India needs a smart strategy to outdo Chinese domination and become global leader in solar energy
The formation of the International Solar Alliance (ISA) is one of the most significant environmental events in decades, even if, as of now, 32 countries have ratified it and another 30 joined up. Gurugram has been chosen to house it given India has one of the most ambitious solar power generation programmes worldwide and that in 2016 it ranked fourth in the list of installed capacity.
The predictions are that there is going to be a further boom in India’s renewable power generation – slated to reach 175 gigawatts by 2022. Of that solar power will contribute 100 gigawatts, while the global target is 1,000 gigawatts. But there are problems.
Let’s begin with India’s renewable programme. In the current budget, the solar programme gets a clear preference. It has been allocated Rs 2,045 crore or 54 percent of the total allocation for renewable energy schemes and projects. The funds have been set aside for a variety of small and large solar programmes. On top of that, it gets international assistance – France has just announced a subvention of €700 million, in addition to €300 million already committed. India has committed $21 million between 2016 and 2021, which will include the cost of setting up the headquarters in Gurugram.
The wind power sector gets only Rs 750 crore or 20 percent of the funds set aside for grid-interactive renewable energy projects. There is a conscious or an unconscious irony about this kind of deployment of finances, given that there is no conclusive evidence that solar energy outdistances other forms of renewables.
It would be useful to look at how the Centre breaks down its solar programme. Take rooftop solar power generation: till March 2017, 40 gigawatts was supposed to be its contribution to the 100 gigawatts target. But despite favourable policies, including a subsidy of 30 percent, by the end of 2016, only 0.67 gigawatt of rooftop installations was actualised. This means that in the next five to six years, rooftop installations will have to increase exponentially. This is unlikely to happen for roughly the same reasons people don’t install rainwater-harvesting systems: higher costs, lack of awareness, and red-tape.
As an offshoot, the solar power programme is not even benefiting Indian manufacturers of solar units as mandated by the Jawaharlal Nehru National Solar Mission. Outmuscled from the beginning by their Chinese counterparts, Indian manufacturers are now facing a serious crisis with Chinese units, subjected to tariffs by the US, flooding the global market. There are other problems, for instance, related to pricing and subsidies, which could, however, work themselves out as the demand for solar power grows.
Solar power tariff has fallen to a record low due to the government’s solar energy drive. Five years ago, solar companies in India were producing a kilowatt-hour for Rs 7. At present, it is down to Rs 2.44, which is cheaper than thermal power. In the recent past, the global price of solar energy has fallen rapidly. As this cost of solar power continues to fall, India has a real opportunity to become a world leader in the transition to a clean-energy eco-system.
It is arguable that subsidies on solar and renewables should be phased out to achieve market parity with conventional energy systems. But this argument doesn’t wash unless you are an anti-subsidy fundamentalist because phasing out conventional energy sources – read fossil fuel – is important both because the emission of greenhouse gases needs to be drastically reduced and because a huge number of people who don’t have electricity/power/energy (237 million) need to be provided clean energy.
According to the Centre for Science and Environment, with the Central Electricity Regulatory Commission’s capital cost of Rs 5.3 crore per megawatt, without any tax holidays, the cost of generating power from a 10-megawatt plant would be around Rs 6.32 per unit of electricity. Commonly quoted tariff figures are more than 50 percent higher. So, while huge unsustainable subsidies ranging from Rs 3 to Rs 6 makes the issue of grid parity a farce, a differential price structure must be evolved so that the rich, the poor and those in the middle can use clean energy, without burning too big a hole in the government’s pockets.
Finally, a word on the global target of generating 1,000 gigawatts by 2300, for which the ISA plans to raise a trillion dollars; by then renewables are expected to contribute 40 percent to India’s energy ‘basket’. The problem is that there is no clarity on how these sums were arrived at. At present, the capacity of solar power installed globally is between 295 and 308 gigawatts, while for India, this number lies between 9.3 and 9.9 gigawatts, according to the statistics from 2016 published by the International Renewable Energy Agency and others.
All we can hope is that the developed world joins the ISA and makes this ambitious programme a reality.