Solar power in india – several bright spots amidst periodic question marks npower electricity bill

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Indian solar power generation is going through interesting but highly dichotomous times. On the one hand, India has made rapid strides in the expansion of the installed capacity. On the other hand, this expansion, along with demand-side factors, has been highly deflationary for the power generation industry as a whole. This industry firms seem to be on the downward slope of the J-curve, waiting for that trigger to see a sustained upward slope of growth. But this is not stopping the march of solar energy expansion by any means.

For the first time in India’s power generation history, the financial year 2017-18 saw renewable energy production breach the 1 lakh Gigawatt-hour mark. This achievement came almost at the end of the financial year on 29 March, tracked by the National Load Dispatch Centre of the Power Systems Operations Company (POSOCO).

Recently, the city of Diu, a centrally administered territory, became the first city in India to generate its entire day-time power requirement through solar. This small city has historically been dependent on Gujarat to supply almost all its power. This changed with the Smart Cities mission. Diu set up a 9 Megawatt (MW) solar plant and installed another 1.3 MW capacity using government building rooftops. Diu also started incentivising rooftop solar installations, paying Rs 10,000 subsidy for every kilowatt (KW) of installed capacity. Running entirely on solar power during day-time, even negotiating the summer peaks is no mean achievement for any Indian city.

The Renewable Energy Global Investors Meet and Expo (RE-Invest) event, which took place in early 2015, set the tone for India’s renewable energy expansion. Prime Minister (PM) Narendra Modi, who has used stretch targets for his governance achievements in various areas, declared that India will hit 100 GW of solar and 75 GW of wind installed capacity by 2022. This was ambitious because when Modi took over as the PM, India did not even have 3 GW of installed solar base. But between 2014 and now, India has increased the solar base 8 times, closing in on 21 GW as of March 2018.

All large Indian states barring the ones in the east have been competing against each other to expand their solar footprint. At various points in the last four years, Andhra Pradesh, Gujarat, Madhya Pradesh, Rajasthan, Tamil Nadu, and Telangana have looked like bagging the top solar producer spot. But as of April 2018, Karnataka has raced ahead, after the Pavagada Solar Park was inaugurated with its 600 MW capacity. The solar park will reach its full 2 GW installed capacity in another two years and will make it the largest single-site solar plant in the world. That distinction is currently held by the Kamuthi facility in Tamil Nadu with a 648 MW capacity.

India has also used solar power creatively in the last few years. The government is currently running a 100 per cent village electrification drive, which should complete by the end of May. Several of the 18,452 villages where this drive was started in August 2015, will see power reaching them through off-grid, distributed solar units. These solar units have been used in remote hilly areas in the North East, Uttarakhand, and Jammu and Kashmir. Then there are installations in deep forests, where grid connectivity and cabling is always a challenge. One such example is Sunderbans, where solar micro-grids have helped light up villages, and locals have learnt how to maintain these units, also resulting in collateral skills development upside. Government promotion LED bulbs and other power equipment which can run on direct current also makes it easier to use localised, distributed solar grids.

Another innovative use of solar power has been in promoting solar pumps for agriculture use. The government has recently launched the Kisan Urja Suraksha Evam Utthaan Mahaabhiyan (KUSUM) scheme, which envisages investing ₹1.4 lakh crore in agriculture solar sector. This includes central government assistance of Rs 48,000 crores. The central government wants to promote installation of about 18 lakh solar pumps across the country as well as move the existing 8 GW pump capacity to solar. The government will also move its tube wells which consume capacity of 8 GW to solar power. Solar power generation capacity of 10 GW would be added on barren lands across the country to support this initiative.

The states will also support this initiative as it will gradually reduce the load on their distribution companies (discoms) to supply power for agriculture. Standalone, off-grid solar power works well for agriculture as the peak hours of generation also coincide with peak hours of use and the power for operating agricultural equipment is not needed round the clock.

Indian discoms are obliged to use renewable power as part of their power supply. This is known as renewable power obligations (RPOs). Since RPO requirement may not always match the renewable generation capacity in a state, discoms trade in Renewable Energy Certificates (RECs) on designated power exchanges in the country. These certificates are then used to source renewable power as required and can be traded on exchanges. The Indian Energy Exchange (IEX) has been seeing a healthy supply of solar power based RECs after the trading resumed earlier this year. This REC trading was stayed by the Supreme Court in July 2017 on account of a dispute between solar power producers and the Central Electricity Regulatory Commission (CERC).

Firstly, after the introduction of the Goods and Services Tax (GST), there was some confusion on how the solar panels were classified. The tax authorities were threatening levying import duties on panels coming in from China, which tend to be 8-10 per cent cheaper than the ones manufactured locally. This had resulted in several importers not clearing their stocks at various ports, most notably Chennai. This issue of HSN code classification was recently resolved by the Finance Ministry. However, India is still considering a safeguard duty on imports, a decision on which is pending. The request for this duty was made by the local manufacturers.

Secondly, solar auctions conducted by various states had seen tariffs fall at a regular pace. In the second half of 2017, solar tariffs crashed almost 50 per cent year on year, with the lowest tariff discovered at Bhadla in Rajasthan at Rs 2.44 per unit. These tariffs were not sustainable for several producers. Many solar auctions in the last few months have been cancelled as states were expecting tariffs around Rs 3 per unit, while producers were discovering Rs 3.2 to Rs3.5 per unit in auctions. States like Gujarat, Maharashtra, and Karnataka have had issues in the recent past running their solar auctions.

Until there is clarity on duties and until auctions end around ₹3 per unit, neither the states nor the producers are going to be happy. This short-term cloud continues to hover on the sector and may impact new investments in the next three to six months.

Despite these challenges, in the financial year 2017-18, renewable capacity addition of about 12 GW far outstripped the increase in coal-based power generation which was limited to 5 GW. Coal-based plants are stressed due to the availability of other options and lack of demand, and in the near term, this problem will anyway exacerbate with solar capacity additions keeping pace despite operational challenges. As a whole, 20.1 per cent of all power generation capacity in India is now renewable, a milestone hit in March 2018.

A recent research report by the University of Technology (LUT) in Finland stated that India will have the capacity to operate on a fully renewable electricity system by 2050. This may sound preposterous but the research accounts for massive investments in storage technology to achieve this end. India’s International Solar Alliance (ISA) leadership has convinced the international community that the audacious renewable energy targets set are achievable.