RESolve Energy Consultants has been active in Indian renewable energy sector for the past three years, assisting companies set up PV module manufacturing units and utility scale projects in key states like Rajasthan, Madhya Pradesh and Tamil Nadu. RESolve has also advised North American and European solar companies in their market entry strategy for India and has also assisted global development banks like World Bank (USA) and Think-tanks like ICTSD (Switzerland) on renewable energy policy and regulatory advisory.
In a recent interaction with Greentech Lead, Madhavan Nampoothiri, founder and director, RESolve Energy Consultants, shared his experience working in the renewable energy sector in India and the growth prospects of India as a solar energy hub.
Highlights of the interview:
- Lack of clarity on policies, faltering RPO mechanism, and cost of financing have affected solar industry in India
- However, with the new government planning to upwardly revise the solar installation targets and several state governments waking up to the potential of the sector, the future looks bright.
- Most domestic manufacturers do not have the scale or the vertical integration to sustain their competitive advantage vis-à-vis much bigger competitors, especially from China.
- Domestic Content Requirements (DCR) are only short term solutions, and cannot be extended for long periods of time.
- Initiatives like net metering and Income Tax incentives can revolutionize the growth of the sector among residential customers
Read the complete interview below:
Based on your experience as strategic consultant in the solar energy sector in different capacities, how do you evaluate the growth of solar industry in India over the past few years, compared to other developing countries?
The Indian solar sector started with a bang in 2010, with the rollout of the Phase 1 of the Jawaharlal Nehru National Solar Mission, and more importantly, the Gujarat Solar policy. The Renewable Purchase Obligations (RPO) and the Renewable Energy Certificates(RECs) implemented at that time also generated lot of enthusiasm. The result was that India’s solar installed capacity crossed the 1 GW mark by June 2012.But the growth stalled soon after that, as a result of the slow progress of the JNNSM, no additional project allocation in Gujarat, and no other state making up for the annual capacity addition gap left by Gujarat. The failure of the RPO regulations and the resultant REC mechanism as a result of non-enforcement of RPO at the state level meant that there were no regulatory supports to sustain the growth of the sector. The scenario is slowly changing, with several states announcing their respective state solar policies and allotting projects through bidding.
In contrast, China’s solar industry has been growing extraordinarily well during the last 3 years, and China, along with Japan and the USA, is today one of the drivers of the global solar industry.
What are the prospects of solar energy in India?
Given the huge power deficit on the one side and the huge availability of solar irradiation on the other side, solar technologies have the inherent advantage of being one of the most suitable technologies for India. The fact that the cost of solar dropped significantly till last year at a time when the electricity costs from conventional sources has also been good news for the sector. The solar industry has evolved quite well over since 2010 and is capable of taking the solar sector to great heights. What has been sub-optimal have been the policy and regulatory enablers. While JNNSM and RPOs provided the policy and regulatory frameworks respectively, the execution has been a problem. With the new government in the center planning to upwardly revise the solar installation targets, and with several state governments waking up to the potential of the sector, I believe that the next decade will belong to Solar.
List three major challenges facing Indian solar energy sector?
The 3 major challenges would be
Lack of clarity on policies at both central level and state level: This has led to a situation where there is no visible project line, which is preventing many companies in investing and expanding in India. Many foreign companies who were very keen to take part in the Indian market are staying away due to the lack of clarity.
Faltering RPO mechanism: If properly enforced, the RPO was supposed to add more than 35 GW of solar capacity by 2022. But right now, there is hardly any interest in RPO based projects due to the lack of enforcement.
Cost of Financing: The borrowing costs in India are among the highest in the world, and this makes it costlier for developers to set up projects.
What is your suggestion to bring consensus among states on solar policies?
I think that it is best left to each state to achieve its solar targets. Most of the states have been following a bidding process, and there are only minor variations in the way the solar policies are pursued.
What are the major implementation challenges for contractors? Any solution to address them?
Possession of land, setting of evacuation infrastructure and mobilizing and managing the local manpower are some of the implementation challenges. But the contractors now have enough experience to anticipate and manage these challenges, and I don’t think that these are worrisome anymore.
Domestic manufacturing segment is threatened by oversupply and price competition from foreign companies. What is your suggestion to foster domestic manufacturing?
The only solution is a surge in demand. The glut of solar modules is largely behind us, and the consolidation of the industry has led to a drop in the manufacturing capacity. The increase in global demand for the modules is also bringing the supply-demand situation to equilibrium. In fact, there are now warnings that there will be a shortage of solar modules very soon. If such a situation happens, the Indian manufacturing sector will also benefit.
Having said that very few manufacturers have the scale or the vertical integration to sustain their competitive advantage vis-à-vis much bigger competitors, especially from China. India also does not have a complete manufacturing ecosystem, which puts it at a disadvantage. Domestic Content Requirements(DCR) are only short term solutions, and cannot be extended for long periods of time. The long term sustainability of the domestic manufacturers will have to come through innovation and focus on quality.
Will trade wars affect India’s prospectus in this sector? What is the best ways for countries to settle these issues?
Trade wars become a problem when the growth of the industry is not good. That is not the case now, since solar is growing at a healthy pace in major countries like USA and China. I personally don’t believe that the trade wars will hurt the sector in any major way. The best way to settle these issues will be through bilateral negotiations.
Cost still remaining a major concern for consumers, how do you encourage public to go solar? Any solid estimate to prove that solar is viable for Indian customers?
Solar will become affordable to the residential customers without subsidies only another 3-4 years from now. Right now, some of the states like Delhi have come up with net-metering policies which allow these residential consumers to generate, consume and sell excess energy back to the Discoms(Distribution Companies). This is a model that has been hugely successful in Germany, and if a right price is fixed for the energy generated from rooftop solar systems, there is no reason why consumers will not embrace solar. There have also been recommendations to the government to provide personal Income Tax breaks/deductions for any consumer who invests in rooftop solar system. While it is quite challenging to monitor such solar systems and prevent misuse of the incentives, if rightly done, these Income Tax breaks can revolutionize the growth of the sector.