Business Today

Race Against Time

The rising solar capacity will reduce the carbon footprint, but faces many challenges
twitter-logo Anilesh S Mahajan   New Delhi     Print Edition: June 18, 2017
Race Against Time

When Delhi-based renewable energy company Acme Solar bid a record low Rs2.44 per unit to bag the 500 MW Bhadla Solar Park in mid-May, it did not surprise anyone. Solar tariffs in India have been on the slide for some time now; every bid for a solar park brings it down further. The tariffs have fallen almost 80 per cent from Rs12.16 for the first 150 MW solar park under the National Solar Mission (NSM) Batch-I in 2010.

Thanks to falling solar tariffs, the gap between renewable and coal-based power generation is narrowing, making renewable power a preferred source in many regions. This is happening despite the fact that power, coal and renewable energy minister, Piyush Goyal, has continued efforts to reduce tariffs for thermal power generation as well. In the last fiscal, NTPC recorded an average tariff of Rs1.94 a unit, down from Rs3.25 a unit two years ago, largely because of improved coal quality and efficient logistics. "This is also reducing our carbon footprint," the minister remarked.

There are multiple reasons behind the dip in solar tariffs. These are cheaper solar panel imports from China, reduction in construction costs, fall in capital costs and assured offtake from government agencies. The cost of debt financing, which in the first quarter of 2016 was around 11.50 per cent, is today 10.50 per cent. Second, during the same period, capital expenditure per MW has fallen from Rs5.53 crore to Rs4.33 crore as the cost of panels is coming down sharply.

In February this year, India tried reverse bidding for wind power projects too. Projects of one GW were split between the windiest states of Tamil Nadu and Gujarat. That saw aggressive bids at Rs3.46 a unit. "We will auction 1 GW more soon," says Goyal.

But solar projects are fraught with risk. Those investing are doing so on two assumptions: the price of solar panels will continue to fall and China will continue export subsidies. Second, the currency will either appreciate or stay stable. Both calls can go wrong. China has overcapacity in solar panel manufacturing and US and EU markets are squeezed because of anti-dumping duties and other import discouraging regimes. "There is a limit to which Chinese players can stretch. The solar story is here to stay, but not with this song and drama (of gradually dipping prices)," says a top banker. He added, "We are asking most promoters of such projects to pump in more equity."

Goyal doesn't believe the projects are risky, but says this is the only way to accelerate solar capacity addition. "I'm not holding the bid buttons for these companies. There is a completely transparent reverse bidding process. They bid according to their own calculations," Goyal told Business Today.

Fortunately for Goyal and India, too much capital is chasing too few projects. This means fierce competition in bids, and cut in the return expectations. The ROI in most projects is in the range of 8-10 per cent rather than the typical 14-16 per cent. Most financial experts believe many players may not be looking at the bottom line but a surge in top line to fuel prospects in future initial public offers. "We are deliberately staying away from solar bids. The margins are too low, and probably some projects are unviable," says Ratul Puri, Chairman, Hindustan Powerprojects.

In the last fiscal, India added 6.8 GW of solar and 5.5 GW of wind capacity. In the process, for the first time, India added more renewable capacity than conventional. The target was 12 GW, but projects in states and rooftop solar are not taking off at the same velocity.

India's commitment is to raise the share of non-fossil fuel share in the energy mix to 40 per cent by 2030 from 30 per cent (in June 2015). Between 2002 and 2015, the renewable grid capacity increased six times, from 3.9 GW (2 per cent) to 36 GW (13 per cent), and todrisay it has already crossed 58 GW (18 per cent). The mix includes solar, wind, small hydro, biomass, cogeneration, waste to power, et al. Goyal, who also heads the power ministry, says India might not require greenfield coal-based power plants in the near future. He cities a recent Central Electricity Authority report, which suggested that in the midterm, coal-based units may run at cumulative plant load factor of less than 60 per cent. India expects to retire 32 GW capacity (both thermal and hydro) by 2022, while 11 GW thermal plants would be renovated.

Thanks to the speed at which Indian renewables are growing, the target of achieving 40 per cent non-fossil blend may be met by 2022 itself.

Storage Pangs

Three ministers in the Narendra Modi government - surface transport minister Nitin Gadkari, petroleum minister Dharmendra Pradhan and power minister Piyush Goyal - are aiming for major achievements in renewable energy. Gadkari wants to run 150,000 state corporation buses on lithium ion batteries. Goyal sees all cars after 2030 running on electricity. If these two can see their projects through, Pradhan can realise the target of cutting hydrocarbon imports by more than 10 per cent by 2022 itself.

It will depend on how quickly and effi ciently solutions are found to store solar power. Across the world, from Elon Musk's Tesla to Mercedes Benz and India's own Indian Space Research Organization are looking to make more effi cient Lithium ion batteries. Musk's dream Gigafactory is expected to produce more lithium-ion batteries annually than were produced worldwide in 2013. Tesla expects to cut battery prices by 30 per cent.

Batteries are not just the solution for cheaper electric vehicles, but could mean renewable can become more reliable and replace conventional coaland diesel based generation to service the base load in the longer term. Not only is lithium ion smaller than nickel-cadmium or nickel-metalhydroxide batteries, it also has higher energy density and can also be endlessly recycled. The renewable energy ministry is funding research at IITs and engineering colleges for solutions to storage, but hasn't met with much success.

India is pinning hopes on limited successes made at the Vikram Sarabhai Space Centre of ISRO, for use in two- and threewheelers. In April this year, Automotive Research Association of India successfully tested their batteries. Still, it is not of the scale to run buses, trucks or even big cars. The plan is to transfer this technology to companies for commercial production. Gadkari is expecting these batteries will be available for Rs 5-6 lakh, instead of the current Rs 55 lakh. But it is still far from reality. The real hope comes from the US. There are series of experiments happening there. Till success is achieved, it's a case of wait and watch.

@anileshmahajan

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