Plans to export solar power to other countries is not a new concept and the most famous example was Desertec where a plan was to build massive solar farms in the Sahara to supply power through undersea cables to Europe. This plan which saw a lot of traction and planning in the early 2010s never came into fruition and remained on the drawing board despite being backed by major companies such as ABB, Siemens, etc.

With solar costs falling by almost 80% over the last decade, exporting solar power may not seem such a far-fetched idea anymore. India recently unveiled a vision for a one-world one grid plan where countries could be connected through a massive grid which would supply solar power from sun-facing countries to countries which were facing away from the sun. This would solve the intermittency problem of solar energy. The Nordic Grid is a successful example of how countries can manage to increase their RE capacities by exporting power to neighboring countries.

A developer in Australia wants to build a 10 GW farm in Northern Territory which could supply power to Singapore through Indonesia. Note Singapore is an island which does not have much land to allocate to the large fossil or renewable energy power plants. Given the preciousness of land, it makes sense for Singapore to import power from countries which have abundant land which is unused. Australia gets very good solar insolation and it also has millions of acres of wasteland. It makes great sense for these two countries to partner together in power especially as it also helps fight climate change and reduce pollution.

The proposed Sun Cable project will also have 20-30 GWh of storage and transport power through a 3,800-km high voltage direct current submarine cables and cover 20% of Singapore’s power demand. The plant should be fully built up by 2027. Note these giant project often fail due to the complexity as well as due to the financial weakness of the developers. Building such a huge project will require multiple partners which can result in diversifying risk as well as bringing in the strengths for different parties.

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 Total Capacity exceeds 6 GW

The southern states of India have been installing solar energy at a rapid pace driven by their perennial shortages of power seen after independence. The solar energy revolution came as a godsend to these states as they rapidly installed solar power to cover up their power deficits. Telangana, AP, Karnataka and Tamil Nadu have put up huge capacities of solar power as a result of which the country has moved from a power deficit to a power surplus state.

Also, read about the top Solar States in India

However, the rapid growth has had a dark side as the Karnataka energy regulator has called for a halt in any new solar power capacity creation for the next three years. The commission in an order has said that though the prices of wind and solar power were low at INR 2.5 to INR 2.8, the problem is that while the state can get prices of wind and solar for a low cost, they still have to pay the fixed costs for a thermal power plant which they have contracted to. So, the overall cost for the state still works out to be higher putting a greater burden on the electricity consumers on the state.

Rooftop solar

The solar RPO obligations of Karnataka have already been met until FY 22, as the state has a cumulative capacity of more than 6 GW. This makes Karnataka the state with the highest solar capacity in India easily moving up higher in the ranks than even Rajasthan. Karnataka in recent years had started a number of schemes to promote solar energy such as the solar parks scheme with Pavagada solar park expected to become one of the largest solar parks in the world with a capacity of almost 2 GW when completed. It had started a small solar power plant scheme for farmers besides solar power plants being auctioned in different districts.

This development has alarmed solar power developers who fear that this trend may be followed by other states which are reaching saturation in terms of renewable power capacity. Andhra Pradesh has also installed large capacities of both solar and wind power in recent years. TN already has one of the largest capacities of wind power in the world with more than 10 GW of wind capacity. It could soon announce a complete halt on large scale RE projects. With the government targeting 175 GW of RE capacity by 2022, this development does not bode well if one of the largest demand drivers of solar capacity stops working on new RE capacity till 2022.

Why has Solar Growth slowed down

India installed around 8 GW of solar capacity last year which was a fall from 2017, as rising duties on solar panel imports and tender cancellation led to the dampening of growth. However, despite the fall in growth, India was the third largest country in the world in terms of solar capacity additions and even in India, solar power accounted for more than 50% of new capacity addition, far eclipsing thermal power capacity growth around 4 GW and wind power at less than 2 GW.

Solar Panel Duties

Gas and nuclear have become marginal in India’s power generation sector with hardly any new additions. The solar safeguard duty of 25% imposed in July last year, has raised solar project costs and with Indian buyers loath to pay more than INR 3/kWh for solar power, the overall sector growth has been hit. Many of India’s developers and utilities are looking at 2020 for pushing growth when the safeguard duty becomes zero. This year should see installs between 7-8 GW again, with rooftop solar becoming a contributor of around 25-30%. While ground mounted installs fell last year, rooftop solar continued its rapid growth driven by favorable policies and falling prices. The economics of rooftop solar is very good as it does not require transmission and can be put up by consumers themselves.

Rooftop solar

Southern states have reached a Saturation point

Solar power faces another major challenge as some states have reached saturation in terms of solar power capacity. India’s southern states, which used to be the most power deficit before the solar revolution, have installed a large number of solar power plants. Karnataka has more than 5 GW of solar power installed and does not want to install any more large capacity as it has become more or less power surplus for the next 3-4 years. Same is the case with some of the other states though on a lesser degree. This means that some of the biggest drivers of solar power like AP, Telangana, TN and Karnataka will no longer take the leadership in growing solar power. This means slower times for solar power developers.

Land and transmission are the other perennial challenges that limit solar power growth from the supply side. However, solar power is expected to accelerate next year as the economics become more compelling and the safeguard duties go away. The push from rooftop solar and other forms of off-grid solar products is also expected to heavily drive the growth in solar power installations.

Acquisitions – Indian Solar Assets

The Indian solar market has been growing at a torrid pace over the last few years driven by favorable government policies and rapidly falling prices which have gone below that of coal. With more than 50% of India’s new power capacity developed last year coming from solar, foreign funds are scouting the market for solar assets in the growing market.

While some financial investors like Goldman, Morgan Stanley and others have been present in India for some time through platforms such as Renew Power, etc., new global infrastructure investors are also picking up assets. The latest one being Global Infrastructure Partners (GIP) which is looking to buy Rattan India’s solar assets which total around 300 MW. Rattan India has been facing a lot of distress in recent times with its thermal power assets in Maharashtra laden with payment difficulties to debtors. The group is quickly looking to deleverage its balance sheet and selling its assets. The group is reportedly seeking around INR 2,000 crores in enterprise value for its solar portfolio.

Also, read “Pick and Choose” Solar Auctions by Indian States Drive Developers up the Wall

Solar India

Petronas, the Malaysian oil giant bought Amplus Partners last month, which has a large rooftop and open access solar portfolio in India marking its entry into India’s renewable energy market. There is a rapid churn in India’s solar developer market with many players exiting the market now as solar development enters a somewhat maturity phase with large developers consolidating the market around themselves using financial heft and scale as competitive barriers against smaller and newer players.

Global Infrastructure Partners (GIP) already has an Indian presence after it bought the asset management arm of IDFC last year and owns a number of infrastructure assets such as roads, ports, etc. through this investment. Besides Rattan India, French power major Engie, is also looking to sell its 600 MW plus solar portfolio in India and is in talks with PE giant Actis and Edelweiss infra fund.

The solar development market constantly needs a rapid infusion of funds for expansion and smaller players are having a tough time to stay in the market given the constant capital needs. Developers are tapping various sources such as PE, multilateral banks such as IFC, ADB as well as pension funds to meet their needs. The public markets have not helped as most of the large developers have failed to list despite planning for large IPOs. Renew Power, Acme and Shapoorji Pallonji have been planning IPOs for a long time without any success. Azure Power is the only solar developer which has managed to list in the public markets with a listing in the US markets. Its performance has not been great with its stock losing ~50% of its value since listing, as India’s hypercompetitive solar market makes it difficult to achieve decent profitability.

You might also like to read about the Indian Government’s plan of Incentivizing States for Solar Park Land

Tata Power Ditches Coal Fired Power plants

Most of the renewable energy additions in India is coming from public/ government organizations or large private companies. The country has vowed to reduce its overall carbon footprint and is targeting to install 175 GW of renewable energy installations by 2022.

Tata Power one of the largest private producers in India has now decided to go off coal-fired power plants.  A report released by Institute for Energy Economics and Financial Analysis (IEEFA) ‘Tata Power: Renewables to Power Growth’ highlights the company’s long term plant to focus more on renewable energy and build out most of its new capacity from solar, wind and hydro through to 2025; despite the fact that TATA Power had earlier decided that a major expansion of coal-fired power would be required to meet the rising power demand in the country.

Tata power

The company has been expanding its renewable energy footprint in India. You can read related stories here:

Tata suddenly goes big in Renewable through big bang billion dollar acquisition 

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Trouble at Tata’s Mundra Power plant

Tata’s Mundra power plant which is a coal-fired power plant suffered losses equaling USD 191 million for the first three quarters of FY 2018-19, which is taking a toll over the company’s financials. In sharp contrast, the company’s renewable operations are yielding profits, recording an EBITDA of USD 249 million in FY 2017-18. More than 40 GW of the existing thermal power plants in India are in financial distress. All these factors have also led the private power producers to turn towards cleaner and greener renewable sources of power. Moreover, the economics of these sources have also improved making them financially viable when compared to conventional thermal power plants.

Tata Power ranks amongst the leading renewable energy companies in India having a huge presence in rooftop solar and electric vehicle charging. The company is targeting to install more than 11 GW of renewable energy as a part of its strategic intent by 2025. More such companies need to realize the fact that the future of a clean and green India lies in their hands and should come forward to generate more of their power needs from renewable sources of power, replacing the dirty and aging thermal power plants.

Also, read about Tata Solar Panels review.

Geothermal Energy India

India lacks geothermal sources of power generation, given its long project development time and large capital investments. However, the geothermal source of power is capable of generating power 24 hours as against the intermittent nature of wind and solar energy. Geothermal energy requires no fuel, works 24 hours a day and is totally green. Read more about geothermal energy advantages and disadvantages. Major earthquake fault lines are ideal places to build geothermal energy plants. They make use of the earth’s heat to generate energy. Countries like Iceland, Indonesia, Philippines and the USA have a strong geothermal energy industry. Geothermal Energy in India is moving at a snail’s pace due to project development and financing problems. However, the potential of this energy resource is immense.

geothermal-energy

Gujarat to host the country’s first Geothermal power plant

Now, Gujarat is set to become the first state in India to use geothermal energy. The Dholera geothermal power plant is expected to be operational in April this year. It will have a 20 kW generating capacity. Dholera experiences immense heat from underground hot springs. Hot water produced from the wells would be used for generating power. Other regions in Gujarat like Gandhinagar and Unai have also been identified for the development of geothermal power plants. Some of the major companies interested in exploring the geothermal energy in India are Tata Power, NTPC, Thermax, Geosyndicate etc. NTPC was collaborating with Geological Survey of India to build India’s first geothermal plant at Tattapani in Chattisgarh.

The initial investment in geothermal energy is 20%-25% higher when compared to a conventional power plant. However, the additional cost can be recovered in three years’ time and the plant also has a longer life expectancy.  India is capable of generating 10 GW potentially from geothermal sources, which is the entire world’s generating geothermal capacity. However, it needs strong government support and incentives along with financing to develop its potential.

“India’s first geothermal power plant will start operating on a pilot scale in April in Dholera, and it will produce 20 kW of electricity. Dholera was chosen for the plant as immense heat has been found under the earth in the form of hot springs,” the Centre of Excellence for Geothermal Energy (CEGE), set up by the state government at Pandit Deendayal Petroleum University (PDPU) said.

 

Source: Think Geo Energy