Even as India is grappling with the issue of adding capacities in power generation and tries to give impetus to renewable energy resources, there are some issues which needs to be addressed to give a further leg up to the sector. In a chat with Raghuvir Badrinath, K Subramanya, CEO, Tata BP Solar, shares his perspectives on how growth can be achieved in the renewable energy sector. The subject of renewable energy is one of the most talked in the recent past. How is it all shaping up on the ground?
The renewable energy capacity of 16,786 Mw is less than 10 per cent of the 167,077 Mw installed power that exists in India today. This is only 10 per cent of the installed capacity. In actual generation terms, renewable energy sources constitute 7.7 per cent of the power generation. India has made a rapid progress in the use of renewable energy and some of the Indian companies have established themselves globally. Under the National Action Plan on Climate Change, the government has set out a target to increase the use of renewables in the overall energy mix from 5 per cent in 2010 to 15 per cent by 2020. The government has launched the Jawaharlal Nehru National Solar Mission (JNNSM) towards realising this target. The solar mission aims to create a policy framework to promote the generation of 20,000 Mw of solar power by 2022. Within the RE sources, wind energy has been the most successful so far and accounts for the vast majority of the R E installations in India. From the long term potential point of view, solar energy has a very big scope and a good beginning has been made, thanks to the JNNSM and state level initiatives.
What is the kind of support that the government is providing to grow this sector?
The government strategy has been not to invest in renewable energy generation capacity directly (or through public sector undertakings) but to attract the private sector to invest in and install the renewable energy generating capacity. The power thus generated is purchased by the government at a feed-in tariff which is set such that the investor recovers his investment and makes a return on the investment. This “generation - based incentive” is the concept on which the solar sector is being developed. However, the runaway success of the wind energy sector over the last 10 years has been on account of the fiscal incentive made available to developers in the form of accelerated depreciation of the plant which resulted on income tax savings for the company which was responsible for the large scale inflow of private capital into wind farms across southern and western states. In terms of promoting manufacturing, the government had come out with an incentives policy (SIPS) under which some half a dozen units are shortlisted to be set up for PV manufacturing with government’s subsidy support to the tune of 20- 25 per cent.
How has Tata BP Solar been approaching this sector and what do you feel will be the road ahead?
We have played a role in developing the Indian solar market over the last 20 years during the phase when only off-grid products such as solar lanterns and home lightings systems and solar street lights could be sold in India. While we have established that business to an extent, we have expanded in the rooftop and free field solar power plants and megawatt-scale grid connected solar power plants in Germany, Spain, USA, Australia and Italy. Now that the Indian solar market is developing the new segments of rooftop and mw-scale plants, we at Tata BP Solar are looking forward to establishing that business in India. As of now we have an existing cell manufacturing capacity of 84 MW and module manufacturing capacity of 125 MW. These will be increased in the coming years in tune with the expansion and development of the Indian and solar market.
What do you think the Government of India should further do for this sector?
The government needs to ensure that the feed-in tariff made available to the solar power developers is carefully set. If it is too high, it would be unsustainable and lead to price increase for the other consumers, if it is too low it would not attract serious investments. Competitive tariff bidding is a good idea in theory to discover the price of a commodity. But in a nascent sector like solar it can play havoc as it is likely to happen in the context of the bidding which has taken place recently in the award of the 30 solar projects of 5 Mw each by the NTPC Vidyut Vyapar Nigam (NVVN) wherein the new and inexperienced players have made such heavy discounts that these have resulted in unviable tariffs. At such low tariffs the projects will be forced to use cheap technology and equipment. They will have difficulties in getting financial closures for their projects because of the poor revenue streams due to discounted tariffs. Eventually, such bids might lead to failed projects. A much better idea would have been for the government to simply pick lots for selecting the 30 projects from a basket of 300 applicants. At least in that case, the projects would have got the tariff of Rs 17.91 as envisaged by the CERC. There would have been successful projects which would have led to the development of the next phase of solar mission by when the tariff would have been settled by market forces.
The second issue is for the government to increase off-grid deployment manifold given the vastness of India and the present state of electrification. There are 23 million households without electricity. Several 1,000 villages are not connected to the grid.and the present solar Mw allocations for this is measly. This is urgent and ensures semblance of energy equity. Our PM has promised one KwH per household by 2012.
How do you think India can learn from the Chinese example which has made good progress?
India has to match China in supporting local manufacturing and infrastructure development. This is important for the security of the nation in the longer term perspective. China has stolen a march over us and is several notches ahead of us though India started much early. We presently do not have a level playing field. In the present circumstances, it is difficult for local manufacturing to blossom inspite of their proven capabilities.Unless this is addressed seriously, local manufacturing will wither away or foldup leaving the field open for dumping by the Chinese. Lastly, the government has to undertake large scale training and development of technical manpower required for the large scale promotion of solar industry in India. There will be a substantial requirement of skilled and technically proficient personnel at every node of the value chain - from R&D to manufacturing to marketing and distribution to operations and maintenance.
