India is beginning to emerge as a major solar power generator, third in rank after America and China, although the country continues to face problems from a stifling bureaucracy and local industry, which seeks protection against foreign manufacturers of solar panels and other equipment.

Nonetheless, given the tie-ups and investments already concluded, experts estimate that solar capacity in the country is set to rise from a mere 50 MW in 2010 to nearly 10 GW in the next five years.

Crucially, the impact of solar power generation will be felt the most in the rural and backward belts that remain outside the national power supply grid, thus changing the lives of millions that rely on the burning of high polluting and unhealthy biomass energy. According to a 2011 study by the International Energy Agency, 404 million of India’s 1.2 billion people have no access to electricity at all.

Solar and other renewable energy sources such as wind and hydro are crucial to plug electricity generation gaps as a result of insufficient utilization of thermal capacities due shortage of coal supplies. This is apart from the much lower emission benefits of renewable energy. According to the IEA study, titled Technology Development Prospects for the Indian Power Sector, “challenges of the electricity sector in India include low efficiencies of thermal power plants, continued reliance on coal plants, and inadequate transmission and distribution networks. Improving the efficiency of electricity generation from coal is needed to exploit the extensive domestic coal resources and reduce air pollution. Integrated gasification combined‐cycle (IGCC) technology could achieve this, but has to be adapted to India’s coal quality or to rely on imported coal.”

States such as Gujarat, Karnataka, Tamil Nadu and Maharashtra are at the forefront of promoting RE in India via fiscal and tariff incentives that promote both domestic and overseas investors. These complement the efforts being made at the federal level to boost renewable energy.

Solar Interest

A bit of India’s solar progress is due to the inducements being extended to investors under the officially backed National Solar Mission, which seeks to install 20GW of solar power by 2022 in the country. New Delhi is now in the process of implementing the second round of the national solar mission, with the response again reported to be very good. Nearly 200 firms have offered over 2,500 MW for the second bidding, much higher than the allocated capacity 350 MW. In the first round, bid applications were about 1,700 MW against allocated 150 MW of solar power.

That response has to be greeted with a certain amount of caution. A 2010 study by the World Bank found that producers have serious concerns about a number of issues, the most contentious of which is a requirement for domestic content to protect local manufacturers, who do not appear to be able to gear up fast enough to meet the country’s needs. US trade officials have repeatedly raised the issue, threatening to take it to the World Trade Organization. European Union officials have raised similar concerns.

Under the terms of the regulations, foreign businesses seeking to manufacturing bases must tie up with a local partner. This process takes a bit more time, but advocates say it ensures a win-win situation for everybody -- business and politics. This is the way the power equipment sector is also being developed. For solar, the local content norm applies only to National Solar Mission, not state-backed projects, such as in Gujarat etc.

The World Bank study also polled developers in India, who complained that a long list of approvals from land usage authorities, pollution control board authorities, the aviation ministry and local authorities for water usage take months to solve. Some approvals must be renewed every year.

Nonetheless, overseas solar operators still have faith that the Indian market will develop. Companies that have tied up with local Indian players include SunEdison, Juwi solar, AES Solar, Conergy, Gehrlicher Solar, and Enfinity. Foreign solar module suppliers that have opened Indian channels include First Solar, Solar Frontier, Abound Solar, Trina Solar and Suntech.

In an assessment, the consulting firm Gartner has said: “given the growth potential, it is only natural for global solar photovoltaic manufacturers and their suppliers to invest in the fast-growing Indian market.”

In a big move recently, the Frankfurt, Germany-based First Solar GmbH, the world's largest solar company by market value, signed an agreement to supply 100 MW solar modules to major Reliance Power for its upcoming project in Jaisalmer, Rajasthan. Solar power from the plant will be supplied to Mumbai.

In a statement First Solar said that the “agreement is the largest PV module supply agreement in India to date,” adding that “40 MW of advanced thin film modules will be supplied by end 2011. Delivery of the remaining 60 MW solar module is expected in 2012.” The company said that it expects India to return about 10 percent of its 2011 sales in megawatts that can make up for the slide in Europe revenues.

The big problem for solar remains cost, which is about 2.5 times that of coal in India, making it necessary for the state to extend fiscal and tariff incentives to make the clean source of power, viable.

However, this too could change. In a significant statement earlier this month, Lanco Solar, backed by the major power and infrastructure firm Lanco Infratech, said that it expects solar power costs to fall by more than 40 percent by 2015 that would allow the industry take on conventional coal-fired power generators without state subsidies and backing.

Renewable High

Indeed, global players see good prospects in investing in India’s RE sector that especially comprise wind and solar. Reports by consultancies PwC and KPMG this year have highlighted that USA, China and India are the top three favored destinations globally for renewable energy investment.

India’s wind energy installations are estimated to rise by 3,000 MW, nearly 40 percent higher than last year. Wind capacity addition for the next three years is projected at 7,500 MW.

One significant interest indicator in Indian RE is private equity investments that have taken a big leap in the first three quarters 2011-12 (ending March) with 14 transactions worth over US$520 million marking a fivefold rise.

Meanwhile, earlier this month, GE, the world's third-biggest supplier of wind turbines, announced its first investment in Indian RE generation. GE is pooling US$50 million with AIMS-listed Greenko group’s US$65 million investment in 500MW wind projects. Greenko is building a diversified RE portfolio in India.

In another recent boost, Hyderabad-based Suryachakra Power has signed joint venture agreements with American Bio Sources Inc (ABS) and Environmental Energy Finance Corporation USA (EEFC) to develop 500MW RE projects in the country.

The deal has been signed between Suryachakra Global Ventures Ltd., Hong Kong (SGVL), a wholly owned subsidiary of Suryachakra Power with ABS and EEFC to set up 50:50 joint ventures to develop solar, wind, biomass power projects in India. ABS already has US$200 million approved funding from the US Export-Import (Exim) Bank to set-up RE projects in India.

Clearly, RE is one momentum that India cannot afford to miss.

(Siddharth Srivastava is a New Delhi-based journalist. He can be reached at sidsri@yahoo.com.)