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Weekly Update: India’s major public sector, conventional power companies ready to go solar

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Coal India Limited (CIL) recently announced its foray into the Indian solar power sector with an initial project of 2 MW (refer).CIL is the largest coal mining company in India and accounts for 80% of the coal production in the country.

CIL plans to set up solar power projects in Ranchi and at company owned coal mining areas in order to reduce existing electricity bills

Additionally, Neyveli Lignite Corp and Oil India Limited are actively venturing into the solar market

A capacity of 2.3GW, driven by commercial parity, is expected to be installed by 2016.As solar power becomes more viable, the shift of at least a certain percentage of consumers to distributed generation is inevitable

The company has said that this project will help them save on their energy bills. The project is to be set up at the company’s Central Mine Planning and Design Institute located in Ranchi, in the Indian state of Jharkhand. In addition, the company plans to set-up installations at the company owned coal mining areas and staff colonies to reduce its existing energy bills. Neyveli Lignite Corp, another publically owned coal mining company, is also actively venturing into solar power generation by setting up a 10 MW project. Recently, Oil India Limited (OIL), India’s oldest and biggest oil exploration and production company, also announced its foray into the solar sector. OIL is actively looking at project development and investment opportunities. State level conventional power companies such as Karnataka Power Corporation Limited (KPCL) and Gujarat Power Corporation Limited (GPCL) have already set up solar projects in their respective states.

The foray of conventional power companies into solar carries a notable underlying message. Firstly, that solar power provides viable business opportunities for companies. Secondly, as in the case of CIL’s foray into solar, that solar power can also help save on energy costs. This is expected to be a key driver for solar PV in the years to come. BRIDGE TO INDIA expects a capacity of 2.3 GW driven by commercial parity to be installed by 2016. Thirdly, these companies realize the potential for solar and do not want to miss the bus on the business opportunities arising from this potential.

In Germany, for example, distributed generation of power using solar PV has taken a significant share away from conventional power sources. A similar story has started to play out in the US. In both these places large conventional power companies and power distribution companies have not been able to successfully capitalize on this shift. Instead, some have even been openly against it. As solar power becomes more viable, the shift of at least a certain percentage of consumers to distributed generation is bound to happen. Now, the choice is in the hands of conventional power majors whether they want to capitalize on this potential to their benefit or resist the shift.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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Weekly Update: Andhra Pradesh set to purchase solar power from rooftops of end-consumers, viability remains a concern

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Last week, the Andhra Pradesh government announced that it will buy power from rooftop PV systems installed on residential and commercial buildings in the state at a fixed tariff of INR 3.5/kWh (refer).

Capital subsidies of 30% is offered by the MNRE and 20% is offered by the Andhra Pradesh state government

Both residential and commercial consumers will require further subsidies for solar to be financially viable

Providing reliable information on rooftop potential and easily accessible, low-cost financing as well as waiving state level taxes for solar PV systems are steps that can be taken by the government to increase viability

The state expects the consumers to take advantage of the 30% capital subsidy offered by the MNRE for rooftop projects (currently on hold, but expected to be available again by early July 2013 for 200 MW of projects annually across the country under Phase 2 of the National Solar Mission). An additional capital subsidy of 20% will also be offered by the state.

Based on an analysis of Delhi’s rooftop potential (refer), accounting for obstructions and shadowing on the roofs, we estimate that typical residential buildings usually have solar suitable rooftop space of at least 40-300 sq. meters, accommodating at least 5 kW of PV. The LCOE of a 5 kW PV system for residential consumers with a cumulative 50% subsidy (MNRE + State) is approx. INR 6/kWh (depending on on-site irradiation). Residential consumers need an additional INR 2.5/kWh from the government for solar to be financially viable for them.

Commercial consumers typically have solar suitable space of 2,400 sq. meters and more, accommodating upwards of 200 kW of PV. The LCOE of a 200 kW PV system with the 50% subsidy is approx. INR 4/kWh. Despite the significantly lower LCOE owing to larger system sizes, commercial consumers need an additional INR 0.5/kWh for solar to be viable.

It is important to note that the solar LCOE is unviable even though we have considered a system cost of INR 120,000 per kW which is lower than the Andhra Pradesh government’s benchmark of INR 160,000-180,000 per kW.

The Andhra Pradesh government’s goal of using rooftop solar power to bridge its power deficit could be a non-starter if the government does not meet the basic viability criteria for the consumers. The Gandhinagar Rooftop Program, offering a feed-in-tariff of INR 11.21/kWh to Azure Power and INR 11.78/kWh to Avantha Solar, is set to complete 1.3 MW of installations (refer) and should be taken as a benchmark. Rooftop solar for end-consumers faces additional challenges of a lack of reliable information on rooftop potential and easily accessible, low-cost financing which also need to be addressed by the government. The government could also consider waiving state level taxes for solar PV systems to improve viability.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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Fixing electricity in India

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The Indian electricity system is in dire need of ‘fixing’ – or, perhaps, of fundamental, paradigmatic reconfiguration? But how can complex systems be changed? This blog piece is based on a very interesting conversation with my friend and a systems aficionado, Anna da Costa, her blog piece and reading suggestion.

In changing systems, too much time is spent on ‘fixing’ and too little on re-imagining

In electricity, India should embrace distributed models rather than the traditional, centralized one of large power plants and transmission grids

This would make the electricity system less political, less corrupt, greener and allow the local population to become value creators in addition to consumers

Did you ever get stuck in a traffic jam in an Indian city and look at the tight mosaic of cars, buses, motorbikes, cycles, pedestrians filling every inch of space, optimistically trying to head into entirely different directions, horns blowing? Add monsoon floods to take it up a notch. And did your eyes then, perhaps, wander to a nearby half-rotten concrete mast, cuddled in a wild knot of power lines? Did that make you think about the fuse in your house that was gone again?

What could this be, you might wonder? An extraterrestrial form of swarm intelligence? A mysterious super-organism? Or just a hopeless mess that will never change? Being German, I might have a genetically limited bandwidth for dealing with exasperatingly uncategorizable complexity. I just yearn to know: are things getting better or are they getting worse? Unable to give an answer, my mind usually wanders off, with a lingering sense of frustration.

But for a systems theorist, this is where the real thinking (perhaps even fun) begins. India must be the ultimate challenge for this rare breed of researchers. Donella H. Meadows in her 1999 article ‘Leverage Points: Places to Intervene in a System’ (refer) argues that we have an intuition where the key leverage points to change a system (a society, an economy, a city, an infrastructure, whatever) might be. We might be already thinking about them. But, we usually want to push them in the wrong direction. Systems are often just too complex for us to understand. Also, we focus 99% of our efforts on fixes within the system, which is not nearly as powerful as changing the system and its purpose itself. Anna da Costa has provided a very useful clustering of Donella’s leverage points (refer), classifying them and adding a layer of human capacity.

Let us take a specific system. At BRIDGE TO INDIA, we work in the power sector in India. This is a notoriously dysfunctional system: there is not enough power, it is not delivered well, the costs are rising, the utilities are in perpetual financial survival mode and hundreds of millions of people do not get power at all. The most powerful points to change a system, according to Donella Meadows, are not the nuts and bolts of the system (“constants, parameters, numbers such as subsidies, taxes, standards”). The best way to change a system is the “power to transcend paradigms”.

The discussion in the Indian ‘electricity system’ is indeed hovering mostly on the level of ‘constants, parameters and numbers’, focusing on transmission and distribution losses (far too high), coal availability (difficult), power prices (too low for the utility, rising too fast for the consumer and voter). From there, it moves up the ladder to matters of investment risks and returns (risks have been considered too high, reducing the level of investment), then to public vs. private players (who better supplies sufficient, reliable power at acceptable tariffs?), to governance of the power market (avoiding massive grid failure, financing repairs and improvements) and then perhaps to the political system of federalism itself (who is actually in charge?). Yet, the system has not been made to work. It just limps along. It changes a little, but usually not enough.

The discussions is limited by the paradigms that fossil fuels are indispensable, that electricity comes from large plants and is transmitted through a grid, that more electricity means more growth and more development, and that electricity is a product that is produced by some and sold to others. This is the way industrialized countries have thought about electricity since the days of Tesla and Edison: In an era of cheap fossil fuels, no climate concerns, and a state-run infrastructure economy. This led to the growth of large power plants and a grid that has become more and more integrated until it covered the entire region, state and increasingly integrates countries, even continents.

Utilities and the companies servicing them became ever larger. They have invested heavily into a specific approach to providing energy: costly and risky exploration of fossil fuels, investment into complex technology such as nuclear power, building of vast infrastructure such as pipelines or transmission grids. In such a system, whenever a decision is made, it has an impact for decades and is very difficult to reverse. In the process companies, regulators and politicians, have become heavily ‘path dependent’: mentally and structurally averse to change. External shocks such as the oil price rise in the 1970′s or the climate debate in the 1990′s are outliers to be made to fit into the system in a procrustean manner.

Thomas Kuhn, a philosopher of science, tried to understand how scientific systems have changed. In his view, they do not follow a process of continuous evolution or progress. Rather, the old system is hollowed out by new ideas until it collapses. There is always a dominant world view (e.g. the earth is the center of the universe) and scientists try to fit all observations into it. Some observations will, however, not really fit (e.g. the observed path of objects in space), causing an irritation. They are at first ignored by the mainstream, but the irritations are bound to become more, because the system is flawed (the earth is not the center of the universe). At some point, they become so powerful that the old orthodoxy is overthrown in favor of a new one (the sun is the center of the universe). And so on.

We are living in an old energy system. We know it is flawed and it is dawning upon us that it might be broken beyond repair. It fails us on at least two accounts: it does not bring enough energy to vast groups of poor people and it does not keep carbon emissions below acceptable limits. In India, the energy system is not only structurally flawed, but also badly executed.

This is an opportunity. Because India is not yet as heavily invested into a centralised electricity system (as, for example, China has become over the last twenty years) the ‘path dependency’ and the sunk costs are less. Ironically, the practical failures of those who should take care of power supply and are thinking along the old model – the large industrial houses, the utilities and the political and regulatory decision-makers – make room for new types of actors, entrepreneurs (‘green’, ‘social’ or ‘just normal’), cooperatives, and individuals working out solutions for themselves. Much like in mobile telephony, where Africa and South Asia have a higher mobile internet penetration than Europe because for many that is the only way to get into the internet, in power, too we will see more and more distributed solutions.

To return do Donella Meadows: what can we do to fix India’s electricity system? We need to think about the provisioning of power differently. In a country like India – dynamic, anarchic, vast – centralised actors might not be able to provide the solution. They might be were IBM was in the 1980′s: on the wrong side of change. The solution might be elsewhere, in decentral solutions – the power station in every home, based on renewables (especially solar), storage, diesel, perhaps in some places gas, driven by local entrepreneurs building up new micro – and meso-grids, perhaps even ‘smart’ grids, connecting a number of generator and consumers. The best the government can do to facilitate this is to allow this market to flourish through easy access to distribution licenses, through realistic power pricing, perhaps through tax incentives. India should become the global leader in this new, powerful, distributed, matrix system of power supply. There are some technical challenges – but they can be solved. Research and finance should look in this direction. Entirely new business models will emerge. Power will be cleaner, and less stifled by the politics of infrastructure. Local jobs and local wealth will be created. It could become a mysterious super-organism. A functioning one.

Since I have referred to many other people’s thoughts in this blog post, let me make one last reference. In the ‘Art of War’, Sun Szu writes that “victorious warriors win first and then go to war, whereas defeated warriors first go to war and then seek to win.” Having to fight a war is already and admission of strategy failure. India should forget about the wars it fights over fixing the current electricity system and instead embrace a winning strategy.

Tobias likes to write about solar business models, solar and energy policy and wider issues of sustainability, development and growth.

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Weekly Update: Penalties for CSP projects likely to be deferred by 10 months as no project is ready for timely commissioning

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The Ministry of New and Renewable Energy (MNRE) has decided to defer the penalties that are to be levied on delayed solar thermal (CSP) projects. 470 MW were allocated under phase one of the National Solar Mission (NSM) in December 2010 and were to be commissioned in May 2013. However, none of the projects are expected to meet this deadline.

No project is expected to reach completion before at least June 2013

Many common and genuine reasons caused the delays, the most important of which was incorrect solar resource assessments

A shift in the short-term CSP strategy can be considered towards its hybridization with other technologies. CSP should also be promoted to provide process heat solutions to factories with high energy and heat demand

A 50 MW project being set up by Godawari Power is the closest to completion and might be fully commissioned by June 2013 (refer). The next project to be commissioned is by Reliance (100 MW), which is delayed by at least six months. The MNRE has suggested that the commissioning deadlines for these projects could be extended by another 10 months.

Some of the common reasons cited by project developers for not meeting the deadline are: a delay in laying of a water pipeline by the Rajasthan government, delays in procurement of heat transfer fluid (HTF) and other components for the plant and delays in achieving financial closure. However, according to industry sources, the main, unstated cause of delay is the incorrect solar resource assessment for the projects. The actual direct normal irradiation (DNI) at most locations in Rajasthan is significantly lower than what was assumed at the time of planning. This realization led many developers to contemplate the relocation or even cancellation of projects. This is not news. In the October 2012 INDIA SOLAR COMPASS, BRIDGE TO INDIA had already mentioned that all projects are behind schedule (refer).

Under phase two of the NSM, it is expected that a capacity of 1,080 MW is to be allocated for CSP projects in 2014. The allocation process for these projects will draw from the learning of the 470 MW projects. However, the complexity of setting up CSP plants has been systematically underestimated so far (refer to this blog entry for a detailed analysis). It is unlikely that these issues will be resolved and lessons learnt by 2014, especially considering that the previous projects would have just come up (if at all).

It might not be the time to write off CSP just yet. CSP power plants retain a key benefit over PV in that they can produce better quality (more stable, predictable) power. This is crucial for a country with a fragile power grid infrastructure such as India.

India should probably consider a shift in its short-term CSP strategy towards hybridization of CSP with other technologies such as conventional thermal and biomass. In addition, CSP should also be promoted to provide process heat solutions to factories reeling under power shortages and rising power prices across the country. This would be relevant especially for industries with high energy and heat demand such as pulp and paper, steel, cement, or textiles. At this stage, more working examples of how CSP can reduce energy costs and improve energy security need to be provided.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

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Can Delhi become a solar city?

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Solar capacity addition in India has so far been centered on large, grid connected, ground-mounted PV plants. The lack of space for such power plants in a highly urbanized and congested city like Delhi is a challenge for solar energy. But, this is true only if solar deployment is restricted to large, ground mounted power plants. The potential to install rooftop solar PV in a city like Delhi can be tremendous.

Delhi’s total land area is 1,483 square kilometers

700 square kilometers of Delhi’s total area is built-up, which could theoretically give a potential of 58 GW of rooftop solar

Not every inch of Delhi’s rooftop space is viable for solar, scaling down the potential drastically, but none the less being worth a couple of gigawatts

The potential fundamentally depends on the rooftop space available in Delhi for the use of PV systems. The numbers are staggering! According to the Census 2011, Delhi’s total land area is 1,483 square kilometers. If such an area were unused and exclusively available for solar installations, it could support 123 GW of installed capacity which, at peak power production, would be more than 20 times Delhi’s current annual peak power demand of 5.6 GW and more than half of India’s installed capacity of 215 GW. According to the Delhi Master Plan 2021, 50% or 700 square kilometers of Delhi’s total area is built-up. If the rooftops on this entire built-up area could support solar PV installations, Delhi could theoretically have a potential of 58 GW!

While this number is enormous and very tempting for us solar aficionados, it would not be accurate. Not every inch of Delhi’s rooftop space is viable for solar. Taking in to consideration the structural strength of building, obstructions like water tanks, shafts and other utility space, the shadows of such obstructions, and incomes of the property owners, the viable space for solar gets drastically scaled down. This none the less gives a potential of at least a couple of gigawatts or more of solar. With gigawatt scale potential, Delhi can definitely become a solar city!

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Weekly Update: SECI launches the second round of competitive bidding for rooftop solar PV projects

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The Solar Energy Corporation of India (SECI) has announced the second round of biddings for the implementation of large scale, grid connected rooftop PV systems ranging from 100 kWp to 500 kWp for a total allocation of 11.1 MW.

A developer can apply for multiple projects for a minimum allocation of 250kWp and a maximum of 2 MWp

No Feed-in-Tariff is being offered. Instead, the bidder will quote a cost in INR/Wp terms based on which SECI will provide a capital subsidy of 30%

Sale of power and the negotiation of the tariff is the developer’s responsibility

The projects will be spread across the cities of Bhubaneswar/Cuttack (1 MW) in Odisha, Gurgaon (1.5 MW) in Haryana, Hyderabad (2 MW) in Andhra Pradesh, Jaipur (3.1 MW) in Rajasthan, Noida/Greater Noida (1.5 MW) in Uttar Pradesh and Raipur/Naya Raipur (2 MW) in Chhattisgarh. A developer can apply for multiple projects for a minimum allocation of 250kWp and a maximum of 2 MWp. The SECI has released the Request for Selection (RfS) document on 1st May 2013 India (refer). The pre-bid meeting is scheduled to be held on May 8th 2013 in Delhi and the last date for the submission of bids is May 30th 2013.

The rooftop PV allocations are different from most policy-based allocations so far in that there is no Feed-in-Tariff (FiT) being offered. Instead, SECI will provide a capital subsidy of 30%. This is similar to the off-grid capital subsidy scheme of the Ministry of New and Renewable Energy (MNRE). Under this mechanism, the scope of work for the bidder includes the identification and leasing of the buildings suitable for the rooftop plants. The bidders also need to obtain No Objection Certificates (NOC) from the relevant distribution company (DISCOM) for connecting the projects to the grid. In addition, bidders are responsible for the complete design, engineering, manufacturing, supply, storage, civil work, erection, testing and commissioning of the grid connected rooftop solar PV project, including operation and maintenance (O&M) for a period of two years after commissioning of the plant.

Under the new mechanism, the bidder quotes a consolidated cost in INR/Wp terms for providing a turnkey solution. Based on this bid price, SECI will provide a capital subsidy of 30%. However, the disbursement of the subsidy is linked to the performance of the plants: 20% will be disbursed at the time of commissioning after the project can prove a performance ratio of a minimum of 75%. A further 5% will be disbursed at the end of the first year, and another 5% at the end of the second year of generation of the plant, if the project can prove a minimum Capacity Utilization Factor (CUF) of 15% for the two years.

The sale of power and the negotiation of the tariff is the developer’s responsibility (refer to the clarifications provided by the SECI in the first phase of biddings). The generated power is expected to be consumed by the rooftop owner first, after which any excess power can be exported to grid.

The new allocation process improves on the existing process for disbursing the MNRE subsidy as (a) it is competitive, which means that the cost to the government exchequer will be minimized; and (b) the disbursement of the subsidy is tied to the performance of the plant, which will ensure that the subsidy is released only to well executed projects. If SECI can allocate such subsidy-based projects on a monthly basis and not limit the allocations to some particular cities, the process can become an effective and transparent replacement of the existing MNRE capital subsidy.

This post is an excerpt from this week’s INDIA SOLAR WEEKLY MARKET UPDATE. Sign up to our mailing list to receive these updates every week.

You can view our archive of INDIA SOLAR WEEKLY MARKET UPDATES here.

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