Published on December 17th, 2013 | by Joshua S Hill1
World Bank Foresees Potential For 20 GW Indian Solar Future
India’s Jawaharlal Nehru National Solar Mission, launched in 2010, is “well-poised to make India a global leader in the development of solar power,” says the World Bank. Aiming to install 20 GW of solar power by the yer 2020, India is already well on her way, having grown from an installed solar capacity of only 30 MW in 2010 to 2,000 MW in 2013.
A new report released by the World Bank – Paving the Way for a Transformational Future: Lessons from JNNSM Phase 1 (PDF) — notes that solar power can reduce India’s dependence on foreign fuel imports, reduce greenhouse gas emissions, and contribute to the country’s energy security — all facts that are well known, and not restricted to India alone.
“In a short span of three years, India has made impressive strides in developing its abundant solar power potential,” said Onno Ruhl, World Bank country director in India. ”With more than 300 million people without access to energy and industry citing energy shortage as key growth barrier in India, solar power has the potential to help the country address the shortage of power for economic growth.”
“However, while India is clearly emerging as a global leader in the area of solar power, to achieve its target of adding 20,000 MW of solar capacity by 2022, it needs to address the key barriers and constraints that could come in the way of scaling up the solar program.”
Already Indian solar has seen costs reduced to amongst the lowest in the world, thanks in part to two specific aspects which have minimised tariffs – bundling of solar power with unallocated thermal generation and adoption of reverse auctioning. According to the World Bank:
Such bundling of solar power with cheaper conventional power helped reduce solar power tariffs for distribution utilities. The reverse bidding mechanism enabled qualified bidders to benefit from declining global prices for solar components, thereby reducing the purchase price of both solar PV and Concentrating Solar Power (CSP) for the utilities.
The authors of the report identified several key observations of the first phase of the Jawaharlal Nehru National Solar Mission (JNNSM):
After evaluating the key objectives of the JNNSM, the authors of the report found the following issues “which could prevent the program from reaching, and possibly exceeding, the target of 20 GW of grid-connected solar capacity in the country by 2022″:
- Lack of adequate participation of Scheduled Commercial Banks (SCBs) in solar financing
- Bottlenecks in the enabling environment
- Payment security for future projects
- Unintended technology outcomes over Phase I
- Beleaguered local solar manufacturing environment
- Adequacy of the current approach to developing solar thermal projects
- Enforceability of RPOs and concerns around solar Renewable Energy Certificates (RECs)
Subsequently, the World Bank identified the following issues as requiring closer attention:
1. Increase access to funds from commercial banks and attract private financing
Under Phase I of the program, scheduled commercial banks mostly shied away from lending for solar projects while export credit agencies, multilateral financial institutions, and some nonbanking financial institutions took up most of the financing. However, given that most infrastructure lending in India has been led by commercial banks, the solar program too will need their active participation to scale up to the levels envisaged.
2. Develop shared infrastructure facilities such as solar parks
The provision of publicly developed infrastructure frees private providers to focus on solar power development, increases efficiency, and lowers costs. Gujarat, for example, was the first state to declare a solar policy (2009) and today, is at the forefront of solar power generation in India. Its first solar park, developed on waste land in Charanka (Patan district), has the largest solar capacity in Asia. The park provides developers with already developed land along with critical infrastructure, including facilities for power evacuation and transmission, roads and water, thereby ensuring the rapid development of solar projects.
3. Use India’s comparative advantage to develop a niche in the manufacturing value chain
India’s solar PV manufacturing capacity is limited and does not straddle the higher technological echelons of the industry. This is because India’s manufacturers lack the raw materials, do not have access to low-cost financing, and face underdeveloped supply chains. In CSP, where local manufacturing is more complex, India has not been able to manufacture some critical components. Either technology suppliers are limited and their products patented or the lack of natural resources poses an impediment. India should therefore seek to define and develop its manufacturing capabilities in specific parts of the value chain where it enjoys a comparative advantage and can emerge as a globally competitive producer. An earlier ESMAP-World Bank study, Development of Local Supply Chain: A Critical Link for Concentrated Solar Power in India has identified the potential for reducing the costs of CSP components in India through local domestic manufacturing.