 "All that glitters is not solar")
From the Softbanks of the world to local farmland owners, one investment that is attracting the money of the Bhartis and the Adanis of the country is solar power.
From a miniscule 2 Mw in 2010, India’s total solar power capacity now stands at 4,000 Mw. Piyush Goyal, minister of state for coal, power and renewable energy, has been saying ad nauseam that “PM Narendra Modi’s dream is to scale up solar to 1 lakh Mw”. Last week, finally, that proposal got the Cabinet’s nod.
The plan, in layman terms, is this: solar panels on your rooftops, on barren land, over canals, rivers and deserts, on mountaintops, solar to run your agri-pumps, telecom towers, factories, remote army units, rural households, and what not.
Unfortunately, solar energy across the world has largely been synonymous with such fancy ideas, with the exception of China. In most cases, solar power was a desperate measure to evade an energy crisis and to look green. For Germany it was a way to neutralise dependence on nuclear energy, while for the US, it was shock therapy administered post the great blackout of the north and eastern states in 2003 as well as the fact that oil was becoming a tool of war rather than just fuel.
In India, on the other hand, it is rapidly becoming the new real estate business. Beyond the millions invested by big names, there are small time players who, with their barren lands and idle capital, are getting tax benefits of as much as 80% of accelerated depreciation (AD) on their balance sheets. It doesn’t matter if you are a halwai or a cement manufacturer – they are both listed as the proud owner of a solar power plant! Established, serious solar power project developers have been waging a war against AD but to no avail.
Financiers will tell you that there is a beeline of landowners who want to set up solar power plants. States are more than happy to give permission so they can tout a long list of investors in solar projects every year.
What they fail to mention, however, is how much of that solar power was fed into the national or state grid. And what the public doesn’t see beyond the million-dollar investment headlines is that the efficacy of solar power is measured in megawatt, not dollars!
Since its inception in 2010, the UPA government's flagship Jawaharlal Nehru National Solar Mission could push solar power generation to only 4,000 Mw – which is less than the monthly power demand in Delhi!
The new government has gone further in its ambitions – it aims to increase it to 1 lakh Mw, or a 25-fold growth, in roughly the same time period.
If market experts are to be believed, India can realistically touch 30,000-35,000 Mw by 2019. SoftBank, in its latest venture with Bharti & Foxconn, has committed to 20,000 Mw! Some 6,000 Mw will be set up by Adani and SunEdison. The total commitment by global players at RE-Invest 2015, the first global Indian renewable energy summit, was 2.5 lakh Mw.
But given they are strategic investors, let’s hope SoftBank and Foxconn have done their due diligence.
For one, there is no land – for solar, at least. If there is, the owner can just as easily set up his or her own solar power plant on it. More troublingly, there are few takers for solar power. At the current rate of Rs 6-8 per unit, who would buy solar power when discoms is not purchasing conventional power at half that price? Once you get past those, there is no transmission network, either. Off-grid solar is challenging and only some social enterprises take the pain to reach power to the north-east or Ladakh or roadless, nameless areas in the hinterlands of states like Uttar Pradesh, Bihar, or Chhhatisgarh.
Let’s now look at the most basic part of the supply chain – solar cell manufacturing. Compared to India's 1500 Mw worth of solar cell production annually, thousands of factories across China manufacture this amount daily! The US has an annual manufacturing capacity of 15,000-20,000 Mw, which is a mere 10% of what China makes. American companies operating here consider their Chinese counterparts, not the Indian ones, as their competition in India.
If SoftBank is planning to set up manufacturing in India, they should keep in mind that we like our stuff cheap which is why we love ‘Chinese maal’ (Made in China). The difference of at least 20-30 cents per unit between Indian and Chinese solar cells has meant that 75% of solar projects in India are built on Chinese solar panels and equipment. And it is thanks to Chinese manufacturers that our cost of solar energy has dropped from Rs 17 to Rs 7 per unit in 4 years.
Capital investment is good when it is channelled via a plan, but the central government has no plan to support its outsize targets. Instead, it has put the onus on the states. Solar power in Gujarat was in a leading position during the PM’s stint there as CM, but that is about it. There has been minimal growth in the past two years. Rajasthan is busy getting every inch of land under solar panels, but still cancelled the largest ultra-mega solar power project because it would kill birds. Madhya Pradesh is going all out to woo private players to come and set up solar power projects but investors are wary of hiccups in transmission and sales.
I would expect Mr Adani to use his money to first strengthen the transmission and the grid – which can’t handle infirm solar power. Can Mr Mittal can take solar to the remote areas where he took his telecom towers and where solar power is actually needed? But we love headlines, don’t we? Rural areas and farmers won’t make for a headline unless they also start selling solar power.
From a miniscule 2 Mw in 2010, India’s total solar power capacity now stands at 4,000 Mw. Piyush Goyal, minister of state for coal, power and renewable energy, has been saying ad nauseam that “PM Narendra Modi’s dream is to scale up solar to 1 lakh Mw”. Last week, finally, that proposal got the Cabinet’s nod.
The plan, in layman terms, is this: solar panels on your rooftops, on barren land, over canals, rivers and deserts, on mountaintops, solar to run your agri-pumps, telecom towers, factories, remote army units, rural households, and what not.
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Fancy, isn’t it?
Unfortunately, solar energy across the world has largely been synonymous with such fancy ideas, with the exception of China. In most cases, solar power was a desperate measure to evade an energy crisis and to look green. For Germany it was a way to neutralise dependence on nuclear energy, while for the US, it was shock therapy administered post the great blackout of the north and eastern states in 2003 as well as the fact that oil was becoming a tool of war rather than just fuel.
In India, on the other hand, it is rapidly becoming the new real estate business. Beyond the millions invested by big names, there are small time players who, with their barren lands and idle capital, are getting tax benefits of as much as 80% of accelerated depreciation (AD) on their balance sheets. It doesn’t matter if you are a halwai or a cement manufacturer – they are both listed as the proud owner of a solar power plant! Established, serious solar power project developers have been waging a war against AD but to no avail.
Financiers will tell you that there is a beeline of landowners who want to set up solar power plants. States are more than happy to give permission so they can tout a long list of investors in solar projects every year.
What they fail to mention, however, is how much of that solar power was fed into the national or state grid. And what the public doesn’t see beyond the million-dollar investment headlines is that the efficacy of solar power is measured in megawatt, not dollars!
Since its inception in 2010, the UPA government's flagship Jawaharlal Nehru National Solar Mission could push solar power generation to only 4,000 Mw – which is less than the monthly power demand in Delhi!
The new government has gone further in its ambitions – it aims to increase it to 1 lakh Mw, or a 25-fold growth, in roughly the same time period.
If market experts are to be believed, India can realistically touch 30,000-35,000 Mw by 2019. SoftBank, in its latest venture with Bharti & Foxconn, has committed to 20,000 Mw! Some 6,000 Mw will be set up by Adani and SunEdison. The total commitment by global players at RE-Invest 2015, the first global Indian renewable energy summit, was 2.5 lakh Mw.
But given they are strategic investors, let’s hope SoftBank and Foxconn have done their due diligence.
For one, there is no land – for solar, at least. If there is, the owner can just as easily set up his or her own solar power plant on it. More troublingly, there are few takers for solar power. At the current rate of Rs 6-8 per unit, who would buy solar power when discoms is not purchasing conventional power at half that price? Once you get past those, there is no transmission network, either. Off-grid solar is challenging and only some social enterprises take the pain to reach power to the north-east or Ladakh or roadless, nameless areas in the hinterlands of states like Uttar Pradesh, Bihar, or Chhhatisgarh.
Let’s now look at the most basic part of the supply chain – solar cell manufacturing. Compared to India's 1500 Mw worth of solar cell production annually, thousands of factories across China manufacture this amount daily! The US has an annual manufacturing capacity of 15,000-20,000 Mw, which is a mere 10% of what China makes. American companies operating here consider their Chinese counterparts, not the Indian ones, as their competition in India.
If SoftBank is planning to set up manufacturing in India, they should keep in mind that we like our stuff cheap which is why we love ‘Chinese maal’ (Made in China). The difference of at least 20-30 cents per unit between Indian and Chinese solar cells has meant that 75% of solar projects in India are built on Chinese solar panels and equipment. And it is thanks to Chinese manufacturers that our cost of solar energy has dropped from Rs 17 to Rs 7 per unit in 4 years.
Capital investment is good when it is channelled via a plan, but the central government has no plan to support its outsize targets. Instead, it has put the onus on the states. Solar power in Gujarat was in a leading position during the PM’s stint there as CM, but that is about it. There has been minimal growth in the past two years. Rajasthan is busy getting every inch of land under solar panels, but still cancelled the largest ultra-mega solar power project because it would kill birds. Madhya Pradesh is going all out to woo private players to come and set up solar power projects but investors are wary of hiccups in transmission and sales.
I would expect Mr Adani to use his money to first strengthen the transmission and the grid – which can’t handle infirm solar power. Can Mr Mittal can take solar to the remote areas where he took his telecom towers and where solar power is actually needed? But we love headlines, don’t we? Rural areas and farmers won’t make for a headline unless they also start selling solar power.