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As grid parity nears, India prepares for a solar revolution

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The Indian government has set a new interim target for solar of 9GW of grid connected solar energy by 2017 – the year that the solar industry is tipping that utility-scale solar farms will reach parity with the cost of coal-fired generation.

The new target set by the Indian government this week will see a tender for 1.6GW of large-scale solar PV projects in the first half of 2013, with a further tender of 870MW of solar PV and 1,080MW of solar thermal projects that will be constructed in the following financial year.

The interim target has been set to help India along the path to its National Solar Mission target of 22GW of installed solar capacity by 2022. But most people think there will be little problem meeting that target, because by 2017, or even earlier, solar will match the cost of coal.

V Saibaba, the chairman of the Solar Energy Task Force at the Federation of Indian Chambers of Commerce and Industry, and chairman of local solar project developer and aspiring manufacturer Lanco, says the electricity industry in India faces a revolution in coming years as solar becomes cheaper to deploy than fossil fuels.

“Solar used to be very expensive but Germany took leadership and today it is close to grid parity,” Saibaba told a conference here in Doha this week. “This was unimaginable just six years back, but it is possible to deploy technologies and make them work.”

Saibaba told RenewEconomy in a later interview that coal is becoming increasingly problematic in India because much of the local reserves are locked away in forests, and the imported coal is crippling the country’s balance of payments. We pointed out some of the issues facing coal in this story a while back. Saibaba said solar, however, could offer solutions not just in large-scale deployment, but also in rural electrification, avoiding the need for expensive grids, and on rooftops.

Lanco Solar is one of the largest solar companies in India, currently building more than 350MW of solar farms – both PV and solar thermal, as well as a polysilicon, wafer and cell facility – the first integrated solar panel plant of its kind in India.

Lanco’s projects include a 100MW parabolic trough plant being built under the country’s ambitious National Solar Mission, which aims to construct 22GW of solar by 2022. However, the cost of solar power has come down so quickly that many private forecasts believe the actual deployment of solar could be three or four times that much in the next decade.

Here is an edited transcript of the interview:

RenewEconomy: India has a very ambitious solar strategy – 22GW by 2020, why is it doing that and what is the significance of that?

Saibaba: The fundamental thing for India is that it is growing at a very fast pace, and energy consumption is growing even faster – at 11-12 per cent. And the per capita consumption of India is one-third of the global average. In 1950, when India gained independence, it had about 3MW of power total installed. By 2000, it had about 100,000MW; and between 2000 and 2010 we added another 100,000MW. We added in 10 years what we did in 50, and now we need to do it again in five years to support the GDP growth. But look at what resources India has – it has only has coal, and most of it is in forest area, and if you want to mine it, it is very difficult. Thirty per cent of our imports are energy resources, so there is  huge foreign exchange shortfall. So energy security is a major issue for the country.

RE: So fossil fuels are not the answer to that, then.

Saibaba: Correct, and India is blessed with a huge amount of solar irradiation. And the grid network is not very strong, and the one energy solution that can meet the energy problems to a substantial extent is solar energy. You can deploy solar at a few kilowatts, and you can deploy it at a few hundred megawatts.

RE: But what about the costs, isn’t solar expensive?

Saibaba: Solar, per se, is definitely expensive as of today. But the solar irradiation is so excellent in India that a 1MW plant will produce 2.5 times more than a similar plant in Germany. But the capital cost of India and germany is about the same, maybe lower in India because of labour costs. But it is more expensive than in Germany because of the interest rates. In Germany they are paying 3 per cent, and in India we are paying 13 per cent, which makes it unviable.

RE: How do you address that?

Saibaba: The Indian government, the ADB and others are looking at instruments to address that.  If we can address this, then solar can be deployed at a very large level in this country. At the same time, the solar cost is coming down. It has come down globally thanks to technology improvements and the economies of scale. The cost used to br about 17 rupees, or 13c US, a kWh – but the average price is now 8.5 rupees, down one half in just 18 months for utility-scale PV.

RE: What has driven that?

Saibaba: The efficiency of solar cells used to be around 13 per cent, it’s now at 17-18 per cent and the manufacturing plants are taking greater scale, and the cost of solar power is showing amazing reductions. Cell efficiencies will grow to 22 per cent – and at this point in time the difference between grid costs and solar costs is something around 2 rupees per kWh. And the cost of fossil fuel power is increasing. We think that in a maximum of four to five years time, utility-scale solar will be at parity, even at the existing interest rates in india

RE: What will happen then?

Saibaba : I think you will find a huge amount of solar utilitisation across the country. Small rooftop installations, rural electrification where power is not available today, that will help solve that problem. It is kind of a revolution that we will see.

RE: You’re also in solar thermal, but that is more expensive.

Saibaba : Yes, if you go back three to four years, solar thermal was more cost efficient than solar PV. Now it is the other way round because solar PV is deployed in a large way in the world, and solar thermal is not deployed so much beyond Spain. But what we see is there is a huge opportunity in solar thermal, and that comes in dispatchibility; you can consistently supply power to the grid, and that has to be factored in when considering cost. In India there are huge stretches of land for this, in Rajasthan and Gujarat. But our analysis is that an area of just 17km by 17km, and filling it up with solar thermal and solar PV, can meet the entire 100,000MW, which is our five-year target. It is possible to do it.

RE: But if the costs are coming down, is that what the energy future of India will look like?

Saibaba: Yes, absolutely, absolutely.

RE: We see lots of Indian companies coming to Australia to dig up coal and take it back to India. Are they making the wrong decision?

Saibaba: (Big smile) I don’t think so. The way energy consumption is growing, we need all sorts of energy sources.

RE: The National Solar Mission aims for 22GW by 2020, but I think KPMG estimated that could be the annual installation rate by that time.

Saibaba: The number presented by KPMG is to have 60-70GW by that time. And I completely agree with them when they say, the moment that solar reaches grid parity, it is going to penetrate in a very, very large way. It is going to be a sustainable source of energy, and we are blessed with so much solar irradiation.

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  • Tirthankar Banerjee

    India’s another major problem is distribution. Large solar farms are not going to address this. A more suitable solution would be distributed generation, especially, covering the rural areas which are not currently connected to the grid or where the network is week. Smart-grid, suitably adapted to local requirements, will be the solution for high penetration of solar.