India's Massive Solar Program Underway

Given the government's big aims, India's solar sector is attracting corporate interest. Investments and tie-ups are being put in place.

As the cost of building solar capacity falls, a significant solar scale-up is expected across the world, including India, which boasts one of the world's highest solar intensities. Already, India ranks fourth in the world after Germany in the latest Renewable Energy Country Attractiveness Indices prepared by Ernst & Young for 2010. China ranks first, followed by the United States.

India is faced with crippling energy shortages. Since 1990, energy consumption as a share of total world energy use has increased significantly in both China and India, when together they accounted for about 10 percent of the world's total energy consumption. That doubled to 20 percent in 2007, according to the International Energy Agency, with their combined energy use expected to account for 30 percent of total world energy consumption in 2035.

The big problem for solar remains cost, which is about 2.5 times that of coal, whose use, with its attendant greenhouse gas emissions, is growing exponentially as the country industrializes. And, with 400 million people without access to electricity using wood, waste and other carbon-producing materials for heating, cooking and lighting, it has vaulted into the ranks of the world's top carbon emitters.

Although India has made little progress in implementing extensive plans for high-end semiconductor fabrication, India's solar cell production plans are progressing well, especially given the local content requirements in the state-backed National Solar Mission, in which the government plans to install 20 million solar lights and 20 million square meters of solar thermal panels to generate 20,000 megawatts of power by 2022. The 20 million solar lights are expected to save a billion liters of kerosene annually.

In an assessment for 2010 Gartner said that "given the growth potential, it is only natural for global solar photovoltaic manufacturers and their suppliers to invest in the fast-growing Indian market."

The Indian solar energy related business (wafers and generating grid power) is thus estimated to grow to US$70-$100 billion in the next decade.

NSM Phase-1

India is focused on both thermal and photovoltaic solar processes to generate electricity. The immediate aim is to produce 1300 megawatts by 2013 with another 10 gigawatts by 2017 and the rest by 2022 to meet the national goal, at which time solar is forecast to deliver 12.5 percent of India's total power output.

The bid responses for NSM-1 have been encouraging, with more than 420 applicants for 650 megawatts of solar power capacity -- 500 MW to be based on concentrated solar power (CSP) technology that is cheaper to establish and the other 150 MW from more expensive photovoltaic panels based on crystalline silicone modules.

This month, investment commitments of more than Rs70 billion (US$1.53 billion) have been finalized under NSM-1 based on concentrated solar power technology. Sixty companies have offered capacity of more than 2,600 MW. Seven firms have been finally selected by the NSM coordinator, state power major National Thermal Power Corp, the country's biggest energy company.

Some 100 MW of solar power each are to be developed by Reliance Power, Lanco and KVK Energy, 50 MW each by Megha Engineering, Godavari Power and Corporate Ispat and rest by Arum Renewables.

Meanwhile, applications for developing 1,740 MW have been received for photovoltaic projects.

The NSM June 2010 guidelines emphasize off-grid and decentralized solar applications, subsidy for rooftop solar photovoltaic installations and small solar generation, lower interest loans and generation-based incentives.

New Delhi has approved migration of ongoing projects to NSM. Solar projects in India thus deliver an IRR of 17-20 percent.

India Corporate Interest

Top Indian firms have been announcing their clean energy plans. Global consultancy Deloitte in a recent assessment said bigger investments and mergers are expected in the renewable energy sector, especially wind and solar.

Tata Power is aiming at deriving 25 percent its power generation or around 8,000 megawatts from clean sources by 2017, with solar and wind energy forming a big portion. The Anand Mahindra-led Mahindra Group is expected to enter the solar energy generation business and should announce a foreign partner soon. NTPC, the Asian Development Bank (ADB) and Kyuden International Corporation (Kyushu) recently signed an agreement to develop 500 megawatts of renewable energy in India within the next three years.

Another recent big-ticket tie-up is global major Siemens and Indian power and infrastructure player Adani group to expand into solar and wind turbine energy production. Indian Railways, the oil firm Indian Oil Corp, exploration company ONGC and Reliance Industries Ltd also have big renewable plans, particularly in the wind and solar sphere.

Foreign Interest

International interest in India's solar sector continues to be high, with American, European and Chinese firms expected to mark their presence and growth. Several plans have been announced in the recent months.

"India has enormous potential for the development of a strong solar industry," James Hu, Suntech's President for Asia Pacific, Middle East and Africa, said in a statement in August. In India recently to identify plant locations, Hillard Herzog, chief executive of US-based Bergamo Acquisition Corp, echoed Hu's statement.

Anil Srivastava of French Areva's alternate energy unit recently said that, "Solar is the new activity. It is absolutely a game changer for India."

Earlier this month, the ADB senior investment specialist Don Purka said the European Investment Bank has expressed interest in financing solar park projects in India. "Financing support is also seen from the US Import-Export bank and Germany's KWF," he said

America's First Solar, Taiwan's Motech, China's Suntech and French Areva have India plans in place. In the wake of the successful visit of President Barack Obama to India, the US-India Business Council is looking to export solar technology to Indian firms.

China-based Suntech Power Holdings, one of the biggest global manufacturers of crystalline silicon solar panels, has signed supply agreements with Azure Power, a leading independent solar power producer in India.

Another recent tie-up has been between Bergamo and Esoft Informatics Private Ltd., an Indian software firm to build six solar thermal power plants of 100 MW Capacity each.

Begamo CEO Hillard Herzog said total investment is expected to be US$2.4 billion. "The Bergamo-Esoft JV will look to ultimately ramp up capacity to 1,000 MW."

Meanwhile, International Finance Corporation (IFC), the commercial arm of the World Bank, said it would fund US$10 million for Sunborne Energy to develop solar power projects in India. Sunborne is backed by US-based investors, General Catalyst Partners and Khosla Ventures. Taiwan's Motech has signed a cell supply contract with India's Solar Semiconductor.

With its enormous solar resources, India is well placed to develop solar power, although careful nurturing by the government and long-term commitments from foreign investors is required. Nevertheless, India offers good potential for both generating projects and component manufacturers.

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