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How to drive private sector into solar power

The entry barrier of huge capital costs— people forget running costs are virtually negligible—can be addressed by innovative financial structuring.

Prasad Menon | Print Edition: February 21, 2010

The National Solar Mission is one of the most ambitious solar plans that any country has laid out so far. The hope is that it will also establish India as a global leader in solar energy, not just in terms of solar power generation but also in solar manufacturing and generation technology. It is imperative that we have a strategy to make solar power affordable. With more than 40 per cent of India's population still deprived of a basic electricity connection, there are half-a-billion people in India as potential customers provided the price is right. Further, it reinforces that major developing nations like India can also become renewable energy hubs. The following steps will help solar power achieve a minimum critical mass and attract investment:

Make solar cost competitive: The generic tariff calculated by the Central Electricity Regulatory Commission (CERC) for solar power for 2009-10 has been proposed at Rs 18.44 per unit, which is four times higher than fossil fuels or wind energy. It is important to make solar energy cost-competitive as quickly as possible for sustainability.

Make funding available: The key barrier has been the high price structure of solar energy systems. This comprises almost the entire cost at the time of installation plus low running costs—negligible in the case of grid-connected plants—to be recovered over a long duration of 25 years. This leads to a perception of solar power being expensive. People forget that once they have installed a solar power system they will pay almost nothing for the next 25 years. The only redressal is to reduce the upfront cost by innovative financial structuring of these projects.

Energy security: Energy poverty is at the heart of economic deprivation, and distributed solar energy can open up a new sustainable development model for rural India. Expand the horizons of business: While the manufacture of solar photovoltaic cells and modules is a high-technology, highfinance activity and will remain confined to leading players, there will be many other opportunities opening up for professionals and entrepreneurs in sales and marketing, installation and commissioning, service and maintenance, research and development, education and training, etc. Polysilicon manufacturing and wafering units should also come up. Solar thermal plants using different configurations of the concentrated solar power technology will lead to the growth of domestic industries in glasses and mirrors, etc.

Enforce RPO levels and introduce time-ofthe-day tariff: The solar mission framework envisages the purchase of solar power by a NTPC subsidiary and sale after bundling it in equal measure with unallocated quota of NTPC's thermal power to state utilities against their solar-specific renewable purchase obligation. If this is enforced and utilities take this seriously and implement 0.25 per cent of their purchase from solar, rising to 3 per cent by 2022, it will open up a sizeable market for solar power developers. Further, introduction of the time-of-the-day tariff will be useful as solar energy availability matches demand requirements during the day.

The new Solar Mission policy has opened up a world of immense possibilities, one where solar power could fairly quickly start competing with fossil fuels. The scourge of climate change and global warming needs to be fought back with no less a warrior than the Sun himself.

The writer is the Managing Director, Tata Power

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