Recently while doing a study to gauge the investment attractiveness of certain Indian states for a global auto manufacturing company I realized that the biggest hurdle was that most of these states were facing a severe energy deficit. In fact India has a power deficit of around 10 to 17% where, a third of its population still has no access to electricity. Power cuts and load shedding is a daily phenomenon. The country, though rich in coal and abundantly gifted with renewable energy, is still unfortunately a net importer of energy. Currently more than 25% of India’s energy needs are met through crude oil imports. As per the world energy outlook report, India is expected to become the 3rd largest importer of oil in the world by 2025. This, however, will not be sustainable in the long run given the high volatility of crude oil prices. All this points to starting an aggr
Using sunlight to create energy is the most promising source of renewable energy for India as it gets more than 300 sunny days a year. In fact due to its geo-physical location India gets solar energy equal to nearly 5,000 trillion kwh/year, which is actually far more than India’s total energy consumption. Although the world has progressed significantly in generation of solar power, India has fallen short to achieve this momentum and produces less than 5 mw of solar power every year.
Challenges and Constraints
India’s biggest challenge is that the local solar industry is highly dependent on imports of vital raw materials including silicon wafer used for solar panels and cells. Apart from that, currently, solar energy in India faces two fundamental challenges; cost and land acquisition for erecting solar photovoltaic (PV) plants. The capital investment required for developing solar power is about INR 16-18cr/mw, which is more than four times the cost required in conventional coal based power generation. Though the cost of solar technology has been gradually coming down over the years it is still economically unviable for power generation. The production cost ranges from INR 15-30 per unit of solar energy compared to around INR 5-8 per unit for conventional energy.
The other concern is the amount of land required for erection of solar power panels. Around 1 km² of land is needed for every 20 to 60 mw generated and that can cause a strain on the available land resource in
Government initiative
In the latest budget for 2010-11, the Government of India announced an allocation of INR 1,000cr towards the Jawaharlal Nehru National Solar Mission (JNNSM) and the establishment of a Clean Energy Fund. JNNSM’s main objective is to increase capacity of solar energy generation to 1,000mw by 2013, 10,000mw by 2017 and to 20,000mw by 2022. Many incentives have been offered to participants in the solar industry, such as a 10 year tax holiday for PV and thermal solar companies set up before 2020, lesser custom duty, exemptions on excise duty on specified equipment and affordable loans. The Government also provides financial help of INR 12/unit for solar PV and INR 10/unit for solar thermal power fed to the electricity grid from a solar energy plant having a capacity of 1mw and above for 10 years. A number of large solar projects have been planned by the Government including some in the Thar desert, which has been demarked for solar projects sufficient to generate power up to 700-2,100gw.
Foreign interest
Many foreign companies are eyeing the huge untapped and lucrative share of the Indian solar market which is expected to grow to around INR 15,000cr by 2013. Foreign firms such as China’s Suntech, US based First Solar and Taiwan’s Motech Industries are already planning to foray into the Indian markets and compete with domestic players.
Solar Power – The future
I feel a new era in solar energy is surely round the corner. It has the potential of creating job opportunities at all levels, particularly in the rural areas. It is expected that by 2020, installed solar capacity in the world would be about 20 to 40 times its present level, but it will still amount to only about 3-6% of global power generation capacity. Nevertheless, I feel that the economics of solar energy are improving due to economies of scale, costs reductions and newer technologies. The Government is also dishing out an attractive picture of India’s massive potential in renewable energy with a side dish of incentives to attract more FDI in this sector. So I think the time is really ripe for foreign players to ride this opportunity and make it a win-win situation. India’s solar energy sector truly needs all hands on deck.