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Solar Plan Could Revolutionize India's Energy Sector

A leaked early version of the Indian Government's national solar energy plan indicates that India may be thinking more ambitiously about a "clean energy" road map than was previously anticipated.

The draft strategy, first published in The Hindu, outlines plans for a national target of 200,000 megawatts of solar generation capacity by 2050. This is 1.3 times India's current installed power generation capacity of 150,000 megawatts across all energy sectors.

Although the Prime Minister's Council on Climate Change is yet to approve the plan, and the Ministry of New and Renewable Energy has not confirmed the claim, this possibility raises important questions for India's energy future, namely: Could a large-scale transition to solar power and other renewables be economically and technically possible? And if so, what would it take?

India is home to one of the most abundant solar resources in the world, with 2.97 million square kilometers of tropical and subtropical land and an average of 250-300 clear sunny days a year. As such, solar power offers significant potential to meet a large share of the country's energy needs using both centralized and decentralized production.

Such changes, if realized, could dwarf current solar leaders Germany, Spain, Japan, and the United States in both domestic market size and export manufacturing. They would also create a hefty job market in solar manufacturing and installation.

According to the leaked document, India's "solar mission" will include measures for rapidly expanding the use of small-scale photovoltaic panels, solar lighting systems, and commercial-scale solar plants, in order to drive down costs and encourage domestic solar manufacturing. The efforts would occur in both rural and urban areas and target residential as well as commercial users. The plan also proposes scaling-up centralized solar thermal power generation, with the aim of achieving cost parity with conventional grid power by 2020 and the full necessary energy infrastructure by 2050.

With India's installed solar capacity currently at only 3 megawatts, this would be the most ambitious solar plan that any country has laid out so far. The scope of the initiative would also match and ultimately far exceed India's plans for nuclear power generation.

Several recent studies have outlined wider renewable-energy scenarios for India, including Energy [R]evolution, a report released by Greenpeace and the European Renewable Energy Council in March and Mitigation Options for India: The Role of the International Community released by The Energy and Resources Institute (TERI) in December 2007. Both reports encourage the transition to solar power as a critical way for India to boost its energy security and help to reduce greenhouse gas emissions globally.

Both the Greenpeace and TERI studies operate from the premise that global carbon emissions must peak by no later than 2015 to avoid dangerous emission levels. They make the case that it is not only technically and economically feasible for India to make the shift to renewable energy sources (if this rollout is combined with energy-efficiency measures), but also prudent to begin this transition now.

There are several reasons for this urgency. First, the reports note that India's power-generation infrastructure is undergoing rapid expansion to meet national development objectives, with the country still facing unmet power demands that equate to as much as 80 percent of current installed capacity. Second, they point to rising energy security concerns as energy prices go up and supplies shrink, making it a ripe time to shift to a new model of energy production.

Crucially, however, once the high upfront investment costs have been circumnavigated, the shift to renewables would actually be cost positive, the reports conclude. "The fuel savings up to 2030 would amount to $2,170 billion, seven times more than the additional investment costs," said Sven Teske, an author of Energy [R]evolution. "Over 30 years, India would make money."

Both reports offer recommendations for how such a shift could happen. Proposed steps include a widespread scaling-up of both decentralized energy production and centralized renewable energy production (particularly solar photovoltaics, concentrating solar power, wind, and biomass); the use of combined heat-and- power systems at the point of generation; the decarbonization of transport fuel (with an emphasis on electric vehicles and other sustainable forms of transportation); an increase in research and development across energy segments; and improvements in the energy efficiency of buildings, transport, appliances, industrial processes, and power transmission.

They also suggest granting priority access to the grid for renewables, creating an innovative legal structure for incentivization and taxation, and rallying both public support and international technological and financial assistance to accelerate fast and effective change.

The reports differ in their approach to nuclear energy, with TERI stating that nuclear will play a key role in India's power sector in the medium to long term, and the Greenpeace study not including it at all.

According to both reports, the primary obstacles facing India's rapid shift to renewable energy are the upfront investment costs required and the need for strong political will.

On the issue of investment costs, TERI found that a shift to a 92-percent renewables share in India's energy supply would result in a doubling of domestic carbon emissions by 2031 (compared with a seven-time increase under the current trajectory) and would cost an estimated 457 trillion Rupees (US$9.6 trillion). This is contrasted with a 75-percent renewables share, which would result in a tripling of emissions by 2031 and cost an estimated 260 trillion Rupees ($5.4 trillion).

Solar would be pivotal in both cases, with concentrated solar power alone making up 61 percent and 31 percent of the total mix for the two scenarios, respectively.

Energy [R]evolution concluded that it is possible for 69 percent of India's electricity and 70 percent of India's heating and cooling needs to come from renewable sources by 2050 - but capturing this opportunity "would require at an additional investment of $154 billion," Teske said.

Meanwhile, the government's leaked national solar strategy proposes investments amounting to some 85,000-105,000 Crore Rupees ($18-22 billion) over this same period. This would clearly fall far short of the estimated funding needs for such a massive and rapid rollout of solar energy, if compared with the estimates above.

Both Greenpeace and TERI suggest the use of international financing mechanisms to bridge the cost gap, a proposal in line with the Indian government's rhetoric in the ongoing international climate negotiations. These proposals include the full utilization of a carbon-credit mechanism such as the Kyoto Protocol's Clean Development Mechanism (CDM), as well as the establishment of a $200 billion international fund "supported by a feed-in tariff mechanism," according to Energy [R]evolution.

"The proposed feed-in law structure, which would be combined with an emission trading mechanism, allows for the upfront investment costs to be met and for planning from local project developers, thanks to a fixed-return guarantee," Teske said.

With regard to the need for political will, there are certainly signs that change is afoot. In addition to the government's potential new solar target, initiatives under way across India include the development and implementation of energy-efficiency improvements for appliances, buildings, power generation, and industry; a revised national policy to upgrade and "smarten" much of India's power grid; a growing portfolio of CDM projects; and emerging leadership in states like Maharashtra, Tamil Nadu, and Rajasthan to adopt and implement progressive renewable energy policies.

Civil society and the private sector are increasingly active in implementing renewables and smart energy projects across many parts of the country as well. However, some observers remain skeptical about the feasibility of India's energy transition plans, with concerns running deeper than the need for finance and strong policy frameworks.

V. Subramanian, former Secretary of the Ministry of New and Renewable Energy, said the strategy outlined in Energy [R]evolution would face significant implementation challenges. "The government of India does not currently have the machinery to implement such a strategy at a national level," said Subramanian, who now serves as CEO of India's Wind Energy Association. "This has to be done by state governments, and as yet the engagement between the two on this is not strong."

In Mr. Subramanian's view, financing is not the key issue. "If India leveraged 1 paise, or one-hundredth of a rupee, on every kilowatt hour generated by coal-fired utilities, we would have enough money to implement all renewables here in India," he said.

It is clear that changes toward a renewable energy future are under way in India - but is the current pace fast enough? Many environmentalists argue that it is still not in line with the stated need and opportunity, and that some barriers are not being addressed. Targets such as those outlined in the leaked solar energy report and recommended in the recent renewables studies would raise the bar of opportunity for scale, pace, impact, and actionable political will. However, India would need a significant machinery overhaul to implement such a change, relying upon the support of international collaboration.

Anna da Costa is a Worldwatch Institute Fellow based in New Delhi. This article is a product of Eye on Earth, Worldwatch Institute's online news service.

Photo credit: Flickr/World Resources Institute Staff, Creative Commons License.

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In a policy study conducted last year on tariff policies in India for renewable energy, I found the following disincentives for increased renewable capacity:

A cap of 5 MW on generation capacity from any single provider. This removes economies of scale that will be necessary to allow renewable sources to significantly satisfy the nation’s electricity demand. It also bars existing providers of electricity (from carbon-intensive sources) from transitioning to cleaner generating technologies on a significant scale. It unnecessarily perpetuates an adversarial relationship between the different stakeholders and participants in India’s energy sector.

Bans on shared commercial/non-commercial generating capacity being able to wheel power out onto the grid or charge a fair price for it. This pushes commercial facilities to stick with carbon-intensive captive generating facilities such as diesel generators.

Customs tariff policies and domestic tax policies that discourage manufacturing of equipment for generating energy from renewable sources. Although octroi has largely been eliminated, significant opportunities remain for tax changes that could spur development of generating capacity from renewable sources.

Tariff policies that bar the use of appropriate technologies in electrical generation in favor of cutting edge technologies. This discourages the construction of new generating capacity that could both be cheaper and manufactured (and maintained) locally. Tariff policies exacerbate foreign exchange outflows and balance-of-payment issues, when they could be used for constructive and more economically beneficial purposes. Current electrical tariff policies also have a negative influence on labor market policies and goals, especially in rural areas.

Bans on premium opt-in price allowances for energy from renewable sources, thereby disallowing rate bases from incorporating small percentages of renewable energy initially, on a blended tariff basis. If such a ban had been instituted in California, we would see much less generating capacity from renewable sources (especially wind) today. We would also see California businesses and consumers unable to opt-in to purchase electricity from renewable sources through premium tariff options. India’s long standing reliance on command-and-control economic policies and costly cross-subsidization measures have outlived their usefulness in the energy sector, which cries out for reform.

Total cost analysis (TCA) processes for carbon-intensive generating facilities are sorely lacking, whereby the total cost of generation is opaque and tariff rates are artificially low. India pays for electricity from burning fossil fuels from other sources beyond the electrical rate base. This provides unfair competitive advantages for polluters and harms cost-recovery opportunities for generators of renewable energy.

A policy bias towards solar and RRF (trash incineration) technologies comes at the expense of wind, small-scale hydrel, geo-thermal, tidal and other renewable technologies. This policy bias will skew generating capacity in a direction that concentrates on solar and possibly on incineration as well.

Concentration on a single source or technology is inherently risky; as we see now with Ethiopia’s failed efforts to concentrate on hydrel expansion. Tekeze and Gibe II have both experienced dramatic and costly failures, with Gibe III’s impacts bleeding into ongoing civil disturbances in Sindh, Pakistan. Energy is a security issue and deserves to be treated as such, rather than a parastatal satrapy or a source of funds from corrupt practices (as appears to be the case with both Gibe II and III).

A ban against modern technologies for energy storage from solar and other renewable sources, whereby all power generated must immediately be funneled into the grid. The storage ban will require increased costs for redundant generating capacity and deprive grid managers of much needed flexibility. Energy storage could be achieved through low technology means such as water lifting and storage during peak generating times, to be tapped once the sun goes down.

Ongoing financial support from multilateral institutions for carbon-intensive energy production, most notably coal-fired power plants. Some of this support is diverted by corrupt local officials. More assets have been deposited in secret Swiss bank accounts from India than from all other countries in the world, combined.

Negative regulatory incentives for achieving increased efficiency in generation from coal, such as pricing policies that pay the same for coal with a high percentage of rocks and other contaminants versus higher quality coal deliveries. Accounts receivables and payables policies at parastatals need to be examined and reformed, with cooperation of state-level parastatals and government agencies.

Lack of opportunities for meaningful participation by civil society organizations in siting, tariff and energy policy matters in India. Public participation is vital for controlling costs, minimizing risks and speeding implementation. Support for civil society organizations needs to be provided and bars for participation lifted. India’s current approach to limiting civil society organizations has the consequence of encouraging the activities of armed militant groups, with concurrent increases in risk levels associated with new energy projects in rural areas.

Nearly complete disfunctionality of judicial institutions as a means for the resolution of commercial disputes fairly and within reasonable periods of time, thereby encouraging unpredictability and high risks for investors. Judicial disfunctionality removes disincentives for corruption and encourages violence as a means for problem solving and dispute resolution.

An over reliance on off-budget debt obligations for funding India’s energy sector through a reliance on multilateral agencies such as the World Bank. Not only has this accelerated India’s contributions to global climate change over the last fifteen years, but it has also diverted funds that could have been used for increasing electrical generating capacity from India and elsewhere. The pace of reform, increased accountability and public openness at multilateral agencies (especially the banks) appears to have stalled and needs to be rejuvenated with support from governments and foundations.

Poor project implementation rates in the energy sector in India have raised costs and decreased generating capacity over the last fifteen years. Since many of those costs were supported by loans from multilateral agencies, India finds itself obligated to satisfy those financial obligations (for poorly implemented projects) before it can consider contributing capital to new, environmentally friendly projects.

Poor tariff structures and inadequate policy making processes for tariff reform have kept India deprived of tariff tools for encouraging conservation and renewable energy. Reform would allow real-time demand-based tariffs and for large users to be taken off grid to support residential customers.

India enjoys tremendous potential to profit from renewable energy sources. Neither international nor domestic Indian institutions have been sufficiently cooperative nor supportive of efforts to realize that potential. Current initiatives to increase electrical generation from renewable sources do not appear to go far enough, fast enough.

Posted by: Anthony Mitchell on 30 May 09

plz send me the details of how to manufacture the required equipment to generate solar energy

Posted by: chikkala Bhavani shankar on 24 Apr 10

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