Sustaining the sunrise in India’s solar industry
The 28th report of the parliamentary standing committee on energy reviewing the National Solar Mission has flagged several areas of concern. A target to generate 100GW of solar energy has been set for 2022, of which 60GW will come from large and medium scale solar projects and the remaining 40GW from rooftop solar projects. However, only 663 MW of rooftop solar projects have been installed. The Ministry of New and Renewable Energy blamed it on multiple approval processes, the reluctance of DISCOMs to set up metering applications at the customer’s ( who now also becomes a power producer) end, and lack of consistency in subsidies and regulations.
The report also raises concerns about whether the falling solar tariffs, which are now Rs.2.44/kWh are sustainable and whether companies are sacrificing returns on investment to corner a larger market share. In 2010, bids ranged between Rs.10-12/kWh which fell to Rs.6-8/kWh in 2014 and has sharply fallen by over 50 per cent in the past one year. If banks pull the plug on funding, or if discoms renege from their power purchase commitments, or if the costs of operation and maintenance make the projects unviable these can hurt India’s fledgeling solar industry.
Interestingly, the committee maintains equanimity on the controversial question of dumping by Chinese SPV manufacturers. It restricts itself to stating that an anti-dumping duty should be imposed on poor quality imported materials. The reality is that the low-cost Chinese imports are fuelling India’s impressive solar surge in recent years. India added 5.5 GW of solar capacity in 2016 and is reportedly poised to add 9 GW in 2017. This is in contrast to a mere 945 MW added in 2013-14 when solar module costs were 58-60 cents/watt as against 16 cents/watts now. Imports account for 85 per cent of India’s needs.
The committee has suggested that the MNRE put more emphasis on setting up large scale manufacturing solar photo cell manufacturing hubs. They have also sought zero excise duty exemption and Zero import duty on raw materials. Considering that the WTO has restrained the government from placing restrictions on power projects that would have forced them to purchase only indigenous SPV modules, the government certainly needs to focus on capacity building and better designing of subsidies.
India’s SPV cell imports are to the tune of $5 billion while exports are just in the order of a few ten million dollars. There is no reason why India cannot bridge the gap in a few years time. For the moment it must use the cheap imports to build solar capacity but increasingly rely on domestic industry to meet future demand.
The report is scathing in its criticism of various government arms including the PSUs for not doing enough to build solar capacity. PSUs were supposed to add 10 GW of rooftop solar capacity by 2022 but are yet to achieve even a tenth of that capacity. With NABARD help only 1.27 lakh solar pumps have been installed against a target of 10 lakh. Against a target of installing 3 lakh streetlights in 169 constituencies spread across Uttar Pradesh, Bihar, Jharkhand, Odisha and Assam by 2018, only 9,400 were installed.
The committee visualizes an investment requirement of Rs.5 lakh crore for meeting the 100 GW target. But the government, by its own admission, has left it to the private sector to mop up the investment while it provides various forms of assistance, financial, administrative, and technical. The committee wants the government to play a more “proactive” role. The danger of the solar industry suffering the same problems that have plagued the power and telecom sector cannot be ruled out.
The growth of solar is critical in India’s ability to combat climate change and bring development to more people. It also has the potential to create jobs. Power minister Piyush Goyal has been among the better performing ministers in the government. Much of what is in the standing committee report contains will already be known to him. But can he address the significant challenges and the shortcomings that the report flags?