Solar Power in Assam

The Assam Government has agreed to provide 800 bigha of land to set up a solar power facility, which is expected to generate 40 MW of solar power. This decision comes in accordance with the solar drive in India. The Prime Minister has promoted the usage of solar and wind power in our country profusely and has set ambitious targets for India. Assam has mostly been in news in India for the violence in the state. It will be nice for the state to set up a new solar plant, which will help in the development of the state. It will provide power and employment and thus tread on the path of development.

However, it looks like there has been some problem for the state to install its long awaited hydro-electric project. Already Rs 6,000 crore has been spent for this 2000 MW plant, but the issue hasn’t been resolved. However with the pro-solar government at the center, I hope the solar plant should go smoothly. It remains to be seen whether Assam will emerge as one of the states helping India achieve its solar target, or remain a laggard. It is important for developing economies like India to focus more on the green renewable energy sources more, for its power requirements.

The US Government also supports India in its mission to be a Solar power country, with the US President promising funds to promote solar in India. US is also exploring projects for a $1 billion clean energy financing, for companies willing to ship equipment to India. The Asia Pacific market is expected to be worth $37.8 billion by 2020; wherein China, Japan and India will be the principal countries promoting solar energy. With the solar energy reaching grid parity in different parts of the world, it is getting more affordable by the day. It will not only reduce the country’s dependence on the dirty coal, but also make the world more greener and cleaner, which is also the need of the hour.

“Protection of environment is an article of faith for our Prime Minister Narendra Modi. So a lot of importance is being given to renewable energy. Beside thermal and hydro-power, renewable energy sector will have a major contribution in achieving the target of power for all,” Goyal said.

TOI

India’s Solar Fund

India has set up a very ambitious solar target of 100 GW by 2022 which would require at least $125 billion in investment. Given that the country is capital starved, many analysts have dismissed this target and said that India would be lucky to meet even half of that target. The main hurdle faced by solar developers in the country is the high cost of capital. India has a number of state owned power finance companies such as REC and PFC, which are involved in lending to large power projects mainly thermal. The thermal capacity accounts for more than 60% of India’s power generating capacity.

IREDA which is a dedicated funding agency owned by the government has funded almost 60% of India’s wind power capacity. IREDA has large lines of credit from international financial developmental institutions like KFW, JICA etc. IREDA is already gearing up to shift its focus from wind energy to solar energy and looking to raise billion dollar funds. It recently raised its paid up share capital base. The government also wants some of the largest banks, both private and public sector to set up dedicated green funds. It could ask ICICI and SBI to do the needful. While most of the large banks have now got some experience in renewable energy funding, they have not been too enthusiastic as there is little security about the paying ability of discoms and the newness of solar technology. Also unlike conventional power loans renewable energy loans are long term approximately 10-15 years, given the cash flows for solar plants are distributed over 25 years with all of the costs going upfront.

India is already getting around $1 billion a year as cess from extracting coal, which goes into the National Clean Energy Fund. Like most of the other things, this fund was also misused by the last government to cover up its budget deficit, rather than fund renewable energy and climate mitigation efforts. The solar rooftop subsidy and the subsidy for solar pumps did not get disbursed on times, despite the large funds available with NCEF. Hopefully this government can not only push the macro things, but also decrease the inefficiency and lethargy from the normal government processes.

Large Indian state owned energy companies such as OIL India, IOCL etc. have periodically made small forays into building very small solar energy plants, but they have done nothing much except generate sound bites. India’s largest capital goods company BHEL had made grandiose plans to build a large megawatt solar wafer, cell and panel manufacturing plant in the then heavy industry minister Praful Patel’s constituency, but nothing came out of that as well. All major PSUs like SJVN, NHPC, NTPC etc. have built small 5-10 MW solar plants without doing anything substantial. Most of these PSUs are extremely cash rich, but like the government companies are passive and inefficient except for one or two. SJVN and NHPC are focused on building hydro power capacities, but have been extremely slow in building those capacities. They have been mostly content in milking their existing facilities. NPTC is one of the better run companies in India with over 40 GW of power generating assets mostly thermal based.

The new Modi government wants all these companies to start building out large solar capacities. This will not only go towards meeting the ambitious 100 GW target for 2022 set out by the PM, but also help in meeting their RPO obligations. Note, as per India’s National Plan on Climate Change, 15% of the energy should come from renewable energy sources by 2020. NPTC going by its current target should have at least 15-20 GW of renewable energy power capacity by 2022. NPTC is come out with a 1 GW tender for building solar farms in Andhra Pradesh and will soon build out 3 GW of solar capacity.

Read more about Advantages of Renewable Energy.

Besides power generating companies, the PMO is also pushing the large state owned oil refiners such as IOCL, OIL, HPCL, BPCL etc. to build solar power capacities. These companies can be easily be pushed into building large solar capacities given their huge revenue and human resource bases.

The world’s largest coal mining company Coal India is also a good candidate to build out large solar farms, given that the company has a giant cash hoard and generates large cash flows each year. In fact Coal India has already tied up with SECI looking to build out 1000 MW of solar capacity in the near future.