Sunday , 24 March 2019

Powering Solar Power With Big Incentives

Solar power generation is growing in India but not as fast as the country needs. Finance Minister Arun Jaitley in his budget of 2017-18 promised addition of 20 gigawatts (GW) of solar power capacity this year. Jaitley also announced feeding 7,000 railway stations with solar power, which promises to give a major impetus to shift to clean energy. Over the last two years, the share of solar power in the country’s energy mix has been gradually increasing, while that of thermal power has been declining. As on December 31, 2016, the thermal power capacity accounts for 69% of the country’s 310 gigawatt (GW) power generation capacity, while solar power accounts for 2.7%. Jaitley’s announcements on solar power are in tune with the ambitious mission of the central government of setting up 100GW of solar power by 2022 in India. The state governments have announced solar policies to promote solar energy technologies in their respective states. Solar power generation is growing, no doubt. There is a consciousness growing among businesses, individuals and governments for clean energy. If solar power generation can receive the right impetus with the help of government policies and falling global prices, it can compete on its own against other forms of energy.
However, one of the major problems faced by the investors in solar power is costs. India’s few solar cell manufacturers have a combined manufacturing capacity of about 1212 MW. However, out of this capacity, only 250 MW – that is, about 20 per cent – is operational. One of the main reasons for abysmally low operational capacity is the dumping of solar cells in India by manufacturers in the US, China, Taiwan, Malaysia and EU. The indigenous cell manufacturers have been asking the central government to control dumping. The ministry of commerce took some measures but has been unable to stop manufacturers from other countries selling solar cells at lower costs in India. As a result it might not be possible for the country to achieve the ambitious target of 100 GW solar power generation by 2022.
The other major problem is finance. The capital costs in solar power generation are high, the payback periods are long. The financial needs of the industry are very huge. If Jaitley hopes that the government can achieve its ambitious targets in renewable energy with the fiscal allocations he has provided he might be mistaken. Public funds provided are not enough to give impetus to renewable energy sector. According to industry estimates, the solar power industry alone would require a credit of $100 billion to meet the 100 GW target. The largest pool of capital for the solar power industry is the international debt markets but they should be made accessible to Indian developers at affordable cost. Commercial banks are another major source for finance for renewable energy sector. However, the credit provided by the banks carries a high interest rate that becomes forbidding seen in the light of high capital costs and low tariffs in the industry. The industry has been representing to the government that the ministry of new and renewable energy along with ministry of finance should come up with innovative financing measures to promote the capital-intensive renewable energy projects. Financing measures such as clean energy fund, generation-based incentive-linked loan repayment and green bonds could be some of those.
But no budgetary support was extended to any agency to address risks. Moreover, financial support to the Solar Energy Corporation of India, the nodal agency for commissioning many solar and wind projects, has been halved to Rs 50 crore. The allocation to the ministry of new and renewable energy has been raised from Rs 5,036 crore last year to Rs 5,473 crore this year. As much as 74% of the outlay is directed to grid-interactive renewables, specifically the second phase of solar park development for 20 GW of capacity. Of the total allocation this year, only Rs 3,361 crore is for solar sector. The budget does not provide much for research and development; as a result technology development is not going to be accorded priority. In fact the budget for research and development has been halved compared to last year to just Rs 144 crore. In 2016-17, the government allocated Rs 20 crore for developing, testing and deploying energy storage technologies. In 2017-18, there is no allocation for energy storage, which could exacerbate challenges with integrating renewable energy into the grid. The budget also does not provide any solution to the problem of land acquisition faced by solar energy industry. Solar power plants need large areas of land. The thumb rule is that 1 MW of solar power plant requires about 5 acres of land and sometimes more. The government must help the industry find suitable areas of non-agricultural and unused land.

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