India’s rapidly expanding solar power market represents a wealth of potential opportunities for home grown and foreign PV manufacturers and project developers. It’s not all plain sailing, though; like any emerging market, the Indian PV sector has its share of growing pains.
Solar power is hot property right now in India. A glance through the finance pages of any paper should be enough to confirm that business activity in this sector is definitely on an upward trend.
And the activity is far from confined to local players. A cursory review of recent announcements reveals a veritable who’s who of Indian as well as global energy and photovoltaic (PV) industry companies.
New Delhi-based Bergen Associates, for example, has recently teamed up with US thin-film maker Advanced Energy to build a 1 megawatt (MW) ground-mounted plant in Kalanaur, Haryana.
The Californian power company SunEdison, meanwhile, has chosen Narmada Canal in Gujarat as the site for a ground-breaking solar concept designed to generate 1MW of clean power while reducing water loss by up to 7 million litres a year.
And Gamesa Electric, a subsidiary of a major Spanish wind turbine maker, is providing the inverters for the 1MW ESSAR Solar Photo Voltaic Power Plant in Bhuj, Gujarat.
It is hardly surprising that the Indian PV market is drawing interest from around the world, mind. For a start, there is no doubting the fact that India needs more energy… and has got plenty of sunlight to fill that need.
According to data from the World Bank, energy use in India had risen from just under 280 kilos of oil equivalent per capita in 1972 to almost 585 in 2009. Over the same period, the population rose from 573 million to 1.16 billion.
Until recently, this increase in energy needs had been met mostly through fossil fuel. But with the population and energy use figures continuing to grow, there has been a realisation that India needs to make as much as it can of renewable energies. Solar fits the bill nicely.
Higher irradiance than established markets
Studies by the US National Renewable Energy Laboratory show most of the country gets more than 5 kilowatt-hours per square metre a day in terms of direct normal irradiance, much higher than that of established PV markets in places such as Europe.
Furthermore, at a time when incentives for solar energy are being slashed in many markets worldwide, in India there is significant support not just through the nationwide Jawaharlal Nehru National Solar Mission (NSM) but also through state-specific programmes.
This combination of factors has led to growing interest in the Indian PV market. By April 2012 the installed capacity across the country, at 540MW, was still modest in comparison to that of established markets abroad.
But according to data published by Bridge to India, almost 319MW of that capacity came on stream in the first quarter of 2012, demonstrating the rate at which the market is picking up speed. So far, so good, then.
But the Indian PV sector’s first footsteps have not been without a few trip ups. First of all there is the local content requirement.
With the first batch of NSM projects (although not, notably, in newer state programmes in Gujarat, Rajasthan and Karnataka), there was a stipulation that crystalline silicon PV modules had to be made in India.
This measure was clearly designed to help stimulate a nascent PV manufacturing industry in the country, but the initial result was to help create a market that is like no other in the world.
Specifically, early project developers got around the crystalline silicon local content requirement by importing a different type of PV, thin film, from abroad.
Financial aid for US thin film manufacturers
US thin film makers, in particular, were aided in their efforts to enter the Indian market through large handouts from the Export-Import Bank of the United States (Ex-Im Bank).
As a consequence, thin film formats, which have always occupied a minority market share compared to crystalline silicon modules elsewhere, have initially dominated the PV project landscape in India.
At one point they accounted for about 80% of projects in the country, according to Bridge to India. In fairness, the local content requirement and Ex-Im Bank are not the only reasons for thin film’s popularity in India.
Thin film is also believed to have superior technical capabilities in hot climates, although that claim has been cast in doubt this year following comments from a top executive at US-based First Solar, one of the biggest manufacturers of this form of module technology.
In any case, thin film’s share of the national market is falling, as originally intended, thanks to the growth of Indian crystalline silicon module makers such as Central Electronics, Indosolar and Moser Baer.
Another factor has been the increasing importance of state programmes with no local content requirement. This essentially opens the door to cheap foreign crystalline silicon imports.
A lot of India is driven by local feed-in tariffs and local incentives that don’t necessarily have the local manufacturing rule
says MJ Shiao, a solar analyst for GTM Research in Cambridge, USA.
There’s just such an imbalance of production capacity that favours crystalline silicon that it will be the dominant technology in India.
Financing: another significant challenge
Whether that technology is made in India or imported from abroad (most likely China) still remains to be seen. And meanwhile, the local content issue is not the only one facing the PV industry in the country. Another significant challenge is financing.
Even though the NSM is backed by one of the most ambitious budgets of any green energy programme worldwide, it alone will not be enough to meet India’s solar power targets. Neither will state-level subsidies.
So far, international funding bodies such as the Ex-Im Bank, Overseas Private Investment Corporation and Asian Development Bank have stepped in to back early projects.
In April, for example, the World Bank’s International Finance Corporation agreed to fund the extension of a Gandhinagar, Gujarat, pilot of rooftop solar systems to the cities of Bhavnagar, Mehsana, Rajkot, Surat and Vadodara.
However, there is an urgent need for Indian debt providers to come forward as well.
Right now, many are wary because of a lack of familiarity with the solar industry and, in the case of power plant projects, an understandably cautious attitude towards the true value of the power purchase agreements (PPAs) offered by electricity companies.
Bridge to India managing director Dr Tobias Engelmeier says:
Some companies have financed projects from equity, especially smaller projects; 1MW, maybe a 5MW in the beginning.
“A second option is you go to your relationship bank, you say ‘I’m a big conglomerate,’ I want to have a debt, and I give you my whatever as collateral. Or you get non-recourse financing, which is difficult in the Indian market, because PPAs are considered to be not strong, because of the electricity boards being in constant debt.”
…so whether it is off-grid or on-grid, foreign or national, thin film or crystalline silicon, it looks as though PV will continue to be welcome in India for the foreseeable future.
This news piece has been provided by PV Insider that are organizing the following two Summits in India:
PV Project Development Summit India 2012
Date: 30th July – 31st July | Venue: New Delhi, India
A 2 day Conference & Expo event, covering all aspects of how to streamline and optimise your PV large scale business to increase your competitive advantage and seize the best new opportunities in the Indian market. To know more click here .
PV Manufacturing Summit India 2012
Date: 1st August – 2nd August | Venue: New Delhi, India
The inaugural PV Manufacturing Summit India 2012 (August, New Delhi) is a focused conference that will address the twin challenges of building a significant manufacturing base to meet the country’s energy demands, while equipping them to make an impact in the congested international PV market. To know more click here.
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