Nuclear energy industry has seen a massive blow after the Fukushima incident, which led to the shutting down of numerous reactors across Germany, Belgium, Switzerland and Japan. Many countries adopted policies to completely stop nuclear power generation after massive protests. Even though Japan is again restarting old nuclear plants, it is doing so gingerly and still facing huge protests from anti-nuclear campaigners.

Building new nuclear power plants has become a long tedious and costly process and given the rapid advancements being made by solar PV technology, we at Greenworldivnestor predict that nuclear power technology will slowly die a slow long death given that the cost curve for nuclear power is increasing. The risks are just too high from the failure of a nuclear power plant. In contract solar power has already become competitive with other fossil fuels and will decline at a low single digit percentage every year, putting additional pressure on competing energy sources. The problems of intermittency is also being solved by innovative methods and the falling costs of lithium batteries.

I don’t think that old nuclear power plants will be shut down soon, given that the costs of running these old depreciated plants is not too high but building on new nuclear power plants has become prohibitive and can only be done with strong government support. I don’t think governments will want to spend precious political capital in supporting this technology. Some countries like India which supporting nuclear power have seen little in terms of capacity addition. Compared to nuclear, solar power capacity additions has grown at an exponential pace.

Countries with a large nuclear power fleet will also find it hard to see old nuclear power plants getting extensions. USA will see almost a third of its nuclear power plants face the end of life by 2030. New nuclear power plant designs take a very long time to get approved. There has not been much improvement in nuclear power technology, with only a few companies like Westinghouse and Areva working on this technology. These companies are in a financially distressed state and not making too much money. China runs its own programs and now is developing its own technology.

Nuclear power technology is all set to become a niche technology like others such as geothermal and tidal power technology. Solar is set to dominate with wind a distant second. Others like coal and gas will still run, but more as support rather than as a mainstream energy source. Some companies in the USA such as NuPower are working on new technologies and processes such as module reactors but I don’t think that these concepts will work against the relentless onslaught of PV silicon power technology.

The Robinson reactor is one of the oldest still operating in the United States, but others are getting on in years. From 2029 to 2035, three dozen of the nation’s 99 reactors, representing more than a third of the industry’s generating capacity, will face closure as their operating licenses expire.

Any shutdowns would be another blow to nuclear energy, which provides 19 percent of the nation’s electricity but has struggled in recent years to compete against subsidized solar and wind power and plants that burn low-priced natural gas. Industry advocates say that by removing sources of clean electricity — a nuclear reaction produces no carbon dioxide or other greenhouse gases — the closings could affect the government’s ability to fulfill its pledge, made at the Paris climate talks last year, to reduce emissions.

Source – NY Times

Solar Growth in India – 2016 & 2017

Solar power in India is set to double to 4-5 GW in 2016, from around 2 GW in 2015 as the market heats up due to government’s strong intent to achieve the 100 GW solar target. Even as other infrastructure and power sectors remain moribund, the solar market is firing on all cylinders. The state governments and central power undertaking have tendered multi gigawatts of solar capacity, which has seen tremendous interest not only from domestic companies, but also global investors and solar players. This has resulted in extremely low tariffs, which has made the government more confident about its strategy. This will also lower the government’s subsidy burden, allowing it to tender even more solar capacity. Though there are doubts whether all the solar projects will get completed due to the super low tariffs bid by investors, I think that the capacity should easily double. ICRA has projected that 5.7 GW will be installed in FY’17, while Mercom is estimating 4 GW of installations in 2016. This would imply another year of 100% plus growth in 2016, after a doubling of the solar market in 2015.

Also read my article: Incremental solar growth expected in USA, China and India

solar panels india

The Indian solar market has become the fastest growing market in the world and I expect it to continue being so for a long time. The main reason is the improving economics and competitiveness of solar energy with other energy sources. This is on top of the green credentials that solar energy has, which gives it a huge advantage over fossil fuel sources such as coal and gas. If you add pollution and global warming changes on fossil fuels, then solar energy would win over other energy sources by a massive margin. Even without these changes, solar energy has become cheaper than gas and wind energy. Even with thermal power it has come close and should go below thermal power in the next 5 years. Also given that solar energy does not face any major land and environmental issues, makes it an ideal energy source where both these problems are much more acute than other places in the world.

The main drivers of solar energy growth in India are:

  • Decreasing prices of solar energy
  • Its green credentials
  • Government Support

 Nearly 5,700 MW of solar capacity is expected to be added during 2016-17, even as concerns over aggressive bidding and regulatory challenges persist, says rating agency Icra. According to an Icra study, the capacity addition, including PV and grid connected projects, in 2015-16 is expected to touch 2,700 MW, which will increase to up to 5700 MW next fiscal, going by the project awards and tenders floated in December last year

Source

USA has doggedly fought a case against India solar procurement rules for the last one year and won the case in WTO. We have repeatedly highlighted the stupidity of the USA government in pursuing this case which will hardly benefit any major USA producers such as Sunpower or others. The Indian government did not impose anti-dumping duties on imports of solar cells and panels last year, which are allowed under WTO rules. They had made this decision, as they did not want to hamper the growth of the solar electricity generation market. Instead to help the local domestic manufacturers, the government had mandated that subsidized procurement would reserve some percentage for local producers of solar products. Even this was found objectionable by USA and it started a WTO case. Note USA has a domestic procurement preference under ARRA and also had imposed ADD and CVD on Chinese and Taiwanese solar panels and cells.

China has almost captured 70% of the Indian solar market due to its low costs and aggressive pricing in the Indian market. Indian solar panel prices is one of the lowest in the world, with prices ranging from 40-50 cents/watt. This is due to low transportation costs from China to India and intense competition. Most USA solar producers such as Sunpower are not able to compete in this market. First Solar is also struggling to win back it lost market share. By forcing India to dilute its rules for domestic preference, USA will benefit China as USA producers have little hope in winning the market. India will lose support for solar energy generation, if jobs are not created locally. It is imperative for the world that India reduces its thermal power dependence going forward and use more solar energy. Currently most Indian solar producers are in a distressed state, as they cannot compete with the scale and costs of large Chinese players. By not allowing Indian manufacturers to grow, USA is giving a strategic advantage to the Chinese companies. Even the big USA NGOs and environmental organization such as Greenpeace have supported the Indian stand. However, USA refuses to realize its stupidity.

Hindu

India hopes to reach a mutual understanding with the US on the contentious issue of domestic sourcing conditions in New Delhi’s solar energy programme by February 24, when the third extension given by the World Trade Organisation (WTO) to both to settle the matter expires.

Failing a settlement or another extension request by the US, which is the aggrieved party, the WTO may publicise a dispute panel’s ruling on the matter which favoured Washington. However, if no extension is given New Delhi has the option of going in for appeal.

US Trade Representative Michael Froman had told the media last week that the two countries were still engaged in conversations. “It’s too early to tell whether we’re going to have an agreement or not,” he said.

India Solar Booming – 2016

We have been closely following the solar energy boom in India, with numerous grid sized tenders being floated by the government. The solar rooftop segment which had been lagging behind the ground mounted solar plans is also seeing a resurgence, with the government allocating almost $700 million to install 5 GW of rooftop solar using subsidies. India has already reached a capacity of 5000 MW of solar energy in January 2016. Based on the completion of the projects and tender awards, the government expects a doubling of capacity to 9000 MW over the next 3 months. This capacity will again double over the next 12 months with another 11 GW being installed.

Also read about Integrated Solar Storage Tenders in India.

This will easily make India as the 3rd largest country in terms of solar energy capacity addition, after China and USA. Japan which is the current No.3 is expected to see a tapering to a decline in annual solar capacity addition, as the country faces a reduced feed in tariff regime, a general slowing down of the economy, restart of nuclear reactors and weakening interest from large Japanese solar companies which are closing plants. India has managed to complete an astounding 15 GW of solar tenders in the last 9 months, as all major government agencies and organizations have put out large tenders. NTPC, SECI and state government distribution companies have come out with large tenders. The bidding has been very aggressive, as a lot of capital around the world has been attracted to the fast growing solar sector in the country.

The biggest risk in my view is project delays, given the infrastructure and red tape systematic problems that exist in India. As per a BTI report, almost 50% of the tendered projects in the past have got delayed. There is another huge risk to the number. The risk is that if the Indian rupee depreciates or interest rates rise, then many of the projects might fail due to the aggressive bids made by most bidders. The IRRs are very thin at 8-12% and based on assumptions like fall in solar panel prices and weak interest rates. These projects could simply not be built, if the economics fail. It might be cheaper for the bidders to renege on their contract and pay the BG penalties, rather that losing more money by building the plant. The bidding of the ultra large thermal power plants in the past has failed miserably.

MNRE

Commissioned in 2015-16 as on 31/01/2016 Commissioning Status of Grid Connected Solar Power Projects under JNNSM in 2015-16
Sr. No. State/UT Total MNRE Projects MW State Policy MW RPO MW REC Scheme MW Pvt. Initiative (Roof top) MW CPSUs MW Total commissioned capacity till 31-01-16 (MW)
1 Andhra Pradesh 0 227.28 0 4.4 1.2 0 232.88
2 Arunachal Pradesh 0.24 0 0 0 0 0 0.24
3 Chhattisgarh 0 64.08 0 1.5 0 0 65.58
4 Gujarat 20 4.1 0 0 0 0 24.1
5 Haryana 0 0 0 0 0 0 0
6 Jharkhand 0 0 0 0 0 0 0
7 Karnataka 10 16 0 0 1 0 27
8 Kerala 12 0 0 0 0 12
9 Madhya Pradesh 40 75 0 5 0 0 120
10 Maharashtra 15 0 0 2 0.95 0 17.95
11 Odisha 10 25 0 0 0.16 0 35.16
12 Punjab 0 15.05 0 0 0 0 15.05
13 Rajasthan 260 42.65 0 19.6 0 0 322.25
14 Tamil Nadu 10 164.075 0 92.7 9.59 0 276.365
15 Telangana 0 279.64 0 1.5 0 0 281.14
16 Tripura 0 0 0 0 0 0 0
17 Uttar Pradesh 0 68.74 0 0 0 0 68.74
18 Uttarakhand 0 0 0 0 0 0 0
19 West Bengal 0 0 0 0 0 0 0
20 Andaman & Nicobar 0 0 0 0 0 0 0
21 Delhi 0 0 0 0 1.247 0 1.247
22 Lakshadweep 0 0 0 0 0 0 0
23 Puducherry 0 0 0 0 0 0 0
24 Chandigarh 0.541 0 0 0 0 0 0.541
25 Daman & Diu 0 4 0 0 0 4
TOTAL 365.781 997.615 0 126.7 14.147 0 1504.243

Solar investments in India

Solar energy has become the dominant renewable energy source in India in terms of investments, with $5.6 billion being invested in 2015, which is almost half of the total RE investments made in India. RE investments increased by 22% in India overall as per Bloomberg, topping $10 billion in investments. Wind and Solar accounted for almost 90% of the total investments. Biomass and small hydro energy which used to dominate investments before 2010, have almost disappeared from investor’s horizons. Given Indian government’s targets for 2022, small hydro and biomass will continue to languish becoming a niche sector. Solar Energy will become even more dominant in years to come.

Read about State Owned PFCs investing in Green Power Plants in India.

2015 saw 2 GW of solar capacity being added and this will increase by 5x times to around 10 GW by 2017, if the recent large tenders by state and central agencies get executed in time. Solar energy is not only dominating the RE space, but is also becoming the dominant electricity source with most investments going into the solar energy industry. While wind energy has not done badly, the capacity increase in wind energy has stalled now compared solar energy, the investments still kept pace at more than $4 billion. It is hoped that wind energy capacity will increase, given that the government’s target implies a 5 GW annual run rate, which is roughly double what it is now. The government will also bring out a National Wind Energy Mission similar to solar energy, to promote investment in this RE technology.

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Even globally investments are increasing in solar energy, as cost declines have made it competitive with not only gas and wind but also thermal power prices. This is not taking into account the carbon emitted by fossil fuel sources such as coal and gas. Solar prices have come down to the 5-6 cents/kWh level in most countries, making it truly competitive in the economic sense and posing a huge threat to other energy sources. Though oil prices have declined sharply, solar investments and RE investments have increased in 2015. This shows that solar energy is no longer a hostage to oil price movements, with governments providing solid support and favorable economics also supporting solar energy.

Overall global RE investment increased by 4% in 2015 to around $330 billion, as most countries increase RE mix in their overall energy procurement mix.

Indian Solar Tariffs on a declining spree

The Indian solar tariffs discovered during recent reverse auctions have defied belief, and led to many industry analysts and consultants question the viability of the solar power plants being built at tariffs below INR 5/kWh. It has been calculated that the ROE on solar plants being built will lead to single digit returns. This ROE can easily go into the negative territory, if any of the risks such as a sharp rupee depreciation or higher global equipment prices materialize. Many of the big utilities such as CLP have decided to stay away from such solar auctions, given the lack of economic viability.

However the recent AP bid in which SunEdison and Softbank had won at INR 4.63 a unit, shows that the competition in the solar market in India remains immense and companies are willing to go for high risks in winning these projects from the government. The drop has been sharp and sudden in the solar tariffs. People were wondering how Sky Power which had won bids for INR 5 a unit, would manage to build the solar plants. Now they are scratching their chins on how companies like Rising Sun, Fortum and Yarrow Infrastructure will get any returns after winning Rajasthan solar projects for 420 MW at just INR 4.34 /kWh (6 cents/kWh). Industry watchers are disturbed as such low tariffs might dissuade serious players from deploying capital in the Indian solar market.

Once the sentiment gets adverse, then it might take a long time for private investors to get in. Note the returns on solar projects are better in other markets in SE Asia and Europe. At INR 4.34/kWh and a capital cost of INR 5.5 -6 crores/MW, it seems almost impossible to make any viable returns. Even with a low cost of capital and low risks (as the power will be bought by NTPC), these bids seem to make little sense. The policy makers and ministers are obviously very happy, as these prices are making solar energy competitive with even thermal power electricity. Gas and wind power prices are now much higher than solar power prices at these tariffs. India’s target of 10,000 MW installed in 2017 looks viable, given the huge competition and low prices.

Read how the Indian government looks to lower Capital Costs for Solar Energy.

However, if most of these projects get stalled if there is a risk materialization, then all of these plans might go bust. Renewable Energy is a highly volatile market. SunEdison which is the world’s largest renewable energy developer found it the hard way, as the debt market for energy companies suddenly reversed leading to liquidity issues. India might also find itself in a pickle, if solar module prices shoot up or some other black swan event happens. It might make sense to bring some rationality back into the Indian solar tariffs, otherwise the whole industry might come under risk.

 “Solar tariffs in India have fallen to a new low after Finnish firm Fortum Finnsurya Energy won a 70-MW project with a bid of INR 4.34 (USD 0.064/EUR 0.059) per kWh, The Hindu Business Line reported on Tuesday.

The company is one of the winners in a tender by Indian power producer NTPC Ltd (BOM:532555) for the development of six projects of 70 MW each, or a total of 420 MW, for the Bhadla Phase II solar complex in the state of Rajasthan. Rising Sun Energy Pvt Ltd won two projects in the tender, offering INR 4.35 per kWh, Solairedirect also won two projects with the same price of INR 4.35 and Yarrow Infrastructure got one project with INR 4.36 per kWh, according to the article.”