India - A Renewed and Resurgent National Solar Mission

I want to kill 10 birds with one stone!

‘I want to kill 10 birds with one stone!’ aptly describes the aspirations, targets and determination of Hon’ble Minister for Power, Coal and Renewable Energy, Shri Piyush Goyal when it comes to resolving India’s power sector problems. This statement is turning out to be prophetic – at least as far as solar is concerned. 

In 2009, on the eve of the Copenhagen Summit of UNFCCC, when the then Prime Minister Manmohan Singh launched the National Solar Mission, with a target of 20,000 MW by 2022, solar industry veterans in India couldn’t believe that change could be ushered so fast. This groundbreaking move aligned an almost three-decade-old Ministry for New and Renewable Energy (perhaps the first independent ministry of its kind anywhere in the world) with the much bigger Power Ministry by setting RPOs (renewable purchase obligations) and signing of long-term PPAs (power purchase agreements) for export of solar power into the grid. 

The Master Stroke – Power, Coal and Renewable Energy under one Minister

Almost 5 years later, in 2014, the new government led by Prime Minister Modi took over. Modi was a known champion of solar, with almost 1000 MW of solar installed in Gujarat between 2010-11 when he was the chief minister – more than in the rest of the entire country. While the credit for aligning solar with the power sector goes to Mr Manmohan Singh, the master stroke, played by Mr Narendra Modi, was to place all of the portfolios for coal and renewable energy and power under a young and energetic minister. Prime Minister Modi and his dynamic Power Minister Mr Piyush Goyal took time to consult the bureaucrats and industry stakeholders before setting the new target of 100,000 MW by 2022 – a fivefold increase which left the bureaucrats groaning and even the die-hard solar veterans gasping in disbelief. This is what is known as the ‘Big Hairy Audacious Goal’ – BHAG – a goal with a serious wow factor that stretches people to imagine and strive hard. 

Industry analysts and consultants, however, came forth with various comments, analyses and charts showing why and how 100,000 MW would not be possible. Even as late as June 2015, Bridge to India released the India Solar Handbook wherein they estimated that India may achieve about 35 or 38 GW only. But a BHAG is just that: a rallying cry intended to inspire and bring about collective action to achieve the goal by gathering momentum. 

The term BHAG was coined by James Collins and Jerry Porras in their classic management book Built to Last – Successful Habits of Visionary Companies which gave examples of companies such as HP and Sony that had articulated their Vision and Mission and set BHAGs that energised the whole organisation to strive for and ultimately achieve BHAGs. The goal set by President Kennedy for NASA to put a man on the moon was a BHAG – which typically take several years to achieve. 

100,000 MW by 2022 is a BHAG that has stirred the whole Indian industry as well as investors from all over the world, spurring them all into action. In the last ten months or so, after the announcement of the 100,000 MW target, the pipeline of solar projects in India (PPAs signed or RFS issued) has crossed 10,000 MW and is likely to exceed 15,000 MW by end of 2015. 

The NTPC has set a target of developing 10,000 MW and purchasing a further 15,000 MW from other developers. It is heartening that SECI has been mandated to develop 20,000 MW of solar park capacity in various states. The Softbank, Bharti and Foxconn joint venture SBG Cleantech plans to develop 20 GW.  Sunedison’s target of 15 GW and Rosneft’s plan for 10 GW are all encouraging signs and that Hon’ble Minister for Power, Coal and RE, Shri Piyush Goyal’s statement, ‘I want to kill 10 birds with one stone!’ is indeed turning out to be prophetic. 

And that’s not all. There is ‘Make in India’ under which there is strong interest from Indian and foreign manufacturers alike to set up solar-cell manufacturing units. Trina Solar, Sun Edison with Adani, JA Solar, Vikram Solar, Welspun, etc., are some of the manufacturers who are moving their manufacturing plans into top gear. 

It is encouraging also to see that the tariffs for solar power, through long-term PPAs of 25 years, are now well under Rs 6.50 per unit and have almost breached the Rs 5 per unit level in the recent tenders in the states of Madhya Pradesh and Telangana. In the tenders in Andhra Pradesh and Rajasthan that are due in the next few weeks, the expected tariffs are in the range of Rs 5 to 5.50 per unit. In a market where the prices of solar cells continue to decline, it is only a matter of time before solar reaches grid parity at Rs 4.50 per unit – especially considering that the interest costs in India at around 12% p.a mean that nearly 60% of the cost of the tariff goes towards servicing the interest on the loan (Share of Cost of Capital in LCOE from IEA’s Solar PV Roadmap 2014). If the interest rates reach single digits, solar will definitely sell for under Rs 5 per unit for 25 years.

Given this tumultuous period for solar, which is both exhilarating and invigorating, I would like to share my views on various policy and regulatory issues, with a view to enabling a renewed and resurgent National Solar Mission to gather steam and reassure and attract investors. My suggestions on the following key areas are given in the table in Annex I. 

•    Smaller solar parks of 100 to 300 MW 
•    Completely removing subsidies for grid-connected solar 
•    Competitive bidding is not a panacea at least for CSP
•    Revival of the REC market, India’s alternative to CDM and carbon markets
•    Setting of the vision and agenda for R&D in Solar for India to attain a global leadership position 
•    Distributed generation and solarising the agricultural feeders and 
•    Solar charging stations for electric vehicles 

My vision for solar is not just grid parity but something that can resolve the problems of the power sector. The distributed nature of solar can take generation to the load centres and reduce the T&D losses – the bane of the Indian power sector. This can be the best solution for agricultural pumping in India which consumes over 32% of the total electricity consumption and is mainly responsible for the heavy losses suffered by the distribution companies whose cost to service the farmers is Rs 7 per kWh in many states. 

For example, in Rajasthan the connected load of agricultural pumpsets is 9043 MW (about 68% of the total generation capacity is around 15,200 MW) and the agricultural consumption is 15,993 MU, which is 38% of the total energy sales of 42,318 MU. T&D losses are nearly 20%. Solarising the separated agricultural feeders with 1 MW to 3 MW solar plants or going for decentralised off-grid solar pumps with a one-time investment can result in recurring savings of Rs 3780 crores per annum if the T&D losses can be reduced by half to 10%. The total connected load of agricultural pumpsets across the country would be easily over 100,000 MW. 

Another emerging opportunity for harnessing solar is for mobility purposes: cars, scooters and bicycles. India imports 80% of its oil and uses over 50% of its foreign exchange for oil imports. The future of mobility is electric vehicles and if EVs were to use solar, this would result in direct savings in terms of oil imports and forex outflow. 

A study I carried out in Rajasthan concluded that to displace 5% of the petrol consumed by cars and two-wheelers in Rajasthan would require 21,051 MW of solar power, assuming that only 50% of the charging of the EVs is done through solar and 50% through conventional grid power. Therefore much more than several 100,000 MWs of solar electricity would be required for EVs in future. 

Suggestions on Policy and Regulatory Issues - National Solar Mission