Loading...

Anti-dumping duties on solar PV cells and modules will bring the Indian solar market to a halt

/

Anti-dumping duties threaten to torpedo the Indian solar market at a time when the new government has made clear its intention to grow solar. They are an ill-conceived and ill-timed vestige of the previous government and serve a very small section of the Indian solar industry at the detriment of the majority of the rest, the power consumers and the taxpayers.

Solar will become more expensive (by at least 70 paisa per kWh) and up to 1 GW of existing projects could be scrapped. This will set the solar market back by 2 years

A small group of Indian industry players will win in the short term. The majority of Indian industry players (including manufacturers) will lose. In the long term, all lose

India should focus on making solar cheaper, not more expensive. Supporting domestic manufacturing is possible under this premise, e.g. by extending cheap loans

The Ministry of Commerce in India has proposed anti-dumping duties of between $0.11-0.81 on cells/modules imported from China, US, Malaysia and Taiwan (currently about 80% of modules used in Indian projects). The decision is based on a very narrow data set from two years ago and now threatens to affect the entire industry for years to come. In addition, the proposed duties would be very detrimental to India’s larger energy, investment, development and growth story.

The duties will result in an increase in the cost of solar power in India of at least 10% or 70 paisa per kWh. Just for the planned new government-incentivized projects of 7.5 GW by 2017, this would cost the Indian power consumer or taxpayer around INR 3,581 cr ($0.6 bn).

But more likely, anti-dumping duties would hit investor confidence badly and bring the market to a halt, setting it back by at least two years. Up to 1 GW of solar projects could be scrapped. Project developers will be forced to reconsider their plans and commitment to the Indian market.

International investors and banks, just gaining cautious new confidence in the Indian market, will be put off as a result. The duties will even harm the majority of domestic module manufacturers, who are almost entirely dependent on cell imports (mainly from China). They will find it very difficult to sell in the India. At the same time, they (like Indian cell manufacturers) may also be exposed to retaliatory measures in export markets.

The negative sentiment will affect the entire solar eco-system in India including EPC contractors, installers and thousands of solar entrepreneurs selling solar products and services across the country. In addition to harming the solar industry, the anti-dumping duties will have a broader negative effect in the country. More expensive solar can contribute less to ameliorating India’s power deficit and energy import woes. Millions of un-electrified households will not get access to a solar solution.

The duties will arguably give a short-term boost to the 3-5 Indian solar cell manufacturers whose sales in India will increase. However, in the long term, they will also be hit by a decline in demand for solar.

We doubt that a one-off measure such as anti-dumping duties would entice investors to set up more manufacturing capacity in India. What would really drive investment into manufacturing in India is the creation of a vibrant, large solar market and long-term measures to boost competitiveness of Indian manufacturing: for example, a consistent and transparent policy framework, investment in R&D and engineering skills development, or the creation of special investment zones with fast track project clearances. India needs to focus on making solar cheaper, not more expensive.

At this point, the anti-dumping duties can only be stopped by a strong political intervention in this narrow, quasi-legal process, in the name of the larger public good.

Tobias Engelmeier is the Director and Founder at BRIDGE TO INDIA.

Read more »

BRIDGE TO INDIA introduces the first ‘SOLAR CASE STUDY’

/

We are pleased to announce a new addition to our portfolio of publications – BRIDGE TO INDIA ‘SOLAR CASE STUDY’. This is an effort to bring a greater degree of depth and transparency to the solar market in India.

Our case studies are aimed at EPCs, project developers, lenders, investors and policy-makers and intend to disseminate knowledge on solar projects that have already been executed

In our first case study, we examine a 36MWp project commissioned in Jodhpur, Rajasthan. The project was developed by Giriraj Enterprises (a Malpani Group company) and the EPC was done by Sterling and Wilson

Through our case study series, we create the platform for developers, EPCs and component manufacturers to showcase their projects and skills to more than 12,000 industry readers across the globe

We believe that everyone in the market can benefit from having more knowledge about the projects that were already executed. Our case studies allow EPCs and component suppliers to compare notes, help project developers take more informed decisions, lenders to fine-tune their risk perceptions and give policy-makers some more on-ground input needed to adjust and improve the regulations. Over time, we aim to distil best practices.

Each of our case studies is sponsored by one of the stakeholders in the project. This does not give the sponsor any editorial rights and we stress the independence of our analysis. However, the sponsor can choose a project that he or she considers a particularly good project. A project, for example, that showcases a particular skill or functionality. We, in turn provide an independent review of the project and share that with the large Indian solar community through our various outreach channels.

In our first case study [Download here], we look at one of Rajasthan’s largest solar projects – a 36 MWp plant near Jodhpur owned by Giriraj Enterprises, a Malpani Group company. The plant was built and commissioned by one of India’s leading EPC companies – Sterling and Wilson. The case study provides an overview of the project, the site, the technology selection and timelines. The study also looks at the key challenges faced by the EPC contractor in working in the harsh desert climate of Rajasthan. Innovative solutions and best practices are also documented.

If you would like us to create a case study on one of your projects, please contact us at contact@wordpress-117315-688799.cloudwaysapps.com.

Akhilesh Magal is Senior Manager, Consulting at BRIDGE TO INDIA.

Read more »

Weekly Update: What Modi’s victory means for solar in India

/

Modi’s election victory was overwhelming. His party, the BJP, has won a clear majority in the lower house with 282 out of 543 seats. Previously, as Chief Minister of Gujarat, Modi had presided over the most successful Indian solar policy. So is Modi good news for solar in India? With the election results barely more than a week past, it is still early to take that call. But let us look at what we know, what he is likely to do and then what the solar industry can hope for.

We know that Modi has a strong mandate for new policies and a good solar track record

It is likely that Modi will make solar a central element of an integrated energy strategy

We hope that the focus will be on growing the solar market and not on protectionist measures

What we knowWe know that Modi has an exceptionally strong mandate. This gives him room to maneuver, to initiate new policies and reforms. His government is strong enough to deal with setbacks and hence take risks. He does not have to accommodate regional parties in a coalition and can choose his cabinet, based more on merit than politicking.

We also know that Modi has a good track record in Gujarat when it comes to improving energy infrastructure and implementing solar policies. His Gujarat solar policy still accounts for around one third of India’s capacity to date. We also know that for him solar is a means to an end: cheap, plentiful, reliable power supply. As per our conversations, he understands that the comparison should be on a Landed Cost of Power (LCOP) basis. Once the Gujarat solar policy was completed, he did not initiate a new phase with government incentives. Instead, Gujarat focused on smaller, innovative models around rooftop solar and micro-grids.

What is likely to happenNow let’s look at what is likely in store for solar in India. First of all, the general macroeconomic environment in India will probably improve. Modi is the preferred choice of Indian business, as well as of international investors. The stock markets have opened with a 4.5% jump on the day his victory was announced. A better macroeconomic environment would reduce inflation, strengthen the Indian Rupee and drive power demand up. These are all factors conducive to investment into solar. There is a backlog of pent-up solar investment that might now be converted.

During the campaign and after his victory, Modi has also stated that he believes solar has a key role to play in India. He wants to bring solar lighting to the around 80 million Indian households without electricity. He also wants to reduce India’s dependence on imported coal, oil and gas. It is therefore reasonable to expect that the existing policy targets of the National Solar Mission (10 GW cumulative by 2017) will increased.

Another very interesting suggestion that has been made public in the last few days is creation of a new Energy “Superministry”, bundling together the current Ministry of Petroleum and Gas, the Department of Atomic Energy, the Ministry of Coal, the Ministry of Power and the Ministry of New and Renewable Energy. This would allow for a holistic approach and make it easier to reform the energy market in India. This could be good for solar, if it is a step towards bringing it into the mainstream of an overall India energy strategy. It could also accelerate a much-needed reform of the power sector, which is one of the main hurdles to growth of the Indian market in general and the solar market in particular.

What we hope for

Then there are a couple of things we can only hope for. Modi is very close to some of India’s largest business houses. Some of them have benefitted (perhaps unduly) from their links to him. What the solar market needs, however, is not cartelization, but liberalization, competition and innovation. In a similar way, Modi’s Hindu nationalist credentials might lead him to favor protectionist measures for the ailing Indian solar manufacturing industry. What the market needs, however, is the lowest possible cost of solar, international investment and a much more integrated and dynamic ecosystem of research, deployment and finance.

Thirdly, solar was, in Modi’s past announcements, sometimes clubbed together with developmental goals. While solar is a great way of providing power in remote rural areas, its scope in India should be much larger. It should be seen as a key building block of India’s long-term energy supply. To that end, it is very important that Modi picks the right minister of whatever ministry solar will fall under.

Overall, Modi’s election victory is very likely good for solar. It has already begun to change the mood in the investment community. It will take time for him to turn the Indian ship around and tackle large, structural reforms in the power market. Delivering on that, however, would create the platform for long-term growth. In the meantime, we would not be surprised to see a complete revamp of the National Solar Mission in the next year, including much more ambitious targets and a stronger focus on distributed generation. Revoking the anti-dumping duties could be another immediate action.

Tobias Engelmeier is the Director at BRIDGE TO INDIA

Read more »

Solar electricity for all? Modi’s idea for electrifying India

/

India’s new government led by Prime Minister Narendra Modi has announced that it wants to provide electricity to all households by 2019. This is a challenging task, considering that only 55.3% rural households and 67.2% households across the country have access to electricity as per the 2011 Census[1]. 43.2% of rural households and 6.5% urban households use kerosene for lighting.

Such a program would require around 19.5 GW of distributed solar

The challenge will be to create a viable market place with sustainable solutions

The target is very ambitious. It shows that electrification and solar are high on the agenda of the new government

Modi’s new government wants to use solar energy to provide a minimum level of electrification across the country. Let us assume that all of India’s 81 million currently unelectrified households will be electrified using solar power. To meet their daily basic requirements, 275 W/household for 3 hours per day (Scenario 2), they will need 240 W of solar panels. This means that approximately 19.5 GWp of solar PV needs to be installed, requiring an investment, under current prices of around INR 250 per system[2] (USD 4.27), of around INR 4,800 bn [USD 82 bn]. This will open up huge opportunity for private sector participation in electrification programme. If the expense is incurred in equal annual installments in five years until 2019, the funding would be the equivalent of 1% of India’s 2013 GDP each year.

Electrical loads
Scenario 1*

Scenario 2

Scenario 3
Load per household (W)
58

275

500
Number of lights (9 W)
2

4

6
Number of fans (50 W)
_

2

4
Electric socket – electronic gadgets (40 W)
1

1

1
TV sets (100 W)
_

1

1
Computer (100 W)
_

_

1

A robust national framework for implementation and funding support for states would be critical to achieving this target. A dedicated nodal agency at the centre to co-ordinate effectively with state level agencies could help. A vast awareness and marketing campaign would be required as well as a significant push in capacity building at the local level for installation, operation, maintenance and repair of such systems. Of course, the state would not have to do everything itself. In fact, it should not. Instead, it should allow a competitive ecosystem of private companies, investors and banks to do most of the legwork.

To that end, it would help, if the government can layout a clear long term policy to provide visibility to market players. A few private sector companies are already setting up rural electrification projects in India and many more are showing interest in the sector. In addition, the government should set up an independent agency that can ensure standards of execution quality in a non-bureaucratic manner.

While the goal may sound ambitious, it is clear that providing electricity to all citizens needs to be a top goal for any government. What the new government should be wary of in implementing such a scheme is the creation of a bubble along the lines of the microfinance market in India. The focus needs to be on real solutions, based on viable and scalable business models, reliable technology and trustworthy providers.

[1]http://censusindia.gov.in/2011census/hlo/Data_sheet/India/Source_Lighting.pdf

Scenario 1 is as per Remote Village Electrification Programme of Ministry of New and Renewable Energy (MNRE), Government of India

Scenario 2 and 3 are based on assumptions of various household loads

[2] Solar PV system with battery bank

InduKalpa Saikia is the Sr. Manager, Project Development at BRIDGE TO INDIA.

Read more »

Innovative Indian cleantech companies show their mettle at the 2014 International Ashden Awards

/

Here are two facts about renewables in India: They make fundamental sense without any kind of government support and they are already being deployed across the country in numerous innovative ways. India is a fantastic laboratory. Of this year’s ten Ashden Awards (link) finalists, five are from India. The winner will be announced on May 22nd. Here is a brief introduction to them:

Models range from village electrification to corporate sustainability

Solar PV is the technology of choice

The real innovation is in the business or cooperation model

Green Houses fed by solar water pumps

1. Rajasthan Horticulture Development Society (website)

In the desert state of Rajasthan, farmers’ sons are returning from cities to work on their farms thanks to a new solar-powered agricultural boom. Acute power and water shortages meant that farmers were only able to grow crops during the monsoon. But Rajasthan has a free and infinitely available resource: the sun. The Rajasthan Horticulture Development Society has provided more than 10,000 farmers with new solar-powered water pumps. Combined with drip irrigation and other technologies to cut water use, this enables year-round cultivation of high-value crops and a high-tech horticulture the state has never seen before. Farmers’ incomes as a result have more than doubled.

2. Mera Gao Power (website)

Uttar Pradesh-based Mera Gao Power is demonstrating the business case for meeting the needs of the some of the poorest people in India with the pioneering use of unsubsidised commercial micro grids. Vast stretches of rural India lie beyond the reach of the over-stretched national electricity grid, with most families so poor that even the cheapest solar lanterns are difficult to afford. But Mera Gao Power has found a middle way: creating solar-powered ‘micro grids’ are lighting up the state, one village at a time. Each system is easy to install and provides seven hours of light and mobile phone-charging for up to 32 houses. For the 20,000 families benefiting so far, that means more time to study, work and socialize in the evening. And with weekly payments of just 25 Rupees, the electricity is even cheaper than kerosene.

3. Infosys (website)

The Indian IT company Infosys switching to more sustainable growth, decreasing electricity consumption per staff member by 44% across its Indian business campuses. This is the result of seizing every opportunity to reduce energy consumption in its existing buildings – from reducing the size of chiller plants for air conditioning, to painting roofs white so they reflect the heat. Cutting-edge design of new buildings also helps keep offices cooler and maximise natural light. With a $80 million cut off its energy bills, Infosys has made a strong business case for large companies to invest into energy efficiency.

4. Greenway Grameen (website)

Greenway Grameen’s mission is to provide an affordable, desirable cookstove to improve the quality of life for Indian women. Collecting and cooking with wood and dung is not only time-consuming; it creates dirty, smoky kitchens. Greenway Grameen’s simple stoves dramatically reduce kitchen smoke, cook more quickly, and stay cleaner for longer. And they’ve been designed with women’s needs and aspirations in mind. Aside from taking care to produce a stove women were comfortable using, extensive market testing revealed that they sell far better when marketed as an essential part of a modern kitchen: more than 120,000 stoves have been sold so far.

5. Sakhi Unique Rural Enterprise (SURE) (website)

A powerful network of women entrepreneurs in central Maharashtra, India, is selling clean energy products like solar lanterns and cleaner cookstoves to other women, improving quality of life of both sellers and buyers. Since 2009, the non-profit social enterprise Sakhi Unique Rural Enterprise (SURE) has been selecting, training and supporting women micro entrepreneurs to be ‘energy entrepreneurs’. For the 600 ‘Sakhis’, selling clean energy products doesn’t just boost their income directly, it also carries a social cachet, helping boost their confidence. For the women using their new products, aside from reducing the drudgery of collecting fuel, cooking and cleaning pots, access to clean light for women and children opens up new possibilities for work and education.

Tobias Engelmeier is the Director at BRIDGE TO INDIA.

Read more »

Weekly Update: Can the levy of anti-dumping duties be stopped now?

/

The Indian Ministry of Commerce has concluded that certain foreign suppliers dumped solar cells and modules in the Indian market in the first half of 2012. The ministry is now likely to recommend dumping tariffs for solar cells and modules. As discussed last week, BRIDGE TO INDIA believes that the imposition of such duties will be counterproductive and can be a ‘market killer’ (refer).

Based on BRIDGE TO INDIA’s discussions (with solar power producer, EPC contractors, MNRE officials etc), the earlier consensus was that antidumping duties had become irrelevant after long delays in the investigations involved

The recently submitted notes have provided more clarity on the subject and have swayed the results

To get more clarity on the situation, we urge interested parties to take part in a quick questionnaire [link]

Based on our discussions with several solar power producers, EPC contractors, component manufacturers as well as with various officials at the Ministry of New and Renewable Energy (MNRE) and state ministries over the past few months, the consensus was that antidumping duties had become irrelevant after long delays in the investigation process. Now, we understand that at the last moment, many major solar power producers and the countries involved have again submitted notes to provide more clarity on the subject and sway the results. According to unconfirmed sources, the US government has also written a letter to the Government of India on the matter.

Going by the procedure, the matter has taken on a dynamic of its own and the obvious conclusion of the process will be imposition of duties, even if it is detrimental to the market in general. It is a legal, not a political or commercial question. The recommendations from the Ministry of Commerce on the tariffs will go to the Ministry of Finance, which will then be in charge of implementing the duties. The deadline for issuing the recommendations (21st May 2014) is fast approaching. What is needed, is a political intervention to prevail over procedural logic. Formation of a new government at the center, following the announcement of the result of national elections last week, will make such an action difficult. Intervening in this process, however, would be a very good first indicator of the new government’s commitment to a growing solar market.

In order to provide more clarity on the situation, we urge all interested parties to take part in a quick questionnaire [link], the results of which we will analyse and publish on an anonymized basis.

Read more »

A renewable energy agenda for the next Prime Minister: Part 2

/

This is part two of a blog series in which I propose a renewable energy agenda for the next Prime Minister of India. Part one outlined how the current energy strategy (or perhaps the lack of it) is damaging the economy (Click here to read part one). In this part, I outline the solutions.

Reduce India’s dependence on imported energy by primarily focusing on solar energy – a widely available resource in India

Slowly phase out fossil fuel subsidies while simultaneously increasing solar subsidies. As solar gets cheaper, the subsidy can altogether be eliminated

Complete the incomplete deregulation of the power sector

ndia can change course. The technology, skills and finance are already available. Perhaps, the only significant thing lacking is the will to change. Every election presents an opportunity for change and therefore, I have three recommendations for the new Prime Minister.

1. Reduce India’s dependence on foreign energy

India must make a conscious decision to reduce its dependence on coal and diesel for generating electricity. India is rich in solar and wind resources and should aggressively pursue them in order to make bring them into the mainstream.

India has made a good start. It has been a pioneer in the wind sector. And the National Solar Mission (NSM), India’s flagship solar program has been quite successful with the quotas always being oversubscribed. Similarly, a host of states have announced solar policies and although many of them are caught up in delays, states like Gujarat have shown the way.

My recommendation to the next Prime Minister is to come out with National Wind, Biomass and Waste-Energy mission, on similar lines as the NSM. The NSM has shown that when policies are transparent, investors are willing to put their money behind these technologies. The NSM has also shown that governments play a very important role in bringing down costs of generation of renewable energy. Solar prices in India have more than halved from INR 17.91/kWh in 2010 to INR 6.48/kWh as of 2013. Wind energy in India is as low as INR 4.0/kWh. Already today, renewable power is cost competitive with coal based power during certain times and in certain segments of the electricity market. However, the pace of deployment remains far too slow. India must set itself more aggressive goals to increase renewable energy deployment.

2. Reallocate subsidies targeted towards fossil fuels to renewable energy

India spent a record 170 thousand crore (USD 26 billion) on fossil fuel subsidies for the year 2012-13. The largest contributor to the fossil fuel subsidy bill is diesel. Most diesel subsidies are targeted at farmers (tractors and water pump sets), but a report by the Petroleum Planning and Analysis Cell (PPAC) shows that most benefits of the subsidy goes to unintended recipients.

The report suggests that over 13.15% of diesel subsidies are consumed by high-end SUV cars (owned by the rich). Commercial vehicles utilize a further 8.94% and three-wheelers 6.39%. Industries and electricity generation (diesel generation sets) consumed 9% while mobile towers consumed 1.54%. This means that only about 13% of the diesel subsidy bill is reaching the farmers (the recipients who need the subsidy the most) and the transport sector, with the rest being siphoned off.

Source: Petroleum Planning and Analysis Cell (PPAC). http://bit.ly/1kWaSre

In comparison, renewable energy subsidies are negligible. The National Clean Energy Fund (NCEF) funds the National Solar Mission (NSM). The total budget allocated so far to the NCEF is INR 8,180 crore (USD 1.3 bn). Out of this INR 3,320 crore (USD 0.52 bn) has already been allocated to the MNRE. The MNRE (which is responsible for the NSM) has allocated INR 1,793 crore (USD 0.3 bn) towards Phase 1 of the NSM and INR 1,875 crore (USD 0.3 bn) for Phase 2. This means that the total NCEF subsidy budgeted between 2010 and 2013, is less that 5% of the total fossil fuel subsidy during one year (2012-2013). This must change.

Source: BRIDGE TO ANALYSIS based on publically available data

I therefore recommend the reduction of fossil fuel subsidies in the following manner: (1) Completely phase out diesel subsidies for all sectors except agriculture and transport of goods (especially agricultural produce). This can be done using the direct cash transfer mechanism. (2) Target LPG subsidies only for the poor.  Cash transfer mechanism can help here, too. (3) Reduce kerosene use for lighting by subsidizing solar lanterns.

3. Completely deregulate the power sector

The deregulation of India’s power sector began in 2003, but has remained incomplete. Open Access (OA) ensures that private power producers can now sell power to consumers by using the state owned transmission and distribution network. However, unrealistically high OA charges often deter consumers from switching to private power producers. Moreover, OA charges are often tweaked to discourage competition. There is an urgent need for a fair methodology of determining the OA charges so that neither the DISCOM, nor the consumer nor an independent power producer is disadvantaged. Truly opening up open access will allow consumers to tie up with cheaper renewable energy producers (especially wind). This lowers energy costs, boosts productivity and improves the economy.

Second, politicians must not be allowed to tinker with power prices. The State Electricity Regulatory Commissions (SERC) must have the absolute authority to decide power prices. In the financial year 2012-13, DISCOMS across India suffered from aggregated losses of over INR 250,000 crore (USD 39 bn). Most Indian DISCOMs are simply not bankable. This is the single greatest hindrance to private sector investment into the power sector.

These three recommendations may be simple, but implementing them requires political audacity. The election will hopefully open the path for the much-needed reform of the sector and enable India to recover it’s lost economic and development momentum.

Akhilesh Magal is Senior Manager, Consulting at BRIDGE TO INDIA.

Read more »

A renewable energy agenda for the next Prime Minister: Part 1

/

In this two-part blog piece, I propose a renewable energy agenda for the next Prime Minister of India. In the first part, the influence of the current energy consumption patterns on the economy of India is discussed. In the second part, the recommendations and potential solutions are outlined.

India’s GDP growth is being restrained by an acute shortage of energy

Our energy supply is heavily dependent on imports. This affects both the current account deficit and the fiscal deficit, both of which are a drag on the economy

If India is to grow, it needs a better energy strategy. Renewables, especially solar should play a key role

India is in the midst of a national election, the results of which will be announced on 16th May 2014. The elections come at a crucial time: the years since 2010 saw a steep decline in India’s economic performance with GDP growth falling from 10.5% in 2010 to 5.0% in 2013 (world bank data).

(Source: World Bank data)

Although global factors played a role, the main culprit is found in domestic structural issues. These include infrastructure bottlenecks, corruption, complex taxation rules, and bureaucracy among others. Energy reforms are also critical – yet hardly discussed (see Tobias Engelmeier’s four part blog series on India’s strategic energy options on the BRIDGE TO INDIA blog).

No country has ever achieved prosperity without a commensurate increase in its per capita energy consumption. India has one of the lowest annual per capita consumption of energy at 565 kg of oil equivalent (kgoe) per annum. China’s people, in comparison consume over three times as much (1,806 kgoe/annum). In India, the problem has not been on the demand side, but on the supply side. Securing energy supplies and delivering it to consumers has been a significant challenge.

To understand what this means at the ground level, one needs to visit the industrialized state of Tamil Nadu during the summer months. Most industries there face power cuts up to 15 hours a day. This has increased energy costs because it forced them to turn to expensive diesel power. And even diesel is sometimes hard to come by, thus affecting the productivity or even ability to operate. Many factories have shut down as a result. Tamil Nadu is no exception. Businesses in many other states face similar challenges. Not to speak of the millions of households across the country without grid power.

On the macro economic level, also, India’s energy crisis is becoming a cause of great concern as it undermines India’s credit rating and limits the government’s policy options by draining national resources away. This finds expression in the current account deficit (CAD) and the fiscal deficit.

The CAD or the trade deficit is the difference between what the country earns by exporting goods and services and what the country spends on its imports. The CAD for last financial year (2012-13) stood at a negative USD 87.8 bn or 4.8% of GDP. This is well above the safe limits for a developing economy. India imported more than it exported. When this happens, the rupee depreciates against the dollar and reduces dollar reserves held by the country. A weakening currency might be good for exports, but is detrimental to the country’s ability to fund its foreign purchases i.e. the country spends more to purchase the same amount of goods. This weakens the entire economy.

The largest contributor to India’s import bill, making up around 35% is the import of oil, gas and coal. Crude oil prices have risen sharply in the last few years. The rupee too has depreciated by nearly 20% against the dollar in the last six months. Given the fact that most international oil transactions happen in dollars, this has been a double blow to India’s import bill and therefore the CAD.

Coal is the main energy source for firing India’s power plants, providing nearly 54% of the electricity. Although India has one of the most abundant coal reserves in the world, a host of scams, poor policy making, insufficient infrastructure and environmental protests have led to a shortage of domestic coal supplies. As a result, India turned to importing coal in ever-larger quantities, mainly from Indonesia.

India’s energy woes have also contributed significantly to the fiscal deficit. The fiscal deficit is the difference between what the government earns and what it spends. In India, it stood at an alarming 4.9% of GDP for the period 2012-13. Subsidies make up a large part of government spending and subsidies on fossil fuels major part of that. In the financial year 2012-13, India spent nearly INR 170,577 crore (USD 26 bn) on subsidies for diesel, kerosene and domestic LPG alone. This is 3% of the GDP[1].

Ultimately, India’s economic success is strongly correlated to its ability to secure energy supplies and deliver this energy to critical areas of the economy in a speedy, reliable and cost effective manner. Renewable energy will play a crucial role in this. India is blessed with good renewable resources (solar, wind and hydro). Moreover, solar and (to a lesser extent) wind are not location dependent. That is, they can be installed close to areas where there is a demand, thereby reducing the need for transmission and distribution infrastructure.

In part two, I outline recommendations for a renewable energy agenda for the next prime minister.

Read more »

Weekly Update: Anti-dumping duties can kill the Indian solar market

/

Sometime before 21st May 2014, the Directorate General of Anti-dumping Duties (DGAD) under the Ministry of Commerce is expected to give its recommendations on the PV cells and module dumping investigations that started on 21st May 2012, based on a complaint by four Indian cell manufacturers. There have been contradictory reports as to which way the results of the investigation may lean (refer link 1link 2 and link 3). The Ministry of New and Renewable Energy (MNRE) has been opposing imposition of any anti-dumping duties (refer) to avoid adverse consequences for solar project capacity addition in India.

Antidumping is a counterproductive measure that can severely disrupt the Indian solar market

If it is introduced, it will increase the cost of solar in India, moving it away again from grid parity

Indian manufacturing would be better served by a stable and growing Indian market and government support in creating an innovation ecosystem

‘The Political Economy of Antidumping’, a paper prepared on the 100th anniversary of anti-dumping duties concludes “a simple summary of research on dumping and antidumping would be that: dumping appears not to be much of a problem; but antidumping is much worse. The antidumping mechanism is really about neither fairness nor predation. It is, instead, about protection, and because it wraps itself in the mantle of fairness and because it is obscure and because its details permit greater protection to be delivered than would be the case with simple legislated protection, antidumping protection is particularly a bad protection.” As explained in this blog, this seems to be particularly true for the Indian solar market.

It may not be very difficult to prove dumping of solar modules in India in 2011-12 when the global PV market was suffering from over capacity and falling prices. To that effect, dumping by Chinese suppliers was proved in the US and Europe as well. During those tough times in the market, domestic manufacturers (most of whom set up shops with the purpose of exporting to Europe) sought refuge in domestic demand and demanded protection. This is when the anti-dumping process started. Since then, many players across the world, including in China, the US and Europe, have shut down driven by fierce competition and falling prices. But as demand has now soared and module suppliers are returning to profitability, the Indian anti-dumping duty process is still ongoing and causing tremendous uncertainty in the market.

The question for India is, whether anti-dumping duty today is a good idea and, given that the context has changed significantly, if political sense can override procedural logic. Indian manufacturers have asked for anti-dumping duties to be imposed against imports from four prominent module supplying countries. The only prominent manufacturing geographies left out are Europe and Japan, which – like Indian suppliers – are relatively more expensive. Thus, the target of the anti-dumping petition, is the entire competitive segment of the industry rather than any specific companies or country.

If the duty is introduced, it will significantly increase the cost of solar modules and set back most of the gains made toward cost-parity in the past two years. It will also make most of the large scale projects, currently developed on wafer thin margins, unviable. As these developers start backing out, it will lead to long drawn legal battles and shattering of confidence in the Indian market. State and central solar programs will either be scaled down or scrapped in such a scenario.

Proponents of anti-dumping duty argue that, in the long-term, it will help an indigenous domestic manufacturing industry develop, improving India’s energy security and balance of payments situation. However, given the uncertainty related to longevity of such measures, we doubt if any meaningful investments will actually flow in creating globally competitive manufacturing facilities in the country. (If that were possible, protection will not be needed to begin with.)

BRIDGE TO INDIA believes that the over aching goal of government should be to allow solar to develop into a robust, large market – as independent as possible from the vagaries of policies. India would benefit greatly from having a cheap, secure energy supply option. Indians would benefit from more power and jobs (most of which are in installation and services around plants, and not in manufacturing). If solar manufacturing is to be encouraged as a political goal, there are much better ways to do so, for instance through more competitive finance and innovation support. The most harmful effect of the anti-dumping duty process is the insecurity it brings to a market that instead needs nurturing. India needs more solar energy.

Read more »

Training program on ‘Standalone Solar Power Supply Systems’ by GSES

/

I attended the GSES training programme on Standalone power supply systems in Delhi last week. The five-day training program was focused on technical and operational aspects of off-grid solar PV projects with a guided site visit to a standalone solar plant to give participants an informative tour of a typical PV with batteries installation.

Participants included system integrators, MNRE channel partners and other key solar industry professionals.

Participants were trained to use NREL design tool ‘Homer’ and optimize various system design parameters as per site requirements.

Participants were also taught the solar water pump design and installation process

The workshop covered a wide range of topics including battery and inverter sizing, load assessment, system protection, yield estimation etc. The workshop attracted a varying range of participants from solar home system integrators to MNRE channel partners. The diversity of attendees generated a healthy debate while allowing individuals to share their practical insights on the solar PV space in India.

Apart from Mr. Dwipen Boruah, a renewable energy professional with over 20 years of experience in renewable technologies, the panel of instructors comprised several guest lecturers from the industry including Mr. Manoj Pandey (St-con power controls), Dr. Indradip Mitra (GIZ) and Mr. Dharmesh Patel (Sr. Manager, Rotomag Motors), who shared their experience and expertise on relevant topics.

For complete session photo highlights, visit http://www.gses.in/training/sarps

Vinay Rustagi is the Managing Director at BRIDGE TO INDIA

Read more »

Weekly Update: Delays designed to kill solar anti-dumping investigations

/

Recent reports (refer) suggest that in view of the large number of solar PV projects under development in India, the Ministry of New and Renewable Energy (MNRE) has asked the Ministry of Commerce to ”stay” any possible imposition of anti-dumping duties on solar PV modules in India. In May, the investigations complete two years from the submission of the complaint and any announcement beyond this timeframe is redundant. The Directorate General of anti-dumping duties (DGAD) under the Ministry of Commerce will meet next month to make its stand clear.

The “stay” is meant to protect the Indian solar manufacturing sector

Such a measure however, may lead to indecision and scuttle new investment propositions, harming the market

BRIDGE TO INDIA is against the implementation of anti-dumping duties

This initiative is designed to protect the Indian solar manufacturing sector. However, the word “stay” in MNRE’s request on anti-dumping investigations represents an underlying and fundamental flaw in India’s policy approach. Such measures lead to indecision and scuttle new investment propositions, harming the market. (Moreover, anti-dumping investigations are a quasi-judicial process and the MNRE’s advice should only be taken as an input. The case should be judged on merit of whether or not dumping has taken place.) The same is happening with the capital subsidy process for distributed solar plants under the MNRE. Even though the ministry does not have funds, it continues to say, for more than a year now, that the mechanism is still in place. While one could argue that the subsidy mechanism itself harms the market segment, a non-functioning one is even worse. Many industry stakeholders have therefore requested the ministry to just do away with subsidies altogether. A third example of “stay” and confusion is manufacturing. Investments into manufacturing in solar in India are bound to come to a halt as well, if the MNRE is unable to provide a clear and reliable policy position. The ministry can’t keep the market guessing.

In principle, BRIDGE TO INDIA is against the implementation of anti-dumping duties as we believe that it would have a negative impact on the solar industry in India. However, it is more important that the government bring transparency to its processes. In an infrastructure industry, such as electrification, with investment horizons of 10 years or more, transparency is key. The government could help design an enabling framework or it could step aside and let the market work.

Read more »

Why opening up ‘Open Access’ is crucial to the success of India’s solar story

/

Gujarat recently announced a ban on private power consumers sourcing electricity from outside the state (refer). This is detrimental to India’s power sector reforms and hinders with the deployment of large-scale solar energy plants. The government should reconsider the decision, if it wants Gujarat to be a solar energy leader.

India’s solar market is currently undergoing a transition from being policy-driven to being parity-driven. Rapid scale under a parity-driven market can only happen under a robust open access regulatory framework.

Open access can work only if the country’s power sector reforms are pushed through. Given that national elections are underway in India, these reforms are unlikely to happen very soon.

Large-scale power plants are critical to reducing the cost of solar, increasing efficiency and helping India meet its energy requirements. All large-scale power plants outside policy allocations must use the open access route to reach consumers.

The implications of this policy change are significant, especially for the solar sector. Gujarat leads the country in terms of total installed solar capacity with over 1 GW of installations. All this capacity has come as a part of state or national policies that promote solar power. In India, the solar market is now transitioning from policy-driven to parity-driven as several consumer segments reach grid parity with solar. For this very promising new market to develop successfully, smooth open access rules and practices are key.

Although open access is guaranteed to all consumers above 1 MW, utilities restrict this by refusing to grant applications. Often, grid congestions are cited as the reason. Although there is some merit to this, the concern is often not based on actual load flow studies. In many cases, the grid could well take solar power. Utilities also lobby at the state electricity regulatory commissions (SERCs) to increase open access changes – especially the Cross Subsidy Surcharge (CSS). India’s power tariffs are structured in such a manner that industrial and commercial consumers subsidize residential and agricultural consumers. When industries and commercial clients sign private power purchase agreements (PPAs), the utility loses out on these high value consumers. This is why a CSS is levied on consumers that shift to open access. While the interests of utilities have to be kept in mind, levying CSS and other charges does not help anybody. It keeps the utilities inefficient and hinders rapid deployment of renewable energies by keeping out private players from the power sector.

The real solution is to bring in an even power pricing mechanism and eliminate all subsidies. If power has to be subsidized for certain disadvantaged sections of the society then the subsidy amount must be borne by the state governments rather than passed on to the utilities. The Universal Identification Number (also called the Aadhar Card) could perhaps be used to target power subsidies to the poorest. Such a change in the power pricing structure requires strong political leadership. Gujarat has demonstrated such leadership in the past. Gujarat did two things rather successfully:

1) It freed up the State Electricity Regulatory Commission (SERC) from political interference and allowed periodic increases in tariffs. It also brought in a uniform power pricing and reduced cross subsidies significantly (see graph).

2) Gujarat separated unreliable agricultural feeders from domestic feeders for farmer’s homes. This meant that subsidized electricity was being used only to power water pumps and not farmer’s homes. Although this meant power prices went up for farmers, they now had reliable uninterrupted power. Farmers unanimously opted for paid power. The state government now subsidizes only the agricultural feeder (see graph). This resulted in a saving of INR 23,000 crore (INR 230 bn.) for the government[1].

Graph: Comparison of Gujarat’s power pricing across consumers with other states and India’s average.

Despite these tough measures that were considered political time bombs, Mr. Modi was voted back to power three times in a row. This goes to show that change is possible without jeopardizing political interests.

It therefore, comes as a particular surprise that Gujarat, which has so far led the transition towards a modern, competitive electricity economy, has decided to ban open access. This not only goes against Mr. Modi’s image as a pro market politician, but also jeopardizes his state’s electricity and solar success. Worryingly, this might just be a precedent for other states under pressure from entrenched utility interests to also ban open access.

[1] Business Today. http://businesstoday.intoday.in/story/gujarats-power-sector-turnaround-story/1/21750.html. February 5th 2012.

Akhilesh Magal is Senior Manager, Consulting at BRIDGE TO INDIA.

Read more »
To top