The ‘National Solar Mission’ expected to be released on November 14, 2009 is one of the eight missions identified in the Prime Minister’s National Action Plan on Climate Change (NAPCC). Quite naturally, therefore, expectations within the solar power community are high that the mission document will provide the impetus the industry seeks, says Santosh Kamath, a director in the advisory practice of KPMG.
An engineer-manager by training, with over twelve years of experience largely in power and utilities’ sector, Kamath has worked in the areas of renewable energy and power sector reforms, policy development, regulatory economics and reform implementation initiatives. And foremost in his list of ‘industry expectations’ is a clear identification of the source of funding.
“Our calculations suggest that there would be a funding requirement of approximately Rs 12,000 crore until 2017 to support the higher tariffs required for solar power, assuming 7 GW of cumulative installed capacity by 2017 and achievement of grid parity by that year. Additionally, incentives for manufacturing and to support R&D (research and development) would be required.”
The National Solar Mission should clearly identify where this money would come from, insists Kamath, during a quick email interaction with Business Line. “For example, a cess levied on all electricity sales at a mere 2 paise/ unit could meet a large part of this funding requirement. In the absence of a credible source of funding, goals would remain merely on paper.”
Excerpts from the interview.
Apart from the funding issue, what other issues should the policy framework address?
The National Solar Mission should bring in, through legislation or otherwise, a certain degree of statutory certainty in the policy measures. In the past, some policies in respect of renewable energy have been criticised because at the state level the policies have undergone changes during the project life. The National Solar Mission should lead to policies and legislative measures that have binding provisions on various stakeholders including the state-level entities. This is no doubt a challenge given the precarious financial position of the power sector in most states. However, combined with funding support to the states, this should be doable.
Also, the document should lay a clear roadmap for building domestic R&D and manufacturing capability. The solar manufacturing industry should be supported through fiscal incentives such as customs duty and direct tax exemptions. Infrastructure and logistical support for solar equipment manufacturing industry such as creation of solar parks along with identifying responsible Government entities to implement them would go a long way.
Finally, the National Solar Mission should lay out a sound implementation framework. In the final analysis, what matters most is how the policies and plans are implemented. This calls for setting up an institutional framework that is empowered, adequately resourced and made accountable to monitor the implementation of the National Solar Mission. Avoiding duplicity of roles between various entities and minimising bureaucratic procedures for clearances and access to the funds will be crucial for speedy implementation. One way would be to set up an authority with sufficient powers for direct intervention and whose accountability is measured at the highest levels of the Government, perhaps at the level of the Prime Minister’s Office.
What are the economics of solar power and why should India go for it?
Solar power is an almost infinite energy source and in the long run can meet a significant portion of global energy needs, with some estimates projecting that 8-12 per cent of global energy requirements in the year 2050 will be met from solar power. India is well endowed with solar radiation with 250-300 clear sunny days in a year. Such is the potential that a piece of square land, 55 km each side in the Thar Desert, can generate enough electricity to equal the entire power generation in the country today. Not only does solar power represent a source of energy security in the long run but is an important element in our response to global climate change since this has close to zero carbon emissions.
Solar power is expensive today and costs almost Rs 15/kwh as compared to conventional coal-based power which is around Rs 3/kwh and liquid fuel-based power at around Rs 8/kwh. However, costs will decline rapidly as capacities are installed and scale economies and technology development drive costs down. That is precisely why this source of power needs to be supported by Government policy and incentives today so that the industry can build scale and become cost competitive tomorrow.
We all remember the personal computer story where, over time, not only did costs decline sharply but processing power multiply manifold as technology and scale economies played out. In the case of solar power, it is expected that parity with conventional power will be reached in the time period 2017-2020 and at that time no further incentives will be needed.
What are the policy measures already in place and how effective have they been?
Currently, the Government of India has an incentive scheme for solar power projects that supports a cost of up to Rs 15/kwh. However, this is limited to only 50 MW of total capacity in the country. Some states like Gujarat and Rajasthan have announced state level schemes that support additional capacities. However, this level of support is not adequate if the industry has to scale up manifold and this does not inspire confidence of large players to enter in a big way.
The industry needs a much bigger push if the entire ecosystem is to be developed including component manufacturers, EPC contractors, ancillary services providers and project developers. Globally, mainly in Europe and California in the US, 5000 MW to 6000 MW are getting added each year. The policy measures in these countries have led to creating a strong initial push that is now leading to development of a solid ecosystem for future industry growth.
What are the key technologies in solar power and does Indian industry have access to the same?
Broadly, there are two technologies – solar photovoltaic and solar thermal. In solar photovoltaic, sunlight is directly converted to electricity using special semiconductors that release electricity when light is incident on their surface. In solar thermal, sunlight is converted to heat energy by use of specially shaped mirrors which concentrate the sunlight onto a small area where the heat is captured through special fluids. This heat energy is converted to steam and runs a steam turbine and generator, as is done in conventional power generation.
If one gets into details, there are various technologies in each of the above areas, where significant R&D activities are happening. Indian industry is looking at technology transfer arrangements with the European and American players to get access to these technologies. However, it is very important for our country to develop indigenous capability in this regard.
The Government should support an environment for R&D by sponsoring research, encouraging collaborations between research institutions and industry and even engaging with international Government-led research institutions for collaboration.