While India is characterized by its strong economic growth and rapidly increasing population, one of its greatest challenges and opportunities relates to the issue of climate change. At about 1.4 billion tons of annual CO2e emissions, the country contributes to over 5% of the total global emissions. India's carbon emissions will continue to grow rapidly, if economic growth is not accompanied by steps to enhance cleaner methods of energy production. The nation needs to work actively towards environmental sustainability, without compromising its economic development. With the rapid rise in electricity usage for residential and commercial applications, as well the increasing connectivity of rural areas to the grid, the overall energy demand is expected to increase from the current 140GW, to 300 GW by the year 2017. An associated increase in GHG emissions is expected, especially from electricity generation, as well as the cement and waste sectors.
Source: INCCA Report, 2007
The key problems pertaining to the energy sector in India can be categorized as follows:
Demand expected to continue to outstrip supply
Source: EIA, Country Analysis Briefs, 2009
http://www.eia.doe.gov/
Source: CEA Load Generation Balance Report, 2010
http://www.cea.nic.in/god/gmd/lgbr_report.pdf
Energy demand in India has been growing rapidly. In spite of the country's resource potential and the increased rate of growth in energy supply over the last few years, India faces serious energy shortages. India's electricity generation capacity often cannot meet the peak demand requirements. As a result, the country has increased its reliance on imports for meeting the demand for oil and coal.
Lack of access to electricity for large proportion of rural population
Source: Planning Commission, 2005
Over 70% of India's population lives in villages. On average, only 44% of all rural Indian households are electrified. The lack of access to minimum services such as lighting and communications results in decreased agricultural and labor productivity, poorer health and education services, etc.
Limited reliance on clean and reliable sources of energy
Source: IEA Energy Statistics, 2009
India relies mainly on coal and combustible biomass for its energy needs. Despite the huge resource potential, the contribution of clean sources of energy represents less than three percent of its total primary energy supply. A key challenge for the nation's economic decarbonisation is to transform the grid towards "near zero" carbon sources and away from coal.
An opportunity exists for tackling India's climate change challenges, with the launch of the National Action Plan on Climate Change by the central Government. India has among the highest solar intensities in the world and low-cost manufacturing potential. With the rapidly declining cost of building solar capacity, a significant scale-up of solar power generation is definitely possible. Based on the vision of the Action Plan, the National Solar Mission was launched with a set of clear objectives, in order to in order to increase the adoption of solar energy and to establish India as a global solar leader.
Potential solutions
Source: www.wwindea.org
Source: TERI - Prioritization of states based on solar intensities
Accelerated deployment of solar power would help alleviate India's energy problems. Most parts of the country receive excellent solar radiation of 4 to 7 Kwh/sqm/day. In contrast, approximately 80% of the United States receives daily solar radiation of less than 5 KwH/ sqm In addition, there is adequate physical space available, and 1% of India's land could supply all its electricity needs in 2030.
Broadly, some of the solutions currently offered by solar energy, fall into the following categories:
Technology:
Photovoltaic solar
Crystalline PV
Thin film (CdTe/ CIGS/a-Si)
Solar heating and thermal electricity
India's Solar PV industry had a capacity of 972MW in 2008, but until recently, there was no domestic market for solar. Companies typically exported most of their modules. The National Solar Mission has greatly increased local demand. This can be largely attributed to the attractive Rs.18.44/kwH feed-in tariff, cost-based compensation rate offered to producers of renewable energy.
Productivity and technology improvements are likely to sustain the leading position of C-Si technology for a significant period of time. Technology development efforts by Indian firms are focused on reduction in wafer thickness, cell efficiency enhancement and development of less energy intensive manufacturing processes for the feed-stock polysilicon. Crystalline silicon has gained market share, but, since temperatures in many parts of the country exceed 40 degrees Celsius for several months in a year, going forward, thin film may be more suitable in those regions. As modules become hotter, they also become less efficient. With thin-film modules the output decreases less than in traditional crystalline silicon models; this is especially important in extremely warm climatic conditions, as prevalent in many parts of India.
For a given module, thin cells produce more power than crystalline cells, as they react to a wider spectrum of sunlight. In March 2010, HHV Solar became the first Indian company to have developed the technology as well as the equipment for setting up a production facility for thin film solar photovoltaic (SPV) modules. Moser Baer India Ltd started a thin film line of 40MW capacity, set up by Applied Materials Inc. Soon after, KSK Surya Photovoltaic Venture set up a 150MW capacity thin film line in Hyderabad.
Processes
Under the National Solar Mission plan, specific goals exist for increasing use of solar thermal technologies in urban areas, industry and commercial establishments. It sets a goal of increasing production of photovoltaics to 1 GW per year, and to deploy at least 1 GW of solar thermal power generation. It also sets the objective of establishing a solar research centre, increased international collaboration on technology development, strengthen domestic manufacturing capacity, and increased government funding and international support. The plan's long-term aim is to make solar competitive with fossil-based energy. In order to adopt leaner operations processes and ultimately obtain higher cost-effectiveness, innovations around the following processes are required:
Setting up of large scale plants
Integration across the value chain
Reducing material consumption
Incentives
The Indian Government is providing several incentives to encourage solar energy investments. The ministry is providing various incentives and duty concessions for both manufacturers and users of solar products:
• Solar Power Generation Based Incentive
In the year 2008, the federal minister responsible for renewable energy announced that the Indian government would provide a subsidy for solar power plants to help develop renewable energy infrastructure.
The subsidy consists of Rs.12 (USD 0.26) per kilowatt hour for solar photovoltaic power and 10 rupees per kilowatt hour for solar thermal power fed to the electricity grid. A maximum capacity of 10 megawatts from each Indian state will be eligible under the scheme and 5 megawatts per developer. Capital investors will not be eligible to apply. Developers will sell electricity to state-run utilities and the incentives will be paid to them based on the tariff the utilities provide.
• Feed-in-tariff regulation
A tariff of Rs.18.44/kwh was fixed by the Central Electricity Regulatory Commission (CERC) after taking into account the following fixed-cost components: a) return on equity; b) interest on loan capital; c) depreciation; d) interest on working capital; e) operation and maintenance expenses. The feed-in tariff period is 25 years for solar PV and solar thermal.
In addition, policies were designed to create the necessary environment to attract industry and project developers to invest in research, domestic manufacturing and development of solar power generation and thus create the critical mass for a domestic solar industry. These include:
• Capital subsidy available in case of semiconductor based units
• Provisions for accelerated depreciation available for solar manufacturers
• Nil excise duty for manufacturers
• Low import tariff for several raw materials and components
• Soft loans to users, intermediaries and manufacturers
The incentives, for a period of 10 years, will be over and above any financial assistance provided by the states.
For proper implementation of these incentive mechanisms, there is a need for close interaction between the private sector enterprises, State Governments, Regulators and Power utilities.
Business Models:
Off-Grid Solar
In the case of off-grid solar applications in rural India, the objective of the business model is typically to increase the affordability of Solar PV systems through innovative rural financing schemes that reduce transaction costs and ensure repayment.
Case Study: SELCO
SELCO is a for-profit social enterprise that provides sustainable energy services to under-served households and businesses in India. The core business of SELCO is the design and sale of photovoltaic (PV) solar-home systems that provide power for lighting and small appliances, to low-income households. While solar PV systems offer an excellent alternative to electrification in rural India, the high up-front capital costs and lack of subsidy make financing a key barrier to commercialization. SELCO's business model aims to overcome exactly this barrier.
The SELCO business model is a combination of:
a) Economic instruments in the form of micro-credit loans.
Most end-users in Rural India cannot afford the costs of a solar system. Hence, SELCO offers a "lease to own" scheme where the consumer pays 25% of the costs up-front and receives a loan for the remaining amount from a rural bank at relatively low interest rates. SELCO also has its own financing arm which plays a role when all other financing options appear closed. They also offer low interest rates with IREDA refinancing 2.5% annually.
b) Awareness and capacity-building of local stakeholders relevant to the promotion of the emerging technology
A key to their success is building confidence with financial institutions by installing demonstration systems in local branches and proving the viability of its systems. This encourages the financial institutions to extend a credit line for SPV's.
c) Partnerships with rural financial institutions, local entrepreneurs and technicians.
Selco achieves customer satisfaction by partnering with local entrepreneurs and technicians who are always available to address the needs of the end consumer. This ensures that consumers remain satisfied and pay back their loans on time. It indirectly maintains a good relationship between SELCO and the financing institutions. The technicians are hired locally and paid on an income-cum-commission basis. They are also responsible for collecting the loan installments.
Impact:
The annual SPV household cost is estimated as $1,687 which is significantly lower than kerosene lighting ($2,285) and grid extension ($3,000 for off-grid households). In addition to clear financial advantages, SPV's offer significant economic (employment, productivity), social (health) and environmental advantages (reduced CO2 emissions).
Innovation
For solar energy to meet its potential and provide a significant reduction in carbon emissions, while fulfilling a proportion of India's energy requirement, it must meet three key thresholds: (1) cost competitiveness, (2) widespread availability and (3) reliability. For the ambitious targets of the NSM to be achieved, rapid innovation is required in certain areas:
Develop Financial Infrastructure
It is extremely important to enhance the support from financial institutions in order to expedite adoption of solar PV via grid-connected as well as off-grid applications.
Banks should introduce lending programs tailored specifically for a range of small and large PV customers.
Only when they develop appropriate financing terms and conditions, will the industry be able to take off rapidly. For example, banks selling home loans could initiate a lending program for selling loans specifically for homes that will have a solar PV roof. This type of bundling might prove to be an easy financing option for the end consumer.
Banks should carefully select and target consumers for such loans.
Assessment of creditworthiness of the potential customer should be undertaken by a trained branch officer or experienced representative. From the viewpoint of a financial institution, the assessment of a loan application for a SHS would usually have to be based on a cash-flow analysis including a sensitivity analysis that assesses the risk exposure of various income sources and expenses.
Risk mitigation
Measures including an insurance system should be adapted to the needs of both the financial institution and the customer. This would be manifested through better transmission of information and training in understanding the SHS technology as well as development of guarantee models via collateral, involvement of community, or the PV dealer.
Provide lending incentives
Currently, banks do not have an incentive to lend at affordable rates for solar projects. In some cases, solar project financing is purely looked at as CSR, while in other cases exorbitant rates are charged because of the high up-front risk anticipated. Possibly, a group of entrepreneurs can get together to negotiate financing deals with the large banks, rather than focusing on local, regional banks. It is important to carve out incentive schemes for the national banks. Also, at a policy level, initiatives could be taken to award banks that include solar projects in their lending portfolio.
Marketing and Knowledge dissemination:
There is a need to increase awareness around solar PV technology. Even the largest banks are not comfortable lending to companies in the solar energy sector. End-consumers in urban and rural areas also are typically unaware of the potential of solar powered systems. For example, in some high income homes, solar powered back-up generators are being purchased at very high prices, of around Rs. 200,000/-. While the benefit of such a system is that it provides a reliable source of power when unpredictable outages occur, marketing of these products could be expanded and improved. Ideally, producers of these products should receive some incentives that would bring down the costs, and increase the usage across wider sections of society.
Research & Development
Extensive R&D investments need to be made, especially for thin film technologies. Even for C - Si technologies, modules with improved efficiencies and lower costs are necessary.
There are plans for setting up a National Centre for Photovoltaic Research and Education at IIT, Mumbai.
Human Resource Development
The MNRE is currently working on an HRD strategy associated with the scale up of solar in India. It is planned that a Government Fellowship program to train 100 selected engineers and scientists in Solar Energy in world-class institutions abroad will be taken up.
IITs and premier Engineering Colleges will also be involved to design and develop specialized courses in Solar Energy, with financial assistance from the Government. However, nothing has been finalized yet. It is important that there is continuous innovation of the learning material, and that the courses taught are well aligned with real-world applications. Since foreign direct investment in education is allowed in India, a 'University' for solar energy education can be developed by an international school. Simultaneously a contract can be signed with a domestic or foreign company that has aggressive plans in the Indian solar energy industry, wherein all the university graduates will be employed by this particular company.
Scale discuss with CT/DC
The NSM target of creating 20GW of solar energy by the year 2022 implies that India's carbon emissions could reduce by XXX tones, after investing Rs. YYY into the program. This targeted 20GW output, out of an estimated 300GW overall energy demand, implies that radical steps need to be taken to move from the current negligible percentage contribution of solar, to a stage where over 6% of energy demand can be fulfilled from solar energy sources.
INSERT SPREADSHEET - EMISSIONS FROM ELECTRICITY + OFF-GRID APPLICATIONS
http://moef.nic.in/downloads/public-information/Report_INCCA.pdf
India contributes about 1.7 Bn tons of CO2e per year.
To achieve 1 Bn tons of emission reduction per year, will need to bring about a 40% reduction in emissions per year.
Look for graph showing current rate of decline. The CAGR of decline is 3% p.a., based on data between the years 1994 and 2007.
Look at EIA table 'Energy Consumption'. CAGR of 5.18% per yr - annual increase in energy consumption. But McK study expects it to be higher, around 9% growth p.a, which brings the 300GW figure in their report. Assume the 9% rate and 300GW requirement. That would require a generation capacity of 400GW (plan availability & other adjustments) CHECK what should this figure be - is 100GW extra ok? This implies about 20 GW capacity addition every year.
205 GW of installed capacity, operating at 100% capacity factor, emit 1 Bn tons of CO2e emissions. So even if we completely use solar for the new energy requirements, only 0.1 Bn tons reduction is possible.
Emission reduction goals don't sound right. Talk to Claire.
We need to know how many GW of solar needs to be installed, in order to achieve XXX emissions reduction
Supply Chain Analysis at Scale
A diagrammatic representation of the solar energy supply chain is given below:
India has nine solar cell manufacturing companies. There is no source of silicon feedstock or significant wafer manufacturing within the country, and significant investment needs to be made in R&D. The smaller, entrepreneurial firms are more focused on innovation and new research.
Source: MNRE Annual Report, 2007
Problems are anticipated due to the lack of an indigenous base in the upstream part of the solar supply chain. It is not sustainable for the country to continue to rely on imports if it wants to achieve cost competitiveness. Proposals have been sent to the government for commencing silicon wafer production capabilities.
The time required to enhance product lines and install new capacity is less than a year, for an experienced project manager. Capacity expansion does not seem to be a large barrier for those companies that possess the technical know-how required at a solar power plant
Currently, the downstream end of the supply chain is not constrained, and there are a number of small installation companies, as well as operations/ maintenance personnel who are present in several markets in India. In terms of the off-grid applications, there are several small dealers of large conglomerates who directly sell products (such as solar home systems) to the end-users.
Expansion Pathway.
Model of the growth path of the technology, or the adoption numbers, between 2010 and 2020 to achieve a billon ton reduction in CO2e.
LOOK AT GT MODELS. CHECK ON THE TARGETS FOR THE EP MODEL.
Capital.
How much capital is required to attain gigaton scale by 2020?
SHOULD WE INSTEAD LOOK AT HOW MUCH CAPITAL IS REQD TO ACHIEVE NSM OBJECTIVES, OF 1/4/20 GW OF SOLAR? ASK CLAIRE.
PUT MODEL HERE.
Barriers:
In order to address the scale-up issues, it is imperative for the various stakeholders to be aware of, and consciously tackle the current and expected industry barriers. This would help increase the adoption of solar energy in India, as a clear understanding of the barriers will enable an informed prioritization of action items that need to be taken.
Regulatory hurdles
One of the grey areas the government was grappling with pertained to the issue of domestic content for solar PV manufacturing. While global manufacturers with no manufacturing in India have been advocating for procuring modules globally, local cell/module manufacturers have been advocating the requirement of both cells and modules made in India.
The government has come up with a recommendation for a phased-in protection to stimulate domestic manufacturing. In the case of Solar PV Projects to be selected in first batch during FY 2010-11, it will be mandatory for projects based on crystalline silicon technology to use the modules manufactured in India. For Solar PV Projects to be selected in second batch during FY 2011-12, it will be mandatory for all the Projects to use cells and modules manufactured in India. The government announced a ban on import of equipment for setting up solar projects, from the year 2013 onwards.
These regulations would make the Indian market less attractive to some stakeholders, especially those who are concerned with the fact that average prices of modules produced in India are slightly higher than the prices observed abroad.
Technological barriers
Especially since the solar PV market in India is newly emerging, it is important that domestic manufacturers are able to maintain high standards. India needs to develop low-cost high-quality manufacturing technologies for high-efficiency thin-film and crystalline-silicon cells. Currently, thin-film and crystalline-silicon modules are 7% to 10% and 12% to 14% efficient, respectively. Investments in R&D need to be made in order to improve the efficiencies of the modules. Thin films, which are made by spraying compounds such as Cadmium Telluride, do not necessarily need imported silicon and cost only around 70% of crystalline-silicon panels.
Currently, locally manufactured solar PV modules are of inferior quality, and are more expensive than what can be obtained from foreign countries. For example, the module prices in India average around $2.2/W, while better quality modules can be obtained in Canada for $2/W, and in China for even less.
Supply chain issues
At the start of the value chain is the polysilicon, which is then used to make silicon wafers, which in turn are used to construct solar cells and then modules. These modules are installed on-site. While there are some vertically integrated solar companies which function along more than one parts of the value chain (eg. Moser Baer and Tata BP Solar), there are also more "pure plays" along each part of the value chain. With large ground-mounted on-grid PV plants benefiting from the new national feed-in tariff as well as plans to increase the size and pace of growth of some of the largest rural electrification programs, competition in the downstream is expected to grow tremendously in the years to come. Larger, well-financed solar companies are expected to acquire smaller firms in order to provide expanded services.
India has zero domestic production of the chief raw material in the production of solar modules, the raw silicon crystal or polysilicon. Indian manufacturers depend on import of silicon wafers or strips to make PV modules. In addition to increase the production of crystalline silicon at the projected rates, a dedicated supply of solar-grade silicon feedstock must be available at a competitive cost. The reliance on imports will be a problem in the long-run, and the upstream part of the solar supply chain must be developed.
Cost of financing (for developers & end consumers)
At the end-consumer level, there are minimal affordable financing options for PV systems. Micro-finance institutions charge rural consumers interest rates that typically exceed 35%. A lot of time and effort has to be expensed in order to get rural banks to provide financing to poor consumers. They are typically not educated enough about how solar works, and securing financing is a challenge since solar systems do not directly create income. Rural banks that support solar, currently charge over 14% interest, which is also quite high.
Financing of solar power projects is also an arduous task, as reasonable debt financing is almost impossible to obtain in India. There is no backstop mechanism which protects the developer of the power plant, in case the state utilities default on payments due. Unless the NVVN (the power-trading arm of Indian power utility NTPC that will buy solar-generated electricity at a fixed rate) provides some backing to the solar power producers, banks would continue to be hesitant to invest in such projects.
The Power Finance corporation charges above 15% interest to developers. Access to international foundations and agencies such as the IFC is not easy, and many developers would be constrained due to the lack of affordable long-term loans.
Lack of skilled manpower
The large solar firms are quickly ramping up to prepare for the sudden increase in local demand for solar PV components. For example, Moser Baer is doubling capacity this year. While there isn't a lack of skilled manpower in the current scenario, with the aggressive growth plans for solar, there is expected to be a major shortage of trained installers, inspectors, solar design engineers, and managers.
Lack of standards
The lack of proper grid interconnection standards may inhibit solar-electric development. Grid management may become a problem unless high standards are enforced for the power entering the grid from various sources. There are also no solar-electric appliance ratings/standards existent.
Additionally, there are a few barriers pertaining to the design of the National Solar Mission policy. These are listed below:
Execution challenges
Quality issues
Yield variation is a problem with poorly manufactured components. Indian developers are using cheap quality components, often purchase from India or China. These are blacklisted components which countries such as Germany and the US would not purchase. The solar components are certified, but certification is not a sufficient condition that assures maintenance of high quality standards.
Policy-level challenges
Reservation for solar thermal vs solar PV
The National Solar policy calls for 50% reservation for each - solar thermal as well as solar PV, while in other countries the ratio is typically 10-1 (in favor of solar). Solar thermal has not yet taken off at a significant scale, and very few competent installers exist. Also, India has significant water shortage and there is a genuine issue around the provision for a reliable water supply for solar thermal projects.
Feasibility
SUMMARY - What's possible? What are your recommendations? Of particular interest here are proposed market-based solutions that look feasible.
DO THIS SECTION AFTER LOOKING AT OUTPUTS FROM MODELS
Appendix
Solar PV manufacturers in India
BHEL - Monocrystalline silicon, Crystalline silicon
Central Electronics Limited (CEL) - Monocrystalline silicon
Indosolar Ltd - Multi crystalline cells
Maharishi Solar Technology Pvt. Ltd - Multicrystalline silicon
Moser Baer Photovoltaic - Crystalline silicon (i.e. Polycrystalline)
Pentafour Solec Technology Limited - Monocrystalline silicon
TATA/BP Solar (JV between BP Solar/TATA) - Monocrystalline silicon
Udhaya Semiconductors Ltd - Crystalline silicon
Usha India Ltd - Crystalline silicon
West Bengal Electronics Industry Development Corporation Limited - Monocrystalline silicon
