Vision 2020 Distributed Solar Power the Way Ahead

Date:   Tuesday , February 01, 2011

If India has to develop at the rate of above 8 percent in the years to come and achieve its mission of being a developed nation by 2020, the most crucial sector that we need to focus upon is Power. For a country that is being heralded as the new land of opportunities, the fact that forty five percent of its 1 billion people live in a state of electricity deprivation does not bode well. India has over 1,67,077 MW (as per the latest figures by the Ministry of Power) installed capacity of power generation and yet there is an energy shortage of 9.6 percent when it comes to peak power and peak power shortage of 12.61 percent. If something is not done to bridge this gap and new sources of power are not created, it has the potential to derail the entire Indian growth story.

Let us now look at the targets for power production for 2020. If the growth continues at similar levels, the power requirement for 2020 is expected to be around 400000 MW. It is obvious that this growing requirement cannot be met by conventional sources of energy. To achieve this target, renewable sources of energy have to play a role. Among various sources of renewable energy, Solar looks the most promising source. India, with about 300 clear sunny days in a year, is well endowed by nature to harness this clean source of energy. The technology involved, i.e. Solar Photovoltaic (SPV) is extremely flexible, reliable and moving rapidly towards grid parity. In fact, a solar photovoltaic (SPV) project can be created in any size and at almost any location in India. For instance a small 5KW home lighting system can manage energy requirements for a household, a 100KW system can run a small commercial center and a 1MW facility can produce enough power for 20 villages. The modular approach for solar power (PV) expansion is very attractive for the Indian market. The government, after carefully studying the escalating prices of non-renewable sources of energy like coal and the negative environmental impact that they cause has come up with The Jawaharlal Nehru National Solar Mission, an ambitious but achievable mission that plans to produce 20 GW of solar power by 2020.

When it comes to harnessing solar power, Solar Photovoltaic (SPV) is the world’s fastest growing energy technology and holds tremendous potential for India. Solar Photovoltaic Systems (SPV) are experiencing considerable decline in prices year after year due to intense research, commercialization of utility projects and increase in poly silicon production. Even though it is still expensive in contrast to conventional sources of power in tangible costs, there is a growing realization that this source is the most promising one when it comes to generating power without polluting the environment. Although the world over installed capacity of solar photovoltaic (SPV) power is approximately 8000MW, in India its installed capacity is just a meager 100 MW. An important reason for low capacity installation so far has been the absence of favorable feed-in tariff as incentive to entrepreneurs. However, this problem has since been addressed. The Central Electricity Regulatory Commission has declared an FIT for Rs 17.91/KWhr SPV power sale for a period of 25 years as compared to the earlier 50MW Generation-based Incentive scheme, where the maximum allowable tariff was Rs 15/KWhr for a period of 10 years. The National Solar Mission (NSM) promises rapid growth of utility scale SPV power projects in the country. The cost of solar power has shown significant reduction year over year and with increase in production, a downward trend continues. It is expected that solar power will become grid competitive in costs around the year 2017.
Azure Power operationalised India’s first private MW scale solar power plant on the Solar as a Service model – in Punjab, in December 2009. This is the first MW scale commercial sale of solar power to a State Utility (Punjab State Electricity Board) and a landmark deal in itself as it paved the way for future commercial Power Purchase Agreements for Solar Power in India. The Azure Power 2MW plant in Awan Village, Amritsar District has been built over 10 Acres of land and is a pioneer for MW scale generation of solar power in India in many ways. The Azure Power business model is one such example. We understand that the high cost of owning and operating a solar power generating system is one of the reason why solar power is less developed in India. Therefore, Azure Power developed the Solar as a Service business model where instead of selling to individual households; the company builds large scale solar power facilities to service demands of several households with a single facility. In fact, aggregating electricity demand in rural and semi-urban areas in India and improving the livelihood of households by offering energy security through large scale solar power generation facilities is one of the guiding principles of Azure Power. These facilities also help stabilize the grid at the tail end and minimize transmission losses which at present are as high as 23 percent in India. Solar Power and other distributed sources of energy can thus help in reducing the impact of grid losses.

The greatest scope for solar power generation today is in the distributed model i.e., in building a large number of small and medium scale projects, rather than a few large scale projects. The distributed model will mean small power plants that can cater to the needs of a collection of villages and ensure power generation at the point of consumption. There is a need for projects that directly benefit the consumers and it makes great sense for projects to be set up where grids do not exist.

There is also a lot to look for in terms of commercial projects as well, with large corporations showing interest in the sector; huge roof-top based projects being an obvious opportunity. The energy security (guaranteed availability of power) offered by Solar Power clearly attracts attention from the commercial sector. Also, the ‘high cost’ of solar power is also not a deterrent for the commercial sector, because the alternative in many cases is the high cost of power generated by diesel generator sets.

However, the future of Solar Power in India will not be easy. Although the government has promised support, several steps have to be taken to meet the aspirations of the NSM. First, NSM comes with an estimated $19 billion USD cost, and the government has committed to funding $900 million for the first phase. Subsequent phases will require additional funding commitments. Second, streamlined project allocation and development in line with the gestation period of such projects will be needed to encourage new age developers to enter the market for rapid capacity build up. The typical gestation period of conventional power plants could be somewhere between 5 to 6 years whereas that of a solar power plant is months. Prompt allocation, Power Purchase Agreements and swift permissions will help meet the NSM goals of 1300MW generation in it’s initial phase. Setting up decentralized solar power plants also prove beneficial to the environment and help solve environmental problems rapidly, since 1MW of solar power is equivalent to the removal of 1200 tonnes of carbon di oxide per year. This emission reduction is equivalent to 550,000 trees and removing 3,600 cars from roads. Finally, project allocation criteria needs to be succinct and should be flexible enough so as to allow foreign investments and project finance. To encourage new companies, criteria such as multi year operations and turnover in India should not be imposed.
In conclusion, for the NSM 2020 to succeed, policy makers will have to view solar power generation from a developmental perspective. Energy security and rural electrification will get a huge shot in the arm from solar power projects that can quickly come up across the country as part of the current policy drive. What is also required are efforts to promote community based awareness, especially in rural areas. My vision 2020 is an India that will not be held back because of shortages and that can give all its citizens higher quality of life in urban areas and better livelihood in rural areas.
Inderpreet Wadhwa,The author is Founder & CEO, Azure Power