NEW DELHI: Extending an helping hand to power-starved Bihar, the Centre has agreed to allocate 50% of electricity from upcoming 1,320 MW NTPC’s Barh unit inPatnadistrict.
It has also agreed to expeditiously take up the fuel linkage issue related to Barauni expansion with the Coal Ministry.
The assurance was given by Union Power Minister Sushil Kumar Shinde in a recent letter written to Bihar Chief Minister Nitish Kumar who had last month led an an all-party delegation to meet Prime Minister Manmohan Singh on the power situation in the state.
The delegation had sought 50% of power generated at NTPC’s two upcoming plants in the state, including the stage II of Barh unit and Kahalgaon as is being done in the case of 14 NTPC units coming up in different states.
They had also sought coal linkages to expansion plans of 500 MW Barauni thermal power unit in the state.
“Ministry of Power agrees to allocate 50% of power from Barh STPS stage-II (1,320 MW) toBihar,”Shinde said.
In his letter, he said as immediate help DVC (Damodar Valley Corporation) will supply 100 MW of power toBihar.
“Bihar State Electricity Board (BSEB) may ensure payment security and sign suitable agreement with DVC at the earliest to get power supply started,” he told Kumar.
Further, NTPC’s Nabinagar stage-II will be expanded to 3×660 MW instead of 2×660 MW, he said adding NTPC has been advised to tie-up the requisite inputs urgently in consultation withBihargovernment.
On coal linkage for two upcoming units of 250 MW each at Barauni, Shinde said: “Biharmay apply for coal block allocation for case-II projects at Lakhisarai, Pirpainti and Buxar etc. Ministry of Power will recommend for allocation of coal blocks to Ministry of Coal,” Shinde said.
In fact, per capita electricity consumption of Gurgaon is much more thanBiharat 1,265 KwH.
Chairman of the Aditya Birla Group Kumar Mangalam Birla had said during the global summit on Bihar, held inPatnain February this year, that heavy industry captains are hesitant in investing in the state without proper electricity supply.
DISCOMS’ LOSSES MAY RISE TO 1.2% OF NATIONAL GDP: REPORT
NEW DELHI: Unless reforms happen, the overall losses of power distribution companies will account for up to 1.2 per cent of the country’s nominal GDP by March, 2014, says a research report.
The financial health of power distribution companies (discoms) is a major concern. Many states in recent times have moved towards hiking the electricity tariffs to improve their financial position.
“Crisis in the power sector is reaching a tipping point with distribution companies’ losses, as a per centage of the nominal GDP, likely to reach 1.2 per cent by March 2014, if reforms are not implemented,” Avendus Securities said in a recent report.
The losses of discoms as a per centage of the nominal GDP rose to 0.9 per cent in FY 2010 from just 0.6 per cent in FY 2006.
The report noted that these losses are likely to have climbed up to 1 per cent of the nominal GDP last fiscal.
“Between FY 1999 and FY 2002, SEB losses, as a per centage of the nominal GDP surged high to 1.2-1.5 per cent,” it added.
The net loss of 15 discoms – which account for over 90 per cent of country’s power consumption – after subsidies was Rs 27,000 crore for the year ended March 31, 2010, according to the Shunglu panel report released late last year.
The committee on financial position of distribution utilities had come up with various suggestions such as setting up of a special purpose vehicle to absorb the losses of discoms.
One of the major causes for the ill-health of discoms is the mismatch between tariff and cost of generating power.
As per Avendus report, discoms of key states need to hike power tariffs at a CAGR (Compound Annual Growth Rate) of 13 to 58 per cent in FY 2013-FY 2014.
In March, rating agency ICRA had projected the losses for discoms – before accounting for government subsidy – in the country at Rs 80,000 crore in FY 2012, much higher than Rs 63,500 crore seen in FY 2010.
The estimates were based on a study of power distribution companies (discoms) functioning in 11 states.
MINISTRIES FOR FREEZING COAL INDIA COMMITMENTS TO POWER PROJECTS
MUMBAI: Amid the growing restriction over the availability of coal in the country, the ministries of coal and power have arrived at a consensus to freeze the capacity and list of power projects linked to Coal India Ltd (CIL) companies.
The power ministry has identified projects of 127,448 Mw capacity that would need 557 million tonnes of coal for the signing of fuel supply agreements (FSA) with CIL and its subsidiaries.
Another 18,271 Mw, needing 122 mt of coal was commissioned between then and March 2012. The rest would be commissioned by 2014-15. The ministry has prepared a list of these projects, based on their preparedness, including placement of orders for machinery and equipment and start of construction.
A power ministry official, who did not want to be identified, said: “The Standing Linkage Committee (Long Term) for power, at its meeting held in February, discussed the issue of freezing capacity of power projects to be supplied by CIL during the 12th Plan. The committee was informed that the subsidiary companies of CIL had issued 172 letters of assurance (LoAs) for power projects, which excludes projects commissioned till March 31, 2009 and drawing coal from CIL and Singareni Collieries Company Ltd.
CIL indicated that coal companies will be able to supply 50 per cent of the normative requirement through indigenous sources and the balance through imports, if feasible.”
He added CIL had pointed out that its efforts to import coal to meet part of the requirement of power utilities had not met with the needed success due to non-availability of a firm commitment from power utilities to accept imported coal and unwillingness on the part of exporters of coal to offer long-term contracts.
“Therefore, the committee emphasised the need for freezing the capacity and list of power projects linked to CIL companies to plan the strategy for meeting coal requirement. This was necessitated in view of it being legally binding on the coal companies once FSAs are in place,” the official noted.
Further, the committee said it would not be possible for coal companies to plan additional commitment to the existing LoA holders who are not included in the list of 12th Plan projects agreed to be frozen by the power ministry and the Central Electricity Authority.
BHEL – R&D IN SHARP FOCUS
Five-year strategic plan envisions higher spend, new focus areas
Bhel Corporate (R&D),Hyderabad, which drives the entire research activity of the public sector company, has drawn up a strategic plan for the next five years. The spend on R&D and engineering is expected to go up to 2.5%, or more than R2,000 crore, of turnover, in tune with the overall turnover target of R1,01,600 crore set for 2017. The Corporate R&D is now looking at a technology shift from conventional research to market-oriented research for ensuring sustainable growth during 2012-17.
Bhel spent R1,162 crore on research and development during 2011-12, which was 18% more than the previous year, and translated to 2.3% of the company’s turnover of R49,301 crore. The share of in-house R&D inputs in last year’s turnover was pegged at R9,512 crore.
According toS Sekar, general manager, R&D, the focus will be intensified on areas in which the company has expertise like transportation technology, transmission & distribution, renewable energy, advanced materials development, indigenisation and futuristic technology areas.
The group has set up eight centres of excellence (CoEs) to consolidate in high technology areas. “We are bringing in a technology shift in key business areas like advanced/ultra super-critical power technology, integrated gassification combined cycle technology, carbon capture initiatives, solar and wind energy, higher rating transmission systems and advanced systems for traction applications,” Sekar said. In the process of strengthening product development and engineering, the company will be focusing more on developing partnerships and alliances for transforming R&D activities.
Bhel has set up a centre for nanotechnology to use nanotechnology applications in developing materials that go into core components. “The centre is working towards material development for power plant components, nano-structured coating for wear and other applications, electrical insulating materials, solar cells, carbon nano-tube applications, fuel cells, nano-material synthesis and nano- sensors,” he elaborated.
A significant development at the R&D centre is the improvement of power availability through the IEC 61850-compliant substation automation system (SAS). The SAS is capable of executing substation control commands and monitoring substation from remote locale, thus, enabling better control and monitoring.
Another focus area of Bhel research is solar power technology. The centre of nano technology has taken up a project to provide uninterrupted lighting system with solar energy using LED, or light emitting diode. Bhel has signed an MoU with Indian Oil Corporation and IIT Rajasthan, for joint development work in concentrated solar area. The products and systems developed through this arrangement are expected to be tested and demonstrated at the solar field being created at IIT-Rajasthan’s upcoming campus inJodhpur.
TheHyderabadcentre has filed 351 claims for intellectual property rights. These include 143 patent applications, 206 for copyright and two for design and about 297 patents granted.
RELIANCE POWER’S KRISHNAPATNAM UMPP MAY NOT BE FIGURE IN 12TH PLAN PROJECTS
NEW DELHI: The government may not include Reliance Power’s 4,000 MW ultra mega power project, at Krishnapatnam in Andhra Pradesh, in its proposal for additional 1 lakh MW power generation in the next five years.
“It is unlikely that the project can be included in the current 12th plan period (2012-17) projects. The company has said that the project is not feasible. The matter is in the court and even if it is resolved, it may not be able to come up by 2017. The work has been stalled,” a Central Electricity Authority (CEA) official said.
The firm, which is setting up the project, has filed a petition in the Delhi High Court after its principal coal supplier,Indonesia, more than doubled the fuel price to $60 per tonne.
Coastal Andhra Power Ltd, a special purpose vehicle (SPV) set up for implementing this UMPP, signed the power purchase agreements (PPAs) with the beneficiary states – Andhra Pradesh, Karnataka, Tamil Nadu andMaharashtra.
In a petition filed in Delhi High Court, the company said, “At the time of entering into the agreement it was understood that the imported coal would be sourced fromIndonesiaat $24 per tonne, which subsequently shot up to $60 per tonne.”
Indonesian government had introduced a new legislation on September 23, 2011 prescribing that sale of coal fromIndonesiawould be made at a benchmark price based on the prevalent international market price of coal.
The company, in its petition, said that securing coal based on fixed price and fixed escalation was no longer possible and the very project was rendered unviable.
However, the matter was discussed in various meetings between June and November 2011, but ‘no solution as such could be arrived at’, the company said in the petition.
The power ministry has envisaged setting up 16 such UMPPs in the future to meet the proposed target of adding 1,00,000 MW in the current plan period (2012-17).
Reliance Power bagged the Krishnapatnam UMPP in 2007 through international competitive bidding. This project is one of the three UMPPs being developed by the company. The other two are – Sasan (Madhya Pradesh) and Tilaiya (Jharkhand). These two plants are domestic coal-based projects.
ADANI GROUP TO SOON DECIDE ON CONSULTANTS FOR RESTRUCTURING
MUMBAI: The over Rs 32,000-crore Adani Group will soon pick consultants for streamlining businesses to help it turn into a “global integrated company”.
Consultants KPMG, McKinsey & Co, Booz and Co, Accenture and PricewaterhouseCoopers have started exploratory analysis of the group’s businesses and practices to suggest ways to optimise performance. Sources close to the development said Adani is likely to finalise consultants and give mandates for different business verticals and operations over the next one month.
“We want to become a global company. For that we must make sure that our processes are flexible, intelligent, efficient and scalable,” said Ravi Sharma, Adani Power’s CEO who is spearheading the restructuring. Sharma said, “We have started an exercise at the group level for business process transformation with the aim to build world-class processes.”
The Gujarat-based group, which started as a salt supplier to American commodity giant Cargill in the 1980s, has interests in power, ports and energy. Its head had earlier told ET that the group planned to invest over Rs 80,000 crore over the next seven years for expansion.
Earlier this year, the group launched a new corporate brand identity in consultation with Wolff Olins. Experts say the re-branding exercise and the business restructuring may be aimed at unlocking shareholder value, help in fund raising and gearing up the management as the company embarks on its expansion plan.
Experts said the restructuring could include an overhaul of the company’s practices and bring about more transparency.
JSPL APPROACHES FOR REVISION ITS STEEL PRODUCTION TARGET
KOLKATA/RANCHI: Jindal Steel & Power Limited’s (JSPL) projected two steel plants will be “bigger” than other private sector steel players in Jharkhand.
Disclosing this the secretary to the department of industries, A P Singh told Business Standard that the management of JSPL had recently approached the state government for allowing them for enhancing the capacity of its proposed steel project in Asanboni, near Jamshedpur from 5 MTPA to 6 MTPA to produce steel through blast furnace in lieu of direct reduction of iron technology (DRI).
The secretary said that the department if industries had advised JSPL to submit their revised proposal and detailed project report (DPR) as the company desired deviation from their earlier MoUs signed in 2005 and 2007.
Singh said till date JSPL projected two steel plants in Jharkhand would be “bigger” than the other steel plants for which MoUs.had been signed.
He said coal blocks had been allotted to JSPL in Godda and Dumka districts, the environmental clearance of which was yet to be cleared by the ministry.
It may be mentioned that in a written reply in the Rajya Sabha on November 15, 2010, the minister of state in the ministry of steel had said that JSPL Patratu project capacity would be 6 MTPA with proposed nvestment of Rs 22,000 crore.
The minister had also said that the total land requirement of JSPL in Patratu was 3114 acres and the 3 MTPA capacity was likely to be commissioned by March, 2012.
JSPL had acquired the erstwhile Bihar Alloy & Steel company at Patrau owned by Usha Martin Group through Debt Recovery Tribunal Auction in 2007.
The closed Bihar Alloy & Steel had 600 acres of land.and JSPL further acquired 964 acres. .
KERALA SEEKS 500 MW POWER FROM KUDANKULAM PROJECT
THIRUVANANTHAPURAM: In the midst of Tamil Nadu demanding that the Centre allocate the entire power to be generated by the Kudankulam nuclear plant to it, Kerala has staked claim for 500 MW from the project.
In a letter to Prime Minister Manmohan Singh, Chief Minister Oommen Chandy has asked the Centre to provide 500 MW from the KNPP located in Tamil Nadu’s Tirunelveli district in view of acute power crisis faced by the state, official sources said today.
With the Kudankulam Nuclear Plant’s first unit of 1,000 MW capacity all set to commence generation, Tamil Nadu Chief Minister Jayalalithaa had written to Singh on April 25 demanding that the entire power produced be given to it.
Refuting reports that Kerala did not want power from Kudankulam, Chandy said a special package has been drawn up to take over land to construct a power transmission line from Kudankulam.
Chandy further said the state was not in a position to draw more power from NTPC’s power plant at Kayamkulam as it was costly. In such a condition, due to acute power crisis, Kerala has asked Centre to provide 500 MW from KNPP, sources, quoting the letter, said.
Chandy wanted the Centre to allocate power from KNPP under ‘unallocated’ option, earmarked for states facing power crisis, the sources said.
To overcome power shortage, the state had recently imposed a 30 minute power cut on various categories of consumers.
Kerala and Tamil Nadu are already locked in dispute over the Mullaperiyar dam issue. While Tamil Nadu has been maintaining that the 119-year old dam was “absolutely safe” and the water level can be raised to 142 ft, Kerala has been insisting that a new dam be built near the existing structure.
NUCLEAR-FREE JAPAN BRACES FOR SEVERE POWER SHORTAGES
TOKYO: The shutdown ofJapan’s last working nuclear power plant and the government’s failure to convince a wary public about restoring production at dozens of reactors leaves the world’s third-largest economy facing another summer of severe power shortages.
Hokkaido Electric Power Co. Inc. shut its nuclear plant late on Saturday—the last of Japan’s 50 reactors to go offline—marking the first time since 1970 Japan has been nuclear power-free.
Japan’s $5 trillion economy has relied heavily on nuclear power for decades, with its reactors providing almost 30% of electricity needs, but last year’s massive earthquake and subsequent nuclear crisis spurred a public backlash against atomic energy.
Cabinet ministers have largely failed to win over the public to allow the restart of the country’s plants—shut one by one for scheduled maintenance and unable to resume operations because of concerns about safety.
Japan’s Asahi newspaper said public sentiment was “wavering between two sources of anxiety”—fear over the safety of nuclear power and doubts on whetherJapancan live without it.
“The public shouldn’t just criticize (the government) but make its own decision on energy policy that involves burden and responsibility, such as through cooperating in power saving,” the paper said in an editorial on Sunday.
The government hopes to come up with an estimate by mid-May of expected shortages this summer, and will then produce a plan to conserve energy that could include compulsory curbs on use of power, Japanese media say.
But setting a long-term energy policy or a clear timeframe for restarting the plants will take time given strong public opposition and a divided parliament that has paralysed policy-making, analysts say.
Policymakers are worried about the damage to the budding economic recovery as the power shortages are expected to be more severe and widespread than last summer, when many areas inJapanwere still running nuclear reactors.
Some also warn of the long-term fallout as the rising cost of electricity, coupled with a strong yen, hits production and could prompt companies to shift operations overseas.
“Depending on the weather, power supply could constrain output during the summer,” the Bank of Japan said.
“But we must be mindful not just of such short-term effects but the chance (the power shortages) could hurtJapan’s medium- and long-term growth expectations,” the central bank said in a twice-yearly report on the economy issued on 27 April.Japanmanaged to get through the summer last year without any blackouts by imposing voluntary curbs on the use of power in the aftermath of the earthquake and tsunami that left thousands dead. Factories operated at night and during weekends to avoid putting too much stress on the country’s power grids. Many big firms are already preparing to take similar steps this summer, but some also plan to generate power themselves to cut costs.
The last timeJapanwent without nuclear power was in May 1970, when the country’s only two reactors operating at that time were shut for maintenance, the Federation of Electric Power Companies ofJapansaid.
FOCUS SHOULD BE ON RENEWABLE ENERGY, SAYS APJ ABDUL KALAM
KARAIKUDI (TN): Advocating the need for energy security, former president APJ Abdul Kalam saidIndia’s power requirement would increase to four lakh MW by 2030 and focus should be on renewable energy generation to meet the situation.
With the growing population, by 2030 the country would have a population of 1.4 billion and the energy requirement would increase from 1,99,000 MW to 4,00,000 MW, he said inaugurating the Centre for Innovation in Energy Research at the Central Electro Chemical Research Institute (CECRI).
In order to meet the same, one should look into possibility of energy security by minimizing energy utility and wastage, he said.
Focus should be on the production of renewable energy in the form of wind, bio-fuel and solar energy, he said, adding that hydro drive model may be considered seriously by Indian scientists.
Talking about Energy Mission 2030, he said affordability, minimisation of dependence on fossil fuel and energy Vs environment were to be considered seriously. Solar energy should be used for agricultural purpose.
Desalination of sea water need to be thought of to meet the shortage of drinking and irrigation water.
CECRI Director Vijayamohanan K Pillai said in the last two decades, CECRI had significantly contributed to basic and fundamental aspects of Electrochemical Science and Technology, notably in areas of energy generation (batteries and fuel cells and ultra capacitors) and storage, corrosion and its mitigation, nano materials and bio-sensors.
“We have a CSIR 800 programme primarily for the benefit of rural communities with respect to affordable health, clean water and environment,” he said.
BETA WIND FARM TO INVEST RS 1,857 CRORE IN TAMIL NADU, GUJARAT, ANDHRA
CHENNAI: Beta Wind Farm Pvt Ltd is planning to invest Rs 1,857 crore to set up a wind energy farm each in Tamil Nadu, Andhra Pradesh andGujarat, according to the subsidiary of Orient Green Power Company Ltd, owned by the Shriram Group.
Beta was earlier planning to set up the proposed farms with the same total capital in Tirunelveli, Tuticorin and Theni , but it later decided to split the 300-megawatt endeavour and go for two more states, stating certain bottlenecks in Tamil Nadu.
Orient Green Power, in a communication to the shareholders, said “evacuation and infrastructure issues” in Tamil Nadu had prompted Beta to revisit the plan. It has now “decided to set up wind farms with a generation capacity of 156 Mw in Tamil Nadu and 144 Mw in the states ofGujaratand Andhra Pradesh, where also the returns are expected to be equally attractive in terms of power generation”.
A consortium of 10 banks, led by Axis Bank, has sanctioned Rs 1,236 crore as a rupee term loan to Beta, which is engaged in generation, accumulation, transmission, distribution and supply of electricity, besides setting up of and/or maintenance of wind energy farms. The others banks include Canara Bank, Dena Bank, Karnataka Bank, Tamilnad Mercantile Bank, Vijaya Bank and Indian Overseas Bank.
For the loan, Orient Green Power had issued a corporate guarantee for the project to Axis Bank, on behalf of Beta. Besides, Gamma Green Power Pvt Ltd, another Orient Green Power subsidiary engaged in the business of setting up of wind mills and wind farms, is planning to purchase two WEGs atGujarat, aggregating 4-MW assets. Towards refinance for assets of 3.98 Mw, it has a raised term loan from Bajaj Finance Ltd and Orient Green Power issued a corporate guarantee for Rs 23 crore in favour of Bajaj Finance.
With this acquisition, total capacity of Gamma would increase to 62.02 Mw.
Orient Green Power Company Ltd is promoted by Shriram EPC, a Shriram Group company, with investments from Bessemer Venture Partners of US and Olympus Capital Holdings,Singapore, for the creation and ownership of renewable energy assets. The company is one of the largest independent operators and developers; its portfolio includes biomass, biogas, wind energy and small hydroelectric projects at various stages of development.
As of September 2011, the company had 300 Mw of aggregate installed capacity. This comprised 250 Mw of wind energy projects and 50 Mw of biomass projects. The company has set a target to become the country’s largest renewable energy producer and other attractive markets, reaching 1,000 Mw by 2013.
FUEL FROM THE SKY
Indrapur is a remote, nondescript island village in Sunderbans,West Bengal, accessible only by a ninety-minute ferry ride. With grid power being practically impossible, it turned to a bright new phase by switching to solar power. The standalone 110 kWp solar power plant has had a great impact on the local community in terms of more efficient illumination when compared to kerosene lanterns, increased employment, better trading opportunities and exposure to the outside world. The solar power generated, is utilised to provide power to every household for basic lighting, commercial utilisation and for water pumping system against a small monthly payment. Close to 10,000 people now have access to electricity and clean water.
The littlevillageofAwan, 40 km fromAmritsar, inPunjab, finds pride of place in the Indian solar map too. Earlier, it used to face severe shortage of electricity and peak gaps at 11% hampered industrial growth and competitiveness. In July 2009, a 2 MW grid-connected solar power plant became operational, supplying power to 20,000 people in 32 villages, thereby generating income and more reliable power for the local community without increasing carbon footprint. “ThePunjabplant has been helpful in eliminating carbon dioxide emissions equivalent to 5,50,000 trees or removing 3,600 cars from Indian roads,” says Inderpreet Wadhwa, founder & CEO, Azure Power, an independent power producer. The company has builtIndia’s first privately owned utility-scale solar power plant in Awan.
Down south, the magnificent Vidhana Soudha inBangaloreis not just the seat of power in Karnataka, but is also a landmark close to the heart of every Bangalorean. The newly constructed South Block—Vikasa Soudha, a replica of the Vidhana Soudha has a 100 kWp solar power plant on its rooftop. It provides power to satisfy the energy requirements of the building and housing facilities of the government offices.
Clearly, the sun is a massive reservoir of clean energy and seeds have been sown for a large solar energy sector in the country.
Solar power remains the brightly promising spot in the field of renewable energy, and its prospects seem to be improving by the day. For the industry, solar presents significant investment opportunity. Investment opportunities across the value chain from manufacturing to engineering, procurement and construction (EPC) to project development exist with an estimated total project investment of $110 billion over the next decade.
There are 1,25,000 villages inIndiathat are deprived of electricity. And because some are remote, in hilly terrain, and have low populations, they cannot be served by conventional grid-based power. Solar solutions are very effective for decentralised electrification and with government incentives this sector is likely to grow in many folds, says K Subramanya, former CEO, Tata BP Solar. “Solar water pumping for irrigation can be a boon and trend-setter with supportive policy framework. A lot of street lighting can migrate to solar and relieve the grid of peaking problems,” he adds.
As one looks to the future,Indiafaces significant challenges of energy security, responding to the call for action against climate change and importantly addressing the issue of inclusive growth within the country. Our coal import requirement is expected to exceed 30% of our coal demand by 2017;Indiawill need to show some action towards its voluntary target of 20-25% reduction in carbon emission intensity of GDP by 2020; and look at ways to electrify over 40% of rural households with reliable electricity.
According to a KPMG report, solar power has the potential to meet almost 7% of our power needs by 2022, mitigate 2.6% of our carbon emissions in that year and save over 71 MTPA of imported coal in that year (equal to $5.5 billion of imports). In this backdrop, the thrust on renewable sources of energy is a step in the right direction. The Prime Minister’s National Action Plan on Climate Change (NAPCC) envisages meeting 15% of our power requirements from renewable energy sources by 2020. One of the eight missions under the NAPCC is the Jawaharlal Nehru National Solar Mission (JNNSM) which was launched in late 2009. The mission targets 22,000 MW of solar power by 2022.
In addition, 21 states are pursuing their own programmes, notablyGujaratand Rajasthan which have undertaken concrete steps to support the programme at the State level and have attracted the largest inflows of investment.
However, the future of solar power inIndiawill not be easy. Although the government has promised support, several steps have to be taken to meet the aspirations of the National Solar Mission. First, JNNSM comes with an estimated $19 billion 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.
For the JNNSM 2020 to succeed, policy makers will have to view solar power generation from a developmental perspective, reckons Wadhwa of Azure Power. A consistent, predictable and long term regulatory environment is the key for development of the solar power generation inIndia. “We must have clear and long term visibility on solar feed in tariff inIndia,” he stresses.
There’s no denying it, more needs to be done and at a faster clip.
SOLAR POWER CAN TRANSFORM OUR ENERGY LANDSCAPE
If we consider a middle class household, with a house on a plot of land 40X50 feet and assume that 20% of the plot area is covered by solar panels on rooftop or on ground, then using today’s technology, we can generate almost 300 units of electricity per month which is more than its average monthly consumption! Yes, if this gets adopted on a wider scale, solar power can truly transform our energy landscape.
Until recently, the cost of installing solar panels was very high putting it beyond the reach of most middle class and even the upper income class households. However, in the past three years prices have fallen substantially from over $3/W to less than $1/W. For an average upper income household consuming say 300 units of power every month, an installation of 3kW costing between R4 lakh to R5 lakh today (without battery storage) would be able to meet their average power needs. That might still sound expensive but if this is accompanied by innovative consumer financing, the costs can be spread out over much longer periods. For example, an EMI of R10,000 per month for 5 years would be adequate to cover this installation cost.
As the supply chain develops, costs of making panels and installing them will get cheaper thereby bringing them more and more within reach of a middle class household. Further, conventional power prices are on their way up. In recent months, many state electricity utilities have raised tariffs by 15-20%. Upper income residential consumers pay in excess of R7/unit in many states and commercial consumers pay in excess of R10/kwh. If one takes the impact of future tariff increases into account then the average lifetime cost, called the levelised cost, of grid power will be in the range of R10-13/kWh for these consumers. That is exactly where solar power cost lies today (and even lower!). So, we have reached parity in many ways. To spread the use of solar power at a consumer level, we need to do the following:
* Develop innovative consumer financing models that spread the one-time cost of solar installations over a longer period.
* There may be a “viability gap” when viewed with current costs of grid power as opposed to lifetime costs. The government should give appropriate incentives to bridge this gap. This can be in the form of renewable energy certificates which can be monetised through trading or through other forms of direct subsidies such as generation linked incentives. The idea is that such incentives for a limited period of time will give industry the push that it needs to develop the eco-system and bring down the costs.
To put the potential in perspective,Germanywhich is a temperate zone country with much lower sunshine than inIndia, has solar installations in excess of 25,000 MW in a grid where peak demand levels reach about 60,000 MW. While it is true that each MW of solar power generates fewer units of electricity than conventional power (a factor of one-fourth) on an annual basis, this statistic illustrates that large scale deployment is possible. InIndia, solar panels can generate 50% more electricity for the same installation as compared toGermanydue to higher sunshine levels.
Indialaunched its solar programme called the National Solar Mission (NSM) in 2009. Besides,Gujaratlaunched its own programme at the state level. About 140 MW of capacity have come up under the NSM and 600 MW under theGujaratsolar programme. Under the NSM, price of solar power was determined through an auctioning process. As against the regulator determined benchmark of R15.39/kWh, the discovered prices were in the range of R7.49/kWh to R9.44/kWh with an average price of R8.79/kWh. This downward trend in prices has emerged due to various factors but most notably due toChinaemerging as a major low cost manufacturing centre for panels, driven by large manufacturing scale, government incentives and integrated manufacturing.
While the solar power generation space is looking very interesting and holds promise for the future, the solar manufacturing sector is undergoing significant pains today. Facing the onslaught of global competition and resultant price crashes, the Indian manufacturing sector is losing money. Many of the companies may not be able to sustain; those that do will have to reinvent their business models to relook at their cost structures, market segments and delivery strategies.
The solar sector holds great promise forIndia. Given that our power needs will more than double in the next decade and we are facing struggles as a nation in producing fossil fuels, the timing is right to give a strong focus to this sector.
Solar technology could do to the energy sector what cellular technology did to the telecom sector. A piece of square land in Rajasthan with each side of 55 km length can generate enough solar power to equalIndia’s entire annual power generation! We need to think differently and make this potential happen!
The writer is partner, management consulting, KPMG inIndia
POLICIES ARE NOT IN FAVOUR OF MANUFACTURING
K Subramanya has the distinction of being the first employee of Tata BP Solar in 1985 and leading the company from scratch to its global reputation and scale today. Last week, he resigned as the CEO of the joint venture between Tata Power and BP Solar. He has been particularly active in terms of awareness creation and development of the nascent solar market in the country. In a recent interview with Sudhir Chowdhary, before his resignation, he discussed the importance of solar power and measures needed to accelerate its market development. Excerpts:
Why is solar power important forIndia? Globally, how has the market evolved?
Indiahas huge potential to become a global renewable energy hub by virtue of the abundance of alternate energy sources in the country.Indiais one of the world’s most diversified ecologies. The total installed electricity generation inIndiahas grown over a hundred fold since the days of Indian independence; however one of the biggest challenges that are being faced by the country today is the possible shortage of energy, which actually decelerates the growth rate of the economy.
In order to achieve the expected growth rate, it is important to ensure that the energy production levels reach the targeted levels of up to 1350 GW by the year 2050. Globally around 50GW of solar manufacturing capacity exists out of which around 30 GW is the saleable/ bankable capacity.
Solar has entered commodity cycle and hence size and scale of operations is important to bring down the cost. Leading companies (particularly Chinese companies) around the world have crossed the 1GW threshold manufacturing capacity driven mostly by manufacturing subsidies support granted by respective governments in the South East Asian region coupled with cheaper loans (averaging 5%) thereby making manufacturing expensive in other locations such as US, Europe and India.
Some of the nations have adopted trade measures to ensure that the local companies are protected such as the local content requirement in US,Canada,Europe.Indiaalso has put in place the requirement of domestic content in the JNNSM projects. However, this is limited only to solar farm projects and that too for crystalline silicon cells and modules which defeat the purpose of protecting the domestic industry as the most of the developers have selected thin films for their projects.
What role has the Indian government played in supporting solar programmes?
The ministry for new and renewable energy (MNRE) has been playing a pivotal role in promoting renewable technology inIndiaover several years. The launch of Jawaharlal Nehru National Solar Mission in 2009 paved way forIndia’s entry into solar markets. JNNSM has been phenomenally successful in spreading awareness about the importance of solar power.
Renewable energy, and solar energy, is now mandated at stipulated percentages of energy supply. JNNSM has set specific targets for solar power and has pushed for both off-grid and on-grid solutions. Because of JNNSM and MNRE,Indiais on its way towards achieving grid parity between conventional and renewable energy.
What should the government do to accelerate the development of solar power market?
Right now, the policies are not in favour of manufacturing. At present there are many Indian companies manufacturing photovoltaic cells and modules. Over the last few years, these companies have been exporting much of their produce to European countries since the Indian solar market has been quite small since it is off-grid. With the National Solar Mission in place now, the framework for large, on grid power plants is in place. Indian solar manufacturing companies can now look atIndiaitself as a market for their produce.
However there is still a problem that we are grappling with. The problem is that solar project developers are asking for foreign made modules for use in their plants since they come at a supposedly lower cost. Their view is that they should be allowed to source material from wherever they want.
HoweverIndiawill not be in a position to become a global solar leader if it is in not a position to manufacture the equipment needed to reach the ambitious target of 20,000 MW by 2022.
What are the costs involved in solar power today?
Pre-JNNSM, the major barrier in solar power was its high cost. Within the two years of its launch, the cost of solar has come down drastically from R17-18 per unit to R 7.50 per unit. The prices have dropped for various reasons. There are economies of scale, as both production and demand increase. The costs of conventional power have also increased. In general, costs of finance are globally lower and excess capacity in some countries has led to a decline in prices in emerging markets likeIndia.
Solar power today is already better than diesel parity, making it a very attractive option for DG displacement. The life time cost of solar power in MW scale project is about Rs. 9 per kWh and this was hovering around R12/kWh last year and about R15/kWh in 2009-10.