energy mix is critical for achieving energy security and, as a result, long-term development. As a result, arguments against solar power based solely on economic considerations would be unpractical.
b) Comparing solar power to conventional sources without taking into account the tariff over the life cycle of a power plant would be a biassed approach. Solar power prices are generally fixed for 25 years (or increase at a pre-agreed rate), whereas in most thermal power agreements, fuel cost is a pass-through, leaving consumers vulnerable to the vagaries of highly volatile fuel prices. As a result, a marginally higher solar power tariff today may not necessarily be a higher risk-adjusted tariff when compared to other sources.
c) Solar power is actually a cheaper source of electricity for industrial and commercial (I&C) consumers. As a result, they are already assessing rooftop solar projects and, more recently, entering into third-party solar PPAs with independent power producers. Furthermore, industry competitiveness is being eroded today not by expensive grid power, but rather by a lack of uninterrupted power (due to high levels of aggregate technical and commercial losses and load shedding), necessitating investment in costly backup power (diesel power today costs upwards of 15 per kWh).
d) Solar power tariffs have been rapidly declining over the years, approaching grid parity, as evidenced by the results of the most recent round of reverse e-auctions conducted by NTPC for 500 MW capacity in Andhra Pradesh under the national solar mission. Leading developers competed at tariffs of less than $5 per unit before the hammer fell at an all-time low solar tariff of $4.63 per unit. The list of recent winners in highly competitive central and state-level auctions includes developers with a proven track record and domestic and international experience, allowing them to assess the viability of the figures they bid.
These prices are comparable to the prices discovered in a few thermal power bids over the last few years. Recent coal-based bids for the purchase of thermal power by Andhra Pradesh saw tariffs in the range of 4.27-4.98 per unit, reassuring that solar power will not be a burden on discoms’ financial health in the long run. Furthermore, distributed generation channels such as solar irrigation pumps would help to reduce the significant financial burden on discoms by reducing grid power demand from agriculture.
4. It is also argued that increased solar capacity base will increase peaking power requirements in the evening, necessitating the investment in more peaking power plants or the operation of existing thermal power plants only during peak hours, resulting in under-utilization and inefficiencies. This worry is obviously misplaced and misdirected. The proper response to addressing peaking requirements is to send the appropriate pricing signals, which can be accomplished by extending time-of-day metering to all customer categories. Today’s stranded gas-based capacities, which are unfeasible to run as base load plants on imported gas or LNG, can be made viable as peaking plants if the appropriate peaking tariffs are in place.
Time-of-day metering, in conjunction with technological advancements in the consumer electronics domain, has the potential to address peaking requirements on the demand side. Washing machines, for example, can be programmed to run during off-peak hours. Furthermore, with increasing urbanisation and continued growth in the services sector, the daily peak period is expected to shift towards daytime in the long run.
It is not my intention to imply that solar power is the answer to India’s energy problems. Solar power has its own set of issues in terms of its impact on overall grid stability, particularly in India, where the grid lacks buffer capacities as it does in the West. While plans to expand solar power are being developed, equal attention is being paid to improving transmission corridors and grid management systems through increased investments and budgetary allocations to states to strengthen the network and deploy smart grid framework.
Furthermore, multilateral development banks are collaborating with the government to boost green energy corridor investments that will directly connect load centres with solar energy generation centres such as solar parks or other distributed generation systems. My intention is to suggest that the sun has finally risen on the renewable energy sector, and it is in our nation’s best interests to harness it for India’s economic success.
