Can solar and wind power India, or will they forever be consigned to remain small, shining emeralds, to be trotted out when guests come home for dinner? Solar works only when the sun shines. Wind works only when it blows. As astute a businessman as Bill Gates has recognised that the intermittency of solar and wind is an insurmountable problem until a cost-effective, large-scale, reliable energy storage solution is found. But storing energy at scale is one of the hardest problems in science. Gates himself is investing in basic research to come out with an invention.
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During the Manmohan Singh government, solar tenders had been issued for around 15-20 megawatts of solar capacity. The average tariff bid was around Rs 9 per kilowatt-hour. Winners then were gung-ho about meeting their price targets. One such, Kiran Energy, led by ex-Tata honcho, Alan Rosling, had partnered with Mahindra & Mahindra to win a total of 50 megawatts. The Modi government has, with fanfare, announced the victors of another round of solar bidding. Project capacities have gone up to 500 megawatts, and prices have dipped to as low as Rs 4.50 per kilowatt-hour. But many of the earlier round participants, including Kiran and Mahindra, have skipped this round. They perhaps feel they cannot compete with the low prices being bid. Kiran is reportedly on the block. If much smaller projects with much more lax pricing did not cut it earlier, what are the chances now of much larger projects capped by much tighter pricing?
Large-scale energy contracts tend to follow a pattern around the world. The money is big, so bidders crowd around like moths to a flame. They undercut each other, often by pennies. The winner is announced with much delight. Coming second is a nightmare. You have expended months of energy with nothing to show for it. Once the competition has been scattered, the winner can always go back to the purchaser, typically a government or a utility, to renegotiate the price. Often the purchasing entity has no option but to acquiesce. Sometimes palms have to be greased.
Consider SunEdison. Its stock trades at less than $2, the company is labouring under perhaps $3.4 billion of recourse debt - according to UBS estimates -and has negative Ebitda, and its chief financial officer has just stepped down amid persistent legal troubles. No matter, the company won 500 megawatts in India in a November solar tender by offering a then-record low tariff of Rs 4.63 per kilowatt-hour. How was it able to convince the powers that be of its viability to execute such a capital-intensive project?
Whenever land comes into question in India, something fishy abounds. An executive at a leading wind developer told me that he considered land as raw material. Many of the solar parks and wind farms have the potential of becoming land grabs. If the developer is not able to deliver on his commitments, or even if the project doesn't get off the ground, at least he has got his hands on land very often subsidised by the government.
Coal generates power at around Rs 3-4 per kilowatt-hour, and natural gas a wee bit higher. Natural gas price is touching record lows the world over, with the gas benchmark plunging below $2 in the US. Natural gas is fast becoming the power fuel of choice, displacing coal at a rapid clip. It causes half the carbon emissions as coal, and according to the Massachusetts Institute of Technology, can serve as a strong bridge to when renewables are ready for prime time. But the bridge might be too far, for unlike solar and wind, natural gas can be used to generate baseload power, the power that a utility must supply with no intermittency.
One bright spot could be solar power from rooftops, but the Indian government doesn't seem to have put much focus on it. It's a complicated issue, for it involves offering attractive rates for solar-generating homes and businesses to sell power back into the electricity grid, without making the rates so attractive that they start crimping the electric utility's bottom line. It further entails the installation of a net electricity meter on the premises of every solar generator, a meter that can read and record the power flowing into the premise, as well as that going outside, and compute the difference between the two, so that both the private generator and the utility know where they stand monetarily.
Supporters of solar and wind claim grid parity, and say they would become even less expensive if externalities like carbon emissions from coal and natural gas were accounted for. Their detractors point to their unreliability, to the cheap land offered to them, to the cost of building new transmission lines to connect solar parks and wind farms to the grid and haul electricity. Suffice it to say that until a utility-scale energy storage solution comes along, they seem consigned to remain niche accompaniments to conventional power. Policy-makers in India who are keen to rapidly go green might just be barking up the wrong tree.
The writer is an energy expert. He can be reached at sunil_sharan@yahoo.com