10 GW Solar Park in Rajasthan

Rajasthan might witness another huge solar investment onto its sunny lands. Rajasthan suffers from huge power shortages and a solar park could be the answer to majority of its power woes. The Adani Group of India has signed a JV with the state government to set up a 10 GW solar park in Rajasthan by 2022. This park will entail a 50% ownership by each of the two parties and will attract investments worth INR 60,000 crores. Adani plans to generate 5,000 MW in the proposed solar park. The proposed park will also have its own manufacturing plant and will thus create huge employment opportunity. This park is supposed to be the largest in India till date and will be known as Adani Renewable Energy Park Rajasthan Ltd. It is expected that the solar park will produce clean energy of ~16,600 million units.

Read about Rajasthan Solar Energy Policy.

Rajasthan has total commitment to achieve 25 GW of solar capacity by 2022. This JV will be a step towards the state’s goals. Rajasthan government shall provide land for the solar park and also some power infrastructure. Also India has a target to build 25 solar parks of capacity greater than 500 MW across the country. Adani group already has a 40 MW solar plant in Gujarat and is also India’s largest private thermal power generating company. The company had also signed a MoU with SunEdison to invest $4 billion jointly for constructing a solar PV plant in Gujarat. I hope Rajasthan, which is one of the largest power deficit states of our country be successful in constructing this solar park, after its dreams of setting up the Mega solar project was shattered on environmental issues.

“This project will be India’s largest solar park and will also house manufacturing facilities to be set up under the country’s ambitious Make In India initiative. We have embarked upon a mission of becoming a world leader in renewable power generation technologies, with a special focus on solar. The development of Solar Park facility is our contribution towards realization of our Honorable Prime Minister’s campaign and commitment towards clean and green energy in India.” said Mr Gautam Adani, Chairman, Adani Group.

Source: Adani PR

India formalizes its 100 GW target

Till now India’s solar target of 100 GW by 2022, was not officially laid down and was communicated only through the minister’s word of mouth. On June 17th, however the Prime Minister of India formally announced India’s solar target of 100 GW to be achieved by 2022. The total global solar capacity installed by 2013 was 100 GW. This formal announcement has been done under the National Solar Mission, which will further boost the country and inspire it to achieve the targets. Though critics have not been a big fan of the numbers, I believe that even if the country achieves a part of what is laid down, it will be great for our energy deprived nation. Also once India is confident about its energy capacity, will it be able to distribute it to the energy deprived people of our country.

Read more about Solar Power in India.

The 100 GW target consists of 40 GW of rooftop solar installation  and the rest 60 GW would be large and medium scale grid connected solar power projects. With falling costs and improving cell efficiencies, there will be huge opportunities in the installation space, as distributed solar creates much more employment and profit opportunities for smaller players. MNRE has now come out with an appropriate action plan in place and will achieve this target under three parts of 19.2 GW each. Funding will be aided by large PSUs and IPPs. Approximately INR 150 billion of capital subsidy will be provided for rooftop solar.  The state government have also come out with their respective policies. The total investment is calculated to come around $100 billion.

How can solar create jobs in India

This big number will accelerate solar growth in India and will enable the country to be more energy-smart and confident. The manufacturing hub in the country will also create ample job opportunities and will provide employment to the unemployed. This could solve a major issue of the country. It plans to use the industrial technical institutes to train people and has already started a separate ministry to look after skilled manpower development. India should provide training to the youth in installing small scale rooftop projects, solar products and small village microgrids. The government banks need to provide funds at subsidized rates to help them. This will help the youth in gaining some skills and understanding of the solar market. It would be a more practical way rather than funding multi crore projects. I want to remain highly optimistic about the solar sector improving in India and also hopeful about the “Achhe din“ soon returning to the country!

Power Trading Corporation India

The new government has made an ambitious target to set up 100000 MW by 2022, up from around 3300 MW set up now. This will require herculean efforts on all fronts in terms of execution, financing, coordination etc. However, the government seems to be confused on how to go about implementing it. There are a large number of government owned agencies and companies that are all moving in different directions trying to implement the target. The states are also moving in their own directions and policies to set up large gigawatt capacities. The companies involving in the governments’ solar melting pot are numerous:

i) NTPC planning to set up 10000 MW of its own and invite bid of 15000 MW for the government.

ii) Solar Energy Corporation of India (SECI) which has become a solar developer cum quasi regulator

iii) IREDA which is going to raise funds and

iv) MNRE which is the nodal ministry in charge of renewable energy.

Now the government has also introduced Power Trading Corporation (PTC) into the mix to buy solar power denominated in dollar tariffs. I have failed to understand why the Indian government is going to pay in dollar linked rupee payments to solar developers for their electricity. The reason is that then the developers can raise dollar backed loans and do not have to pay the hedging costs. However, someone will have to pay the hedging costs at the end of the day. The government will become liable to pay the higher cost, if dollar rises against the rupee.

Read more about Solar Power in India.

While there is no doubt that lower interest rate costs will help the solar developers, at the end of the day the Indian taxpayer is on the hook for the hedging cost either way. A better policy would have been to offer some kind of credit guarantee, or some kind of insurance against any sharp rise in the dollar. Interest costs in India are higher due to higher inflation. If inflation was lower, then interest costs would be lower. Paying in dollars will not solve the problem. I think it’s a stupid idea that should be buried.

As part of the government’s plan to push solar electricity by paying for it in dollars, power trading company PTC India Ltd may call for bids from solar project developers on behalf of the ministry of new and renewable energy (MNRE).The radical approach of dollar-denominated tariff expected to be followed by India’s largest power trader may be similar to that of state-owned NTPC Ltd, aimed at providing green power at less than Rs.4.50 a unit.With firms such as PTC making a purchase guarantee, these projects will become bankable and help solar power reach grid parity. The power sourced will be supplied to the states.Inviting?dollar-based tariff bids advocated by energy minister Piyush Goyal, along with sharing of hedging risks, is expected to reduce the solar power rate from around Rs.6.7 per unit to around Rs.4.37, with the firms freed from any foreign exchange risk.A PTC executive requesting anonymity confirmed the plans and said, “We are having discussions with MNRE. Micro issues are being discussed. It is a good idea. We are in positive talks.”

Source Mint

Funding for Solar in India

One of the biggest problems in attaining India’s target of 100 GW will be the massive capital required, as solar energy is capital intensive. India is perennially short of capital and funding the $100-150 billion will be a herculean task, even if the other hurdles are removed. India’s banks are in a really bad shape with most groaning under bad debts, which is around 10% or more of their total loan books. India’s bank have also reached the sectoral limits of lending to India’s overall power sector as per a FICCI report. This means that India’s solar energy will really find it hard to get funds, as the public sector banks and institutions are the biggest source of funds. India does not have a well-developed corporate bonds market and multilateral and bilateral institution such as KFW, WB and ADB can fund only a limited number of solar projects.

The private equity players can help in funding the equity requirements of these projects, but a large portion of the debt will have to come from the banks. India’s government has made a vital change which will help a big portion of the India’s solar energy sector. It has made it a priority sector under the Indian laws. This means that the 40% of the funds under the priority sector can be lent to the solar sector (the small projects of (1-3 MW).

Under the new notification, banks can lend up to Rs. 15 crore for small renewable energy projects under wind, biomass and SHP. This will really help boost the fund flow for rooftop and micro grid solar installations. Note the other sectors allowed under priority lending are agriculture, education and small enterprises.

India has massive potential to leapfrog a part of the fossil fuel area for its 300 million citizens, who do not have access to any electricity. They can straightaway be supplied with green solar energy and it does not even have to spend money on building transmission and distribution networks. It can use microgrids and energy storage to supply power to these communities. This has already happened in the case of the communication sector, where India bypassed the fixed line telephony to supply mobile phones to almost all parts of its population. This happened because of the increase in affordability and distribution ease. Already entrepreneurs are pouring in by the hundreds, to build solar companies to supply power through rooftop installations and micro grids.

RPO to increase to 8% in India

India’s government is thinking of increasing its solar renewable purchase obligation target from around 3% to 8%, in order to push energy consumers to increase their consumption of green energy. India has a target of generating 15% of its electricity consumption from wind, solar, biomass and small hydro power by 2020, as per its National Action Plan on Climate Change. However it hardly met even 5%, in FY 13 as per CEA. This means a substantial ramp up in renewable energy capacity is required. Not only will green energy sources have to increase their share of the total power generation, but also keep up the pace with the incremental power capacity that is coming up in India due to rapid GDP growth.

The ministry of power wants to increase the solar RPO obligations, in order to meet the solar target set by the PM. However, the vision and the implementation reality do not match up. The current RPO setup is in a mess, with most state utilities not following the mechanism and not meeting the penalties either. Most green energy producers do not rely on RPO certificates to generate cash, as the REC certificate trading has been a non-starter. The government needs to clean up its existing act before moving on to more ambitious targets.

Another proposal of forcing thermal power generators to set up large solar power capacities will not work either. The current power industry is saddled with huge debts and problems of coal procurement. Many of them such as Mundhra plant of Tata Power is running at a loss, while others are in litigation. On top of this mess, you want to add more costs to thermal power generators. This will only prevent companies from setting up new thermal power generation capacities as well.

India has good targets and a good vision, however the ground reality is far removed from these targets. Most people think that 100 GW will not be achieved, given the pathetic situation of the economy and the structural barriers. Even meeting 50% of the target will be good. Putting more regulations and laws onto private businesses will not help but drive them away. Instead of forcing businesses, government needs to come up with innovative ideas to help build capacity.