Solar Energy : An Emerging Option for India

1. Solar Energy:An Emerging Option for India Ashwin Gambhir Prayas (Energy Group), Pune SOLAR ENERGY – IS IT A VIABLE OPTION NOW? 11th April, 2012, Raintree Hotel, Anna Salai, Chennai

2. Outline • About Prayas • A brief overview of the Power sector • Energy Security • Solar Electricity • PV and CSP • Solar Heat Applications • Policy and Regulatory Aspects of Solar • Concluding remarks

3. About Prayas Energy Group Prayas is a Voluntary Org, based at Pune, India • PEG works on theoretical, conceptual and policy issues in the energy and electricity sectors. • Based on a comprehensive, analysis-based approach for furthering the ‘public interest’. • Research & Interventions (regulatory, policy). • Civil Society training, awareness, and support.

4. Power Sector Status • Present Installed capacity ~ 187 GW (RE- 23 GW, 12%) • 2010-11 Generation ~ 950 BU (incl captive) (RE – 50 BU, 5%) • Un electrified Houeholds ~ 33% (8 cr); villages ~ 7% or (40,000) • Peak Load shortage -13% ; Electricity ~10%; unreliable service. • Financial health of Utilities worsening (~70,000 cr losses in 2010-11) • 6-7% growth in electricity use; projected to double in 2020; largest growth in Industry and commercial/residential. • Rising energy imports and electricity tariffs

5. Power Generation Capacity including captive, percentage shares of 210 GW (2010-11)

6. Share of Generation including captive of a total of 900 TWh (2009-10)

7. Energy Security • India’s net imports of energy (petroleum, coal and gas) increased from 129 mtoe in 2006 to 191 mtoe in 2010 (10% p.a. growth). Likely to increase to about 227 mtoe in 2011-12 and to about 366 mtoe in 2016-17. Tripling in a decade. • A significant financial burden on the economy. At current prices, the total energy import bill for 2011-12 is ~ Rs. 5.4 lakh crores (USD 108 billion) – approximately equal to the state GDP of Gujarat. Rs. 1500 crores/day for its energy imports. • With only a 5% price increase/yr during the 12th plan, the total import bill would increase from 108 billion USD to 196 billion (constant) USD by 2016-17 – an annual increase of 13% per year.

8. Production and Consumption of Fossil Fuels (Oil, Gas and Coal) in Mtoe India from 1981-2010

9. India’s energy imports in mtoe Source: (EIA, 2012; PPAC, 2012) and Prayas calculations

10. Energy Security contd… • In 2008, India spent 7.3% of its GDP on energy imports, while Germany and Japan – whose energy import dependence is about 75% and 95% respectively, as against only 33% for India – spent only 3.3% and 4.4% of their GDP respectively. • India’s high level of energy imports also contributes significantly to its trade deficit: net energy imports are responsible for over 60% of the country’s trade deficit, and gross energy imports contribute to about a third of the total import bill.

11. Financial impact of projected energy imports Source: (BP, 2011; PPAC, 2012)and Prayas calculations

12. Large grid connected Renewables • Energy security, price rise in fossil fuels; focus on local environmental and global climate concerns has made RE an extremely important supply option for the future. • RE moving from margins to mainstream. • Capacity (~23 GW) and Generation (~ 50 BU) • $ 9.5 billion (50,000 cr) invested in large RE in India in 2011. • Fastest growing energy sector, 22% CAGR past decade. • Significant Policy and regulatory push (State and Central) (RPOs, RECs, NAPCC (15% by 2020); State specific policies, SIPS, Green levies; NCEF etc) • 12th Plan; RE ~ 30/40 GW (10 solar, 15/25 Wind)

13. Grid Connected Renewable Capacity; Jan 2012

14. Range of Tariffs in Rs/kWh for all sources

15. Solar • Electricity • PV (Grid connected MW scale/ distributed off-grid/rooftop) • CSP (With & Without Storage/Hybrid) • Heat Applications • Hot water (low temp applications) • Steam (medium-high temp) – Industrial applications • Advantages • Practically unlimited resource; very low gestation period; Both Electricity and Heat possible; Wide range of scale & modularity; Cost effective Thermal Storage to serve peak/base load and increase CUF; No use of water in PV; dry cooling possible in CSP; heat applications already cost competitive.

16. Sharp price drop has allowed solar PV to take off.

17. Distributed small scale solar PV • 33% of HHs still without access to electricity though RGGVY making major inroads; sustained supply still an issue. • Indian PV market too small to affect global prices. • For PV emphasis should be on distributed solar (typically a few kWs to a few hundred kWs capacity) for critical social infrastructure (schools, PHCs, drinking water schemes, agriculture) in specific areas, which if implemented effectively can have a variety of local socio‐economic benefits. • Need for simple regulations to promote off-grid solar and to make it more bankable; most importantly to make consumer tariffs more equitable through policy/regulatory instruments. • Explicit provisions for future grid integration to prevent redundant investments.

18. Rooftop PV • Reduction in T&D investments & losses; transformer losses. • Distributed solar PV feeding into the distribution grid improves quality of the local power (esp voltage profile) and can potentially address black outs. • Beginning in WB and Gandhinagar. • High tariff consumers (commercial and industrial) in high insolation areas best suited to exploit. • However grid integration in weak Indian grid is difficult (technically and under existing regulations) • Many issues need further debate and clarification • Connectivity; Metering Arrangement; Energy Accounting; Scheduling Requirements; Administrative costs; Wheeling Charges and Losses; RPO Compliance etc. (3rd April Workshop along with NCPRE, IIT-B)

19. Concentrated Solar Thermal Power • Distinct from PV in terms of scale and possibility of storage. • Need to incentivize storage (for peak load, higher reliability and CUF and ability to dispatch) and dry-cooling to reduce consumptive water use for cooling. • Significant further cost reduction possible from higher indigenization; local manufacturing and scales. • Needs continuous pieces of land; relatively flat. • India already has all expertise in thermal generation, needs to concentrate on local manufacturing and R&D.

20. HEAT applications for solar energy • Significant part of energy needed in the form of HEAT • “Thermal parity” equally important. • Significant demand from low-medium temperature applications in various industrial processes. • Need to think of solar thermal beyond electricity • Much better to use for heat directly, saving oil or electricity. • Greater savings from no conversion loss to electricity. • Much better distributed use, many applications and scope. Source: http://www.energybulletin.net/stories/2011-07-26/bright-future-solar-powered-factories http://www.solarfire.org/The-Thermal-Problem

21. Analysis of International Policies In the Solar Electricity Sector: Lessons for India Prayas Energy Group (PEG) & Lawrence Berkeley National Lab (LBNL) Authors Ranjit Deshmukh Ranjit Bharvirkar Ashwin Gambhir Amol Phadke

22. Objective • How should India define its country objectives for solar promotion given its limited financial resourcesand energyaccess issues while developing its solar industryand contributing to the global goal of solar cost reduction?

23. Although solar costs are dropping rapidly, solar power is still more expensive than conventional and other renewable energy options, and the solar sector still needs continuing government policy support. However, government policies are driven by objectives that go beyond the goal of achieving grid parity. These include increase in renewable energy generation to mitigate climate change, or boost energy security; develop domestic industry to create jobs and exports; develop technology and intellectual property rights via RD&D; and improve access to electricity where the electric grid is unreliable or absent. The need to achieve multiple objectives and ensure sufficient political support for solar power makes it difficult for policy makers to design an optimal solar power policy. The dynamic and uncertain nature of the solar industry, combined with the constraints offered by broader economic, political and social conditions further complicates the task of policy making.

24. Framework for policy assessment Deployment FiT, RPO, REC, GBI Domestic Value Addition

25. Learnings from other countries • Spain • Need sustainable growth; no retroactive policy changes. • Germany • Significant political and peoples support; regression built in FiTs; promotion of distributed small scale solar; emphasis on transparent and stable long term policy. • China and Taiwan • Manufacturing is key; not just deployment support, control 74% of PV cell manufacturing today. • Began with distributed small scale solar for lighting

26. Going Forward

27. Long Term Realistic Energy Planning- a dire need • BAU is simply impractical and unsustainable. • Relook at type of industrialisation - future development paradigm • Tariff policy to discourage excessive, luxury use of energy. • Change from supply to demand side thinking, from fossil fuels to Efficiency/Renewables in the long run. • Need for a more realistic and rational energy supply and demand projection studies (considering equity, limited fossil reserves & rising prices, energy security, water availability, local and global environment issues, EE/RE resource & their declining costs etc) • Link policy to specific objective goals. • RE for energy security and supply / not for global climate • Multi-criteria framework for assessing mitigation options.

28. Sources of Electricity, 2020 (IEP and Low-C C) Efficiency • Two Official forecasts show • Increasing role of • Efficiency and RE • Reduced • Energy Demand Forecast Renewable Coal Nuclear Hydro

29. Solar Policy and Regulation • Long term stable policy regime with dynamic targets linked to cost reduction. • Targets linked to retail tariff impacts and the financial health of the utilities. Cannot be uniform across states. • Equitable apportioning of National Target amongst States considering consumer mix (proportional to the industry, commercial & high residential consumption)and ability to pay. (Ex: Bihar and Jharkhand) • RPO compliance and enforcement of penalties unclear leading to market uncertainty. • Protect poor from high costs (financial, environmental, social) • Equitable sharing of incremental costs, especially w.r.t solar; mandate purchase only for rich to begin with; or else program unsustainable. • New business model for off-grid and grid interactive RE (incl solar) which promotes equity accepted by FOR.

30. Contd… • Cost reduction by efficient procurement (Competitive Bidding). • Continue reverse bidding under ceiling of FiT (with safeguards) for price discovery and cost reduction. MoP committee constituted. • Emphasis on R&D (basic and applied) key for continued cost reduction. • Must for increasing future targets. • Promote solar (PV and CSP) manufacturing in India. • Must for energy security, cost reduction through indigenization; high export potential; significant future job growth potential • Industry specific incentives needed in the short term, with sunset clause. • Facilitate low cost finance availability. • Capital Intensive Sector with high sensitivity to cost of capital • Long term infrastructure Bonds.

32. The importance of low cost finance

33. Contd… • 1 MW+ consumers now de facto Open Access Consumers • large market opening possibility, grid parity closest; utility procurement may reduce proportionately. • Effective land policy for renewables including solar • Social inclusion through land leasing and profit sharing for long term sustainability. • Planned solar parks to create level playing field and better planning, esp Tx. • Long term transmission planning and measures for grid stability • Grid Integration and Transmission (Entire burden on home state), mechanism to spread costs across electricity sector. • Grid Integration of large scale RE possible (needs more studies and coordination among stakeholders)

34. Concluding remarks • NAPCC RE target ~15% by 2020 (~ 250 TWh) • Doubling the rate of RE capacity addition (3,500 MW/year to 8,000 MW/year) with greater coordination between stakeholders. • Effectively means mainstreaming of RE including solar • Industry and developers need to become core power sector players, the earlier the better. • In industry’s best interest to try and quickly move away from concessions (needed in early phase) and gear up to future IEGC requirements of Scheduling, dispatch, forecasting, OA and Tx charges etc. • For solar to become key resource in the future, need to gain people’s trust, only possible with emphasis on transparency and governance in all processes and through reliable and credible data in the public domain. • SOLAR will be a necessity for tomorrow. Let us all prepare for that.

35. A parting message • “Limits to available energy resources are hurting economies and curtailing development in poorer countries. India, being more vulnerable to energy shortages than most other countries, needs to urgently implement a multi-dimensional solution to avoid a crisis… To avert economic hardship and work towards mitigating climate change, we must find answers to the energy conundrum soon. This is possible through a three-pronged strategy to ‘replace, improve, and reduce'.” (replacefossil fuel based energy sources with renewables, improveend use efficiency andreduce consumption, especially of the rich). Source: Girish Sant, Handling the energy crisis; http://www.thehindubusinessline.com/opinion/article2845265.ece

36. THANK YOU ashwin [at] prayaspune [dot] org Prayas Energy Group www.prayaspune.org/peg