Category: Market Outlook

The Indian solar market is at a crucial juncture. Anti-dumping duties (ADD) will impact the market – severely if imposed, still substantially even if not (just by creating uncertainty). Projects under the National Solar Mission (NSM) will be affected least. Projects under state policies and parity-based projects might not only be delayed but fully called off. For more details, please download our latest India Solar Compass (July 2014 edition) here.

If ADD were not tabled in the first place, India would have added over 1.6 GW in next year

Even if ADD will be scrapped India would add only around 1 GW solar capacity in the next year

The NSM will be the main contributor to solar growth, irrespective of ADD

The Ministry of Commerce had recommended ADD for solar cells and modules in May 2014. Since then, the Indian solar market has held its breath. We are considering three scenarios for the market projection.

In the first scenario, we assume what would have been the case (hypothetically, as a base line), if ADD had not been recommended in the first place. In this case, we would have expected over 1.6 GW to be added in the next year. Various state policies would have contributed around 700 MW. Over 300 MW would have come from the NSM. Parity based projects would have contributed an additional 300 MW.

Figure 1: Projected quarterly PV installations in India (hypothetical, no ADD talk)

In the second scenario, we presume that the announcement of recommendations is leading to delays but by August, a decision not to impose the duties will be announced. This is currently a likely scenario. India could then still reach almost 1 GW of new capacities in the next twelve months. State policies would add over 300 MW. Around 300 MW would be added under NSM. Parity based projects would contribute around 200 MW.

Figure 2: Projected quarterly PV installations in India, if ADD are scrapped

Under the third scenario, we presume that ADD will be imposed. Projects in the installation stage will likely still get commissioned in Q3 of 2014. But after Q3 of 2014, the only significant capacity additions will be under NSM. The impact of ADD will be minimal for projects under the domestic content requirement (DCR) category. Under the open category for NSM, the orders have already been placed for modules and few projects will likely be commissioned in next year. The parity-driven market will come to a halt. In total India will only build around 550 MW. The overall effect of anti-dumping duties vis-à-vis the baseline scenario will be a minus of 1 GW or two-thirds.

Figure 3: Projected quarterly PV installations in India, if ADD are imposed

Mudit Jain is a consultant at BRIDGE TO INDIA.

The Ministry of Commerce has recommended anti-dumping duties (ADD) for solar cells and modules from the leading supplier countries. The final decision on their imposition is now awaited. Since then, the solar market in India has come to a standstill, with many projects and policies on hold. For more details, please download the latest edition of the India Solar Compass (July 2014) here.

The imposition of ADD could lead to a reduction of solar installations by almost 67% in the next year

Even if ADD is not enforced, installation capacity in the next year is still expected to fall by almost 40% due to delays caused by uncertainty about ADD

Projects under state policies and parity based projects will be affected most severely

As a result of the ADD, the cost of solar power could rise by about 10%, making many solar projects unviable. Also, making solar power more expensive to the taxpayer or power consumer. Indian module manufacturers who do not have their own cell manufacturing, will find it almost impossible to sell in the Indian market. Given the limited capacities of domestic cell manufacturers, the market will face bottlenecks for at least two years.

Had ADD not been tabled, we expect that India would have added over 1.6 GW of solar capacity over the next year. Even if ADD are not enforced, India will likely add almost 40% lesser solar (delays due to uncertainty). If ADD are imposed, the market will fall back to the growth level of pre 2011 and many players and investors might exit.

Figure 1: Projected solar capacity addition in the next year

Vinay Rustagi is the Managing Director at BRIDGE TO INDIA.

The new budget for 2014-15 will be the first of the recently elected government in India. The expectations are high, but the finance minister has to walk a tightrope to ensure fiscal prudence in an economy that has been handed over to him in a bad shape.

BRIDGE TO INDIA expects the government to increase the allocations to the MNRE

The government should think of ways to strategically support the growth of solar manufacturing

The possible reinstatement of accelerated depreciation for wind projects is expected to have a significant impact on the solar sector

The interim budget for 2014-15 presented by the outgoing government announced allocation of funds for setting up ultra-mega solar power projects but lowered the budgetary allocations to the Ministry of New and Renewable Energy (MNRE) and did not extend the 10 year income tax holiday for new solar projects.

In terms of taking corrective measures, we expect the government to increase the allocations to the MNRE. This should help revive the subsidy scheme for rooftop solar projects (refer). Given that Minimum Alternate Tax (MAT) of 19% is payable even if there is an income tax exemption (maximum rate is 33%), removing the tax holiday does not make much difference to either the cost of solar power or the government’s tax revenues. The government may or may not extend the tax holiday. If it does, it would be advisable to also waive off the MAT component so as to make it truly effective.

To show that the government is serious about promoting manufacturing in India, especially in the wake of anti-dumping duties being potentially imposed, it should think of ways to strategically support the growth of solar manufacturing. That means, manufacturers in India should be able to become competitive in the medium term without further government support. It would be a huge policy blunder if anti-dumping duties are enforced, but domestic manufacturing still does not take off. In such a scenario, the government would not  be able to keep the market afloat, let alone achieve ambitious new goals.

Apart from this, we expect this budget to signal a reform of the the power sector at large and provide more energy access. This will set the tone for a regulatory overhaul of the existing transmission and distribution mechanisms and make the rural electrification authorities look at all possible alternatives to achieve their targets. This, in turn, will be good news for the solar sector.

Another aspect of the budget that is expected to have a significant impact on the solar sector is the possible reinstatement of accelerated depreciation for wind projects. If this happens, a lot of tax-driven investment that had moved from wind to solar will move back to the wind sector. This will have both negative and positive implications on the expansion of the solar sector in India. Negative, because the availability of funds will reduce. Positive, because it will help steer the market towards more long-term and project-related investments.

Overall, we expect this budget to take steps in the right direction but it is still much too early to see the whole picture on where the government intends to take solar in India.

Jasmeet Khurana is a consultant at BRIDGE TO INDIA.

Is the Indian solar market finally going to live up to its huge promise? I have hopes that it will. The new government has made all the right “noises”. It wants to embed solar firmly within a larger energy strategy for the country. The new Power Minister, Piyush Goyal, wants to take his cue from China, currently the world’s largest solar market. At the same time (and predictably) power tariffs have been hiked by as much as 30% in some states. And the cost of solar is falling again. All this is great news. The only concern is the possible imposition of anti-dumping duties. However, several ministers have already spoken out against them. Perhaps they will be dropped.

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At BRIDGE TO INDIA, we strive to provide you with the information and analysis you need to navigate the Indian solar market. We do this through our reports, through regular blog pieces and our weekly newsletter. Through the various publications, we estimate that we reach about 80% of professionals in the Indian solar market. Our goal is to help create a functioning market for solar in India – and we have witnessed it coming a long way since we started covering it in 2010. These are exciting times. Everything is changing: India, the energy system, business models, development models and (unfortunately) also the climate. We, too, have to change and improve. For that reason, I am reaching out to you. If you can spare 15 minutes, it would be wonderful to have your feedback on our publications. Are we relevant and timely and analytical enough? Have we missed something or made a mistake? How can we do better?

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Since 2010, India has built a solar capacity of over 2.5 GW. Like in many other rapidly growing markets, there have been teething issues. A number of plants under-perform. To bring more transparency to the market, we have launched a new series of India Solar Case Studies, starting with a 36 MWp plant in Rajasthan. The case studies can help future developers make better decisions with respect to location, EPC, technology and maintenance. And there are many more projects to be built in India. To visualize that, we have created an India Solar Map showing the potential of solar in India. It is virtually limitless: Using 0.5% of its land or half the desert district of Barmer, India could build 1,000 GW of solar power, enough to generate 1.5 times the current electricity demand. This is, of course, a thought experiment. The reality would look different, with solar plants spread across the country.

Yet, it is important to know, that solar can play a very central role in India’s future power strategy. How solar is growing every day, what the policies and the projects are, is documented in our new editions of the India Solar Compass and the India Solar Handbook. They should give you the data and information on the market you need. Both publications have been entirely re-worked to make them more concise and useful to you.

In our blogs, we have covered a lot of ground. I invite you to browse our blog website. We looked at a number of solar policies, at the challenges for utilities and at business models around e.g. solar irrigation pumps. The focus in the last weeks was on two issues: the first was, of course, the new BJP government that has been voted into power with a majority in parliament. Subsequently, there have been many very encouraging statements for the solar market in India. We have covered them in some detail. On the other hand, there is the threat of an imposition of anti-dumping duties. We have taken a strong stance against them, because we are convinced that they would set the market back by two years. That would be a great loss. It would put many Indian solar companies out of business and would make solar power a distant dream for millions of consumers.

In the coming months, we are looking forward to presenting a number of thought leadership reports on the future of solar in India. There is a growing consensus that solar goals can be more ambitious than the current 20 GW of the NSM. 100 GW is quite feasible. But in what manner? Centralized or distributed? We compare different scenarios: building GW-scale “mega” projects, MW-scale projects, commercial rooftop projects or residential systems. We look at the landed cost of power, at infrastructure requirements, at job creation and at ecosystem effects. In a second report, we look at the technical challenges for the grid operators in integrating significant distributed renewable sources in a specific geographical area: How to ensure stability and safety? How can an uninterrupted supply be guaranteed? What are the lessons from countries which already have a high renewable energy penetration? A third report focuses on what solar can contribute to improving the power supply in the city of Patna. This will be along the lines of our analysis from last year on converting Delhi into a solar city.

The best way for you to stay up to date with our publications and the Indian solar market is through our weekly newsletter. You can subscribe to it on our homepage. Also, we will be presenting you the BRIDGE TO INDIA website in a completely new and improved design that will hopefully make it even easier for you to access our content. As a valued reader, I ask you to please share your feedback with us.

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Tobias Engelmeier is the Director and Founder at BRIDGE TO INDIA. Twitter: @TEngelmeier

On 26th June 2014, the Ministry of New and Renewable Energy (MNRE) announced continuation of the capital subsidy scheme for rooftop solar projects (refer). Under this scheme, the government will continue to provide 30% of the capital cost of the projects as an upfront subsidy to rooftop projects implemented by MNRE “channel partners” or state nodal agencies. Three note-worthy tweaks have been made to the subsidy mechanism.

Firstly, state nodal agencies are expected to play a more important role in the process. The state agencies can now independently approve and implement projects up to 50 KWp each and set their own targets. Up to 10% of the financial assistance can be provided at the time of approval of these targets.

 Secondly, the maximum size for a project to avail subsidies has been raised from 100 KWp to 500 KWp.

Thirdly, the subsidy can now be availed by not only the state nodal agencies and channel partners but also directly by other agencies such as railways, defense,  public sector units and municipal corporations. All these changes are broadly positive in our view.

However, over the past 18 months, project approval under the subsidy mechanism has come to a standstill: very few subsidies were actually paid out. Due to budget cuts, the MNRE was unable to pay the subsidy. This unresolved situation has frozen the market. Customers are aware that a subsidy policy exists and expect low system prices which channel partners cannot offer. Many customers then prefer to wait for the subsidy to be available and defer going solar. This lure of subsidies even negatively affects projects that are viable without any subsidy. Clearly, a bad subsidy scheme is worse than no subsidy scheme. Recognising this, several industry representatives and industry bodies have recently asked the government to do away with the subsidy mechanism and leave the market to operate on its own (refer).

Now that the government has decided to nevertheless continue the subsidy, the question is: will it provide the funds? In the last financial year (April 2013- March 2014), MNRE had received a budgetary allocation of INR 15.2 billion (USD 250 million) for various renewable energy programs.

However, there was a mid-term course correction due to India’s current account deficit crisis and the actual disbursement ended up to be only INR 4.4 billion (USD 72 million). For the current financial year (April 2014 to March 2015), previous government in its interim budget set the disbursement target at just INR 4.26 billion (USD 70 million).

This disbursement for all of MNRE’s activities (including other renewables) needs to be revised up at least to the previously envisaged target of INR 15.2 billion (USD 250 million)  for it to have any meaningful impact on the solar rooftop market (capacity addition of 200 MW).

BRIDGE TO INDIA is of the view that even a well funded subsidy mechanism for rooftop solar projects will only restrict the market, as budgetary constraints will continue to set the boundaries for its growth. It might be a better idea to incentivize faster adoption by focusing on larger regulatory aspects around grid connectivity and net-metering along with easier and cheaper access to finance for solar projects.

Jasmeet Khurana is a consultant at BRIDGE TO INDIA.

There is a notable change of atmosphere in India since the elections. Suddenly, business conversations are full of optimism again. There is talk of growth and investment, of a golden future. This is in sharp contrast to the debilitating gloominess that had settled over the country in the final years of the last administration. The great Indian pendulum is swinging back.

India is experiencing an emotional turnaround

This is still based on expectations and announcements, not yet on facts

It will take some time for international opinion to change

As India is again entering into a phase of optimism, let’s look back. Remember the heydays of 2005 to 2010? India was booming, I mean BOOMING. The questions and answers centered around the word “when”, not “whether”. When will India become the world’s biggest economy? When will it be global superpower? India’s IT prowess, the demographic dividend, its world class, internationalizing companies were hailed everywhere. Every international company had to have an “India strategy”. This is how the American author Fareed Zakaria experienced the India hype at Davos in 2006:

“As you got off the plane in Zurich, you saw large billboards extolling ‘Incredible India!’ The town of Davos itself was plastered with signs. ‘World’s Fastest Growing Free Market Democracy’, proclaimed the local busses…. When you entered the meeting rooms, you were likely to an Indian voice, one of dozens of CEOs of world-class Indian companies in attendance… The impeccably dressed chairman of the forum, Klaus Schwab, donned a colorful Indian turban and shawl, nibbled on chicken tikka, and talked up the country’s prospects with Michael Dell. ‘India Everywhere’ said the logo. And it was.”[1]

India seemed to be on an unstoppable path to glory. Then, in 2011-13, it just imploded. Growth slowed from almost 10% to just over 4%. The demographic dividend became a demographic challenge. Stories of corruption and graft took over. First, international companies stopped investing in India. Then Indian companies stopped, too. The mood reached a nadir in early 2014. Now, however, following the elections, the pendulum is swinging back again. This is very good news. But how far does the optimism spread, is it on strong foundations and whom does it reach?

India’s fundamentals have not changed. The challenges and benefits of a large, complex democracy remain. The demographic development is predictable and will make India the world’s most populous country by the late 2020s. The population is young and thirsts for prosperity. If even a moderate measure of prosperity is achieved, it will change not only India, but the world. India can only stop itself. And sometimes, it does.

What has changed is the perception of where India is and can be (the “soft factor”). I see an emotional turnaround in the Indian business community. This is driven by the election victory of Modi’s BJP: by the fact that he is pro market and by the fact that he has an exceptionally strong mandate to effect much needed reforms. The mood is surpassing ground realities, which still have not changed much. Most researchers predict growth to still be much slower than in the heydays at around 6% for the next two years. It is also noticeable that the international community is still less bullish than the Indian one.

In my view, the exuberance of the years described by Zakaria was as exaggerated as was the later gloominess. The current sense of optimism is still well dosed, it is tangible and liberating and it helps the country tackle challenges without falling for the illusion that there are none.

[1] Fareed Zakaria: “The Post-American World”, pp. 130-1

Tobias Engelmeier is the Director and Founder at BRIDGE TO INDIA. Twitter: @TEngelmeier

The IEA estimates that one in five people or 1.3 billion around the world lack access to electricity. There are two ways of changing that: expanding the grid around a classical centralized power generation system or creating distributed solutions around either appliances (e.g. solar lanterns), homes systems (typically also solar) or mini-grids (from different fuel sources, including e.g. solar, biomass, wind, storage and diesel gen-sets). While China has shown how to successfully expand the grid, in India, South-East Asia and Africa, distributed models might be more successful, as a very interesting new report by the Sierra Club on “Clean Energy Services for All” shows. The report can be downloaded here.

Tomorrow will be different than today, because progress in distributed and renewable power generation has been much faster than in centralized power generation and grid infrastructure

Providing energy access to all is much more affordable, if efficiency gains are considered

We are seeing more and more proven, scalable, investable business models

Governments in developing countries have promised grid extensions for decades. Many of them have failed to deliver. And even when a grid reaches a village, it often does not reach each household and often fails to provide electricity. In the past, people simply had to wait in the dark. This is changing now. While grid and centralized power generation technology evolves at the gradual pace of a mature market, there is a rapid development in distributed power supply options. This is driven by the fast reduction in the cost of renewables (mainly solar), by the mobile phone revolution (offering functionalities around payments, monitoring or controls), and by the Chinese manufacturing scale (for applications, modules or batteries). Add to that the sheer need for power, entrepreneurship and a large body of “impact money” and we see a fundamental shift: new, distributed energy access models.

Off-grid energy demand is, of course, a moving target. There is a basic demand for e.g. lighting, mobile phone charging, fans, TVs, irrigation pumps, food storage and processing. This could be fully or partially met by smaller systems ranging from solar lights to solar home systems. However, as people climb the energy ladder, their demands will naturally increase: they might want ACs, mobility solutions or refrigerators. Household electricity demand will grow from around 50 kWh per year (for simple lighting) to almost 2,500 kWh per year (see the model by Sierra Club below). Mini-grids are more suitable to provide these quantities. At a later point, perhaps, the central grid will also be extended to reach such mini-grid areas, in which case the distributed generation will help to stabilize the grid. In the end, there might well be a highly asymmetric energy landscape, where household systems, bottom-up utilities and traditional utilities will interact.

Source: Sierra Club – Clean Energy Services for All

The IEA estimated in 2011 that providing energy access to all would cost $640 bn over the next 20 years.[1] This is 300-500% above the current investment trajectory and around 30% of all current development aid, of which 1-2% goes into energy access.[2] The Sierra Club has now presented an analysis with a much lower, more achievable figure of $200 bn. The game-changer is an assumption that energy efficiency technologies (such as LEDs), will make much less generation capacity necessary to provide the same amounts of energy-related solutions (e.g. light).

Today, the Sierra Club estimates the distributed energy access market at $200-250m. It will grow by 26% per year until in 2030, it will be a $12bn market. Solar lanterns will be a small chunk of that – while home systems and mini-grids make up the major part.

Source: Source: Sierra Club – Clean Energy Services for All

In order to kick-start the market, Sierra Club estimates that around $500m is needed – $400m of which is for the energy solutions providers. Over the past five years, the industry has prepared itself well for take off: there are hundreds of entrepreneurial companies offering different variations of technology use as well as ownership, payment and maintenance models. Bangladesh today, adds around 80,000 solar home systems every month with Grameen Shakti being a leader. In India, Gram Power, Mere Gaon Power and Selco are well known. A look at the Ashden website gives an inspirational selection.

[1] IEA: Energy for all (http://goo.gl/6lNVvO)

[2] Sierra Club: Clean energy services for all (http://goo.gl/0hiyBk)

Tobias Engelmeier is the Director and Founder at BRIDGE TO INDIA. Twitter: @TEngelmeier

The Indian stock market as a whole has been on a bull run ever since the new government has come into power. However, one group that has done exceptionally well is the solar cell manufacturers, whose valuations had been very low before. The stock price of the three independently listed cell manufacturers has risen sharply: Websol Energy Systems rose a staggering 168%, Moser Baer by 130% and Indosolar by 254% in the past three months.

The stock price boom has been triggered by favorable regulatory measures, recommendation of anti-dumping duties on import of solar cells and rise in exports to Europe

Indian manufacturers still remain far from recovering from the global oversupply from foreign manufacturers

What will drive successful solar manufacturing in India above all else, is a stable and strong, long-term demand for solar modules based on transparent and predictable regulations and a supportive financing environment

The stock price boom has been triggered by favourable regulatory measures and international market developments. The expanded domestic content requirement (DCR) under the National Solar Mission (NSM) gave the first positive impulse to the Indian cell manufacturers. Despite delays from developers in placing orders, it was clear that Indian cell manufacturing units could be up and running near capacity limits soon to meet the demand created by the NSM.

The second trigger is the recommendation for anti-dumping duties on import of solar cells and modules by the Ministry of Commerce. Actual imposition of such duties could be a booster for Indian cell manufacturers in the short term, if they can deliver sufficient quality cells for modules in the short term over and above the NSM domestic content tranche (which is doubtful). However, most other stakeholders in the industry, including the power consumers, the developers, EPC companies, BOS suppliers and even most of the domestic module manufacturers that do not have cell manufacturing capabilities would suffer and oppose the duties.

Finally, the Indian module manufacturers have been boosted by the rise in exports to Europe as a result of European protectionist measures against Chinese solar manufacturers. Last year, the European Union entered into an agreement with several Chinese companies (which together had over 60 per cent of the EU market) to commit them to a minimum selling price and maximum sales volume (refer). Indian suppliers have been able to fill in some of the gap left behind by the Chinese suppliers. This is especially beneficial for integrated cell and module manufacturers like Tata Power Solar and Indian module manufacturers who use cells from China to Taiwan. Overall, Indian solar companies’ exports to Europe have risen from $106m in FY 2012-13 to $270m in FY 2013-14 (making up around 80% of their exports) (refer).

However, from a longer-term perspective, Indian manufacturers are still far from recovering from the hard-hitting global oversupply conditions in 2012 and 2013 that led to a strong consolidation in the manufacturing sector. Their valuations on the stock market, even after this rally, are still just about 1/5th of their all-time highs. The Indian manufacturers face larger issues around their competitiveness, which none of these short term measures can resolve. These include a comparatively small scale of operations, high interest rates, limited vertical integration and a high cost of power.

What will drive successful solar manufacturing in India above all else, is a stable and strong, long-term demand for solar modules based on transparent and predictable regulations and a more supportive financing environment. As there are hopes that the new government might focus on that (rather than getting side-tracked by short-term measures), many Indian and international investors are talking about investing into solar manufacturing in India again, with the aim of going larger or deeper or integrating Indian manufacturing better into global operations.

Jasmeet Khurana is a consultant at BRIDGE TO INDIA.

This summer has been particularly harsh in North India – both in terms of record temperatures and lack of power. Delhi has seen power cuts ranging from one to five hours daily. During the peak summer season, this is close to living hell. It is therefore no surprise that people are protesting at the situation. The irony however is that the sun shines mercilessly and is largely untapped.

Delhi’s power shortage is not due to inadequate generation capacity. It is simply because power tariffs are so low that DISCOMs cannot afford to buy expensive peak power in the market

Power prices are intentionally being kept low to cater to vote bank politics. People do not realize that if they want quality power, they must pay for it

Delhi and its politicians must adopt a long-term view – which means higher prices in the short-term but a much healthier grid and lower energy costs in the long-term. Rooftop solar can play a vital role

It’s not as if there is a deficit in power generation capacity in the country. India has a total generation capacity of 245 GW and actual peak demand in the summer months does not exceed 150 GW. In the month of April 2014, the peak summer demand stood at 141 GW (Central Electricity Authority, Executive Summary Power Sector April 2014). Why are over 100 GW generation capacities lying idle? The answer is simple: The politics of power pricing and lack of coal supply. A lot has been talked about on India’s inability to meet coal demand, so I limit my discussion to the former – power pricing. Politicians influence the Electricity Regulatory Commissions (ERC) and artificially keep power prices subdued to cater to vote banks. In Delhi, the former Chief Minister Arvind Kejriwal did this during his now famous AK-49 government (it lasted 49 days). During his short tenure in office, Kejriwal slashed power prices without taking into account the consequences, namely that cheaper power means less power. It isn’t just Mr. Kejriwal. Governments across India lower tariffs, typically before elections, to raise them again after elections. Below market rate power prices means that DISCOMs cannot maintain the existing T&D and generation infrastructure and invest in new infrastructure. Nor do DISCOMs want to buy expensive short-term power to make up the deficit, if they can only sell it at a loss. They’d rather sit back and do nothing.

Politicians do not seem to understand that low power prices and 24×7 power supply simply cannot go hand in hand. Quality power has a price. The government cannot endlessly subsidize power. We need a change in mindset. If voters understand that politicians promising cheap power in effect promise them less power, this vicious cycle might be disrupted. Increasingly, it seems, they do. Any change must be systemic and long-term. Yes, in the short-term people will feel the pinch and prices will go up, but in the long-term, this will ensure that the DISCOMs can supply quality power. In the long term, power will get cheaper, if it is supplied through a functioning infrastructure rather than through ad hoc and back-up measures.

There is hope that the new government under Prime Minister Narendra Modi will go in the right direction. He has already demonstrated in the state of Gujarat that if people are given a choice between poor-quality cheap power and more expensive uninterrupted power, they will shift to the latter (see my earlier post here). The challenge for Mr. Modi would be to get the state governments on board – bear the short-term consequences and reap the long-term dividends. Whether long-term solutions will really prevail over election tactics and cheap promises will be demonstrated soon, when Delhi votes for a new government.

If power prices have to be raised, this represents a wonderful opportunity to introduce a significant amount of solar into Delhi’s energy mix. BRIDGE TO INDIA and GREENPEACE have already estimated Delhi’s rooftop potential as more than 2 GW (read the report here) (The current shortfall in Delhi is 400 MW). Solar would be immune to storms (like the one we saw on 30th May 2014) that might destroy crucial transmission lines bringing power into the state. Also, the hotter and brighter the day, greater would be the solar power produced which would keep millions of ACs, coolers and fans running. Yes, rooftop solar power is expensive, but the gap between conventional power and solar power is fast closing. These systems last for 20-25 years with little maintenance and no exposure to fuel price volatility (unlike coal or gas). To give credit where it is due, Delhi has already announced a rooftop solar policy. But political uncertainty (both at the national and state level) has meant that the policy hasn’t gone ahead. This must be fixed immediately so that next summer the sun can be welcomed, not cursed.

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

Solar photovoltaic installations in India have crossed 2.5 GW in May 2014. Government incentives have been the main driver in the past and are still the main determinant of the market. In future, parity – driven projects will take hold. For an overview, download our latest India Solar Handbook [download here].

The first phase of the National Solar Mission (NSM) and the Gujarat solar policy were the main drivers

Most projects under batch one of phase two in the NSM will be installed in Rajasthan and Madhya Pradesh

Rajasthan could overtake current leader, Gujarat in terms of total installed capacity within the year 2015

As of May 2014, India had an installed capacity of over 2.5 GW.[1] 70% of it is found in the deserts of the western states of Gujarat and Rajasthan and almost all of it is incentive-driven, utility-scale and grid connected. With around 900 MW installations, Gujarat claims a lion’s share with over 36% of total installed capacity of India. It is a healthy distance ahead of Rajasthan, the second-best state. However, with most new projects under the NSM planned in Rajasthan, Rajasthan will likely overtake Gujarat in terms of total installed capacity within the year 2015. Madhya Pradesh will bridge the distance with Gujarat in terms of installed capacity by end of year 2015. A significant number of projects are planned under NSM in Madhya Pradesh. Additionally, the state has recently allocated 100 MW projects under round two of state policy.

Apart from Gujarat and Rajasthan, only Madhya Pradesh, Maharashtra and Andhra Pradesh have crossed the 100 MW mark. Several other states such as Punjab, Andhra Pradesh, Uttar Pradesh and Karnataka could join the 100 MW club soon, based on PPAs already signed. However, the commissioning of new projects is under threat from the proposed imposition of anti-dumping duties.

[1] BRIDGE TO INDIA project database; BRIDGE TO INDIA data is bottom up, based on individual commissioned project

Mudit Jain is a consultant at BRIDGE TO INDIA.

In a recent statement, Ministry of New and Renewable Energy (MNRE), has said that it proposes to allow tax incentives for households who wish to set up rooftop solar plants and the proposal is to be discussed with the Ministry of Finance (refer).

As of now, individuals and or households do not get any tax benefits for going solar

The proposed tax incentive is expected to promote distributed solar generation

Like the accelerated depreciation benefit the proposed income tax incentive is not output-related and is based only on the investment made

Currently, accelerated depreciation benefit (80% in the first year) is available only to companies. It allows them to reduce their taxable profit in a given year if they invest in a solar plant and hold it on their balance sheet. As of now, individuals or households do not get any such benefit (refer to BRIDGE TO INDIA’s blog on how this is hurting the solar sector).

The new proposal is encouraging. The shape and form of the proposed tax incentive is not known, but broadly, it is expected to promote distributed solar generation for households and small commercial and industrial establishments by allowing individuals to offset their investment in solar rooftop plants against their taxable income. The idea is much more preferable to MNRE capital subsidies (30% subsidy provided by MNRE in principle to rooftop projects less than 100 kW) because subsidy disbursement process is marred by funding delays and bureaucratic procedures. However, the idea of tax incentives has room for improvement and needs to be thought through in more detail.

Like the accelerated depreciation benefit, the proposed income tax incentive is not output-related and is based only on the investment made i.e., it does not encourage quality in solar installations. Such tax incentives tend to incentivise short term decisions rather than the longer term investment approach befitting a long-lasting renewable energy installation. The Indian wind sector has grappled with this challenge. The second is that such tax benefits depend on the investor’s ability to absorb tax benefits and are not available to all investors thereby distorting the market. Why not decouple the tax benefit from the investment in the same way that, say a carbon credit or a renewable energy certificate can be traded independently of the power output? That would attract professional, financial investors who want to develop solar projects in special purpose vehicles which cannot utilise income tax or accelerated depreciation incentives. They are expected to be better at developing, financing and operating solar power plants because of their ability to bundle projects and their greater focus on quality and experience. This would drive down the cost of solar and create a level playing field.

Jasmeet Khurana is a consultant at BRIDGE TO INDIA.

The Indian solar market has taken a significant leap in 2012, but the market has slowed down in 2013. This article lists measures that could rekindle fast growth in the Indian solar industry. For an overview, download our latest India Solar Handbook [download here].

Growth in the Indian solar sector has slowed down in 2013

The main reason for the slowdown is uncertainties and delays around policies. The new government wants to now push the solar market

Conducive regulatory mechanism for decentralized generation, stricter Renewable Purchase Obligation (RPO) enforcement, re-adjustment of the Renewable Energy Certificate (REC) mechanism, easier access to finance and non-imposition of anti-dumping duties (ADD) are key steps for accelerated market growth

Annual solar capacity additions in India (2011 to 2013; MW)[1]

The Indian solar market has ignited the imagination of the industry. There is vast energy demand, sufficient space, over 300 days of sunshine and one of the highest irradiation levels in the world. New capacity addition has taken a huge leap in 2012 with 420% growth. However, the market has witnessed a slump of 7% in 2013. With uncertainties surrounding RPO, REC and ADD, a further slowdown is possible. On the other hand, the new Bharatiya Janata Party (BJP) government under Narendra Modi has signaled that solar is high on its agenda. The following steps could accelerate growth.

Conducive regulatory mechanism for decentralized generation

Various grid related charges for small solar plants, that do not use the medium grid, should be reduced. Reduction in open access charges, cross-subsidy surcharge, transmission charges, transmission losses, wheeling charges and wheeling losses will encourage small entrepreneurs to set up micro grids. This will enable energy access for people based in areas not connected to the grid or with an unreliable grid.

Stricter RPO enforcement

States have to put in place a stringent penalty structure for not meeting RPO targets, wherein the penalty is higher than the forbearance price of solar RECs. Additionally, incentives can be provided directly to obligated entities to help them meet their RPOs (as practiced in the UK or Australia).

Re-adjustment of the REC mechanism

The primary reason for the slump in REC-based projects is the lack of RPO enforcement and the uncertainty surrounding the price of the RECs beyond 2017. Various proposals have been floated for reviving the mechanism. They include letting the price range freely or creating “vintage” RECs to account for the fact that the falling cost of renewables are under consideration.

Provision of better performance data

Arranging low cost financing is a challenge for solar projects due to a lack of detailed performance information. Though the situation is improving, a validation from a reputed source will increase the chances of obtaining non-recourse infrastructure finance or easy consumer finance options.

Non-imposition of ADD recommendation

The antidumping duties proposed by the Ministry of Commerce must not be imposed on the nascent Indian market. If imposed, they will increase the solar module prices to levels of 2011. Several projects for which PPAs have been signed will become unviable. For sustained growth of the market, the levelized cost of solar energy must be reduced, not increased.

[1] BRIDGE TO INDIA project database

Mudit Jain is a consultant at BRIDGE TO INDIA.

The heavy reliance on diesel has made the telecom segment a front-runner among diesel parity driven solar markets in India. Installation of solar on telecom towers is rapidly increasing. For an overview, download our latest India Solar Handbook [download here].

Consumption of diesel in telecom towers is over 3 billion liters annually

The Department of Telecom (DoT) has mandated the usage of renewable energy in 50% of the telecom towers in the rural areas and 20% in urban areas by 2015

Solar installation on telecom towers has reached 30 MW with average project size of 5-6 kW

Telecom towers are second only to Indian railways in terms of diesel consumption in India. Currently, 40% of installed towers are situated in regions with less than 12 hours of grid supply on average.[1] Annual consumption of diesel in telecom towers is over 3 billion liters.[2] The DoT has set renewable energy technology targets for telecom towers. Operators are obligated to switch 50% of the telecom sites in the rural areas and 20% of telecom sites in urban areas to a renewable technology by 2015.

Power and fuel costs account for 30-40% of the operator network cost.[3] With pilferage, the cost is even higher. Enforcement of the regulation will lead to a reduction of 540 million liters of diesel consumption annually.[4] At current diesel prices of INR 56/liter, this regulation will theoretically result in annual saving of over INR 8 billion at current levels.[5] Upfront cost, maintenance challenges, security of installations and the high requirements for reliability of power have been the key constraints, hampering the growth of this segment.

Solar is the most fitting renewable energy technology for telecom towers. Cumulative solar installation on telecom towers was 30 MW by 2013. Over 5,000 telecom towers have installed solar systems with an average project size of 5-6 kW.[6] Cumulative installed capacity is expected to grow at a CAGR of 78% till 2016. The addressable market is also rising fast: India is expected to have one million telecom towers by 2017. The diesel prices are set to rise further as the new government has already voiced its concern over the current subsidy scheme and import bills.

Projected cumulative solar projects in telecom sector (MW)[7]

[1] Tata Strategic Management Group, Green Telecom Towers – An Attractive Option for a Sustainable Tomorrow; bit.ly/1jkYrIR

[2] Greenpeace: Enabling Clean Talking; bit.ly/1lSXTps

[3] ATKearney: The Rise of the Tower Business; bit.ly/PcvnX7

[4] Greenpeace: Enabling Clean Talking; bit.ly/1lSXTps

[5] A diesel generator typically generates 3-4 kWh/liter and usage of solar system will likely result in savings on INR 4-5/kWh.

[6] BRIDGE TO INDIA market analysis

[7] BRIDGE TO INDIA market analysis

Mudit Jain is a consultant at BRIDGE TO INDIA.

India’s solar sector has been grossly underperforming vis-à-vis other countries as well as the potential for the energy source in the country. The wish list for the sector broadly comprises the following – strengthening of RPO mechanism, regulations to facilitate distributed generation, promotion of domestic manufacturing, rural electrification and availability of cheaper finance. It is very encouraging to note various positive signals coming out of the new government on all these fronts and some of the thematic messages coming out about future role of solar power in the country.

In the President’s address it was announced that the National Solar Mission will be expanded

Narendra Taneja stated that India will closely look at the ‘Chinese model’ when devising its renewable energy policy

The only dampener in the solar sector in India today is the possible imposition of the anti-dumping duties

Indeed, the new Prime Minister, Narendra Modi, speaking at an event on Sunday (8th June 2014) has highlighted the need to bring about a ‘saffron revolution’ focused on solar energy (refer). According to him, the focus needs to be on skill, scale and speed to revive India’s growth story. In the President’s address yesterday (9thJune 2014), that highlighted the new government’s roadmap, it was announced that the National Solar Mission will be expanded.

Last Friday (6th June 2014), the new Power Minister, Piyush Goyal, touched upon two key aspects – he said that the new government might amend and expand the scope of the Electricity Act to push for higher utilization of renewable energy by changing the scope of RPO obligations and also use relevant amendments to fast-track rural electrification projects using solar (refer). Over the past month, BJP’s energy convener, Narendra Taneja, has repeatedly been saying on various platforms that solar power can play a ‘transformational role’ in rural electrification efforts under the new government (refer). He recently also said that India will be looking closely at the ‘Chinese model’ when devising our renewable energy policy covering both equipment manufacturing and power generation (refer).

Solar is a capital intensive sector and the cost of finance has major impact on the project feasibility. In that context, the sector has been demanding access to cheaper and preferential finance. A favorable government move on this front can go a long way in improving competitiveness of the Indian solar industry in relation to conventional power as well as to foreign competition.

BRIDGE TO INDIA views all these comments as being extremely positive for the sector and we can already see a noticeable improvement in sector sentiment as compared to just a month ago.

The only dampener in the solar sector in India today is the possible imposition of anti-dumping duties. BRIDGE TO INDIA has consistently maintained that the new government needs to do away with these duties and instead provide a comprehensive, long-term plan to promote competitive domestic manufacturing. If anti-dumping duties are revoked and some of the positive sound bites get converted into actions, we can almost guarantee that ‘acche din aane waale hain’ (good days are about to come) for the solar sector in India.

Jasmeet Khurana is a consultant at BRIDGE TO INDIA.

Until now, the Indian solar market has been driven by incentive based utility scale projects. The contribution from the rooftop segment has been minimal. However, rising grid tariffs and frequent load shedding are now encouraging consumers to install solar in commercial, industrial and residential segments. For an overview, download our latest India Solar Handbook [download here].

Parity has reached first in commercial segment, where tariffs are highest

The industrial segment offers good prospects for larger projects

The residential segment has the largest overall potential, but parity will be reached later

The adoption rate for solar is increasing in all three rooftop segments (commercial, industrial and residential). We expect the cumulative installed capacity to be 0.5 GW by 2016, growing at 33% every year.

Projected cumulative rooftop solar capacity (MW)[1]

The commercial consumers such as malls, office spaces and retail outlets pay as much as INR 11/kWh in certain locations. These are the highest tariffs in India. Rising energy prices has been the main driver for adoption. Solar power is already cheaper than grid power for commercial consumers in Maharashtra, Delhi, Andhra Pradesh, Kerala, Tamil Nadu, Karnataka and Odisha. Electricity consumption in this segment was over 65 TWh in 2011-12[2].

The tariffs for industrial users are generally 10-15% lower than commercial tariffs and reach INR 8/kWh in certain locations. The industrial segment is likely to scale up later than the commercial segment. However, the high load requirement and larger available rooftop space in the industrial segment is conducive to solar projects. Additionally, the share of electricity consumption in this segment of 45% (352 TWh in 2011-12) is highest in the country[3]. Maharashtra, Odisha, Punjab and West Bengal are fairly close to parity.

Residential power consumers are usually charged less than industrial and commercial consumers. The highest tariffs are around INR 7/kWh. Overall, this segment has the highest consumer base in India. In terms of electricity consumption, this segment is second only to industrial segment. In 2011-12, the electricity consumption was over 171 TWh[4]. The main driver for adoption of solar is a desire in many parts of the country to become less dependent on unreliable grid power. Incentives such as net metering and capital subsidy will likely give the segment a boost. However the major acceleration will come only after grid parity is widely reached.

The Ministry of New and Renewable Energy (MNRE) offers a 30% subsidy on rooftop systems. However, the subsidy was in the past year not disbursed in a timely and reliable manner. A large pipeline of projects is still awaiting approval for subsidy. Thus, subsidies currently do not drive the market. In future, however, the scheme might get revived and promote accelerated growth of the rooftop segment.

[1] BRIDGE TO INDIA market analysis

[2] Central Electricity Authority: Growth of Electricity Sector in India from 1947-2013; bit.ly/1kkRmZn

[3] Central Electricity Authority: Growth of Electricity Sector in India from 1947-2013; bit.ly/1kkRmZn

[4] Central Electricity Authority: Growth of Electricity Sector in India from 1947-2013; bit.ly/1kkRmZn

Mudit Jain is a Consultant at BRIDGE TO INDIA.

The answer is yes. India is a very good market for solar. In fact, going by its vast population, high irradiation, the growing energy demand and power deficit, limited access to fossil fuels and the large number of un-electrified villages, it should be one of the best markets. However, it is also a difficult market. For an overview, download our latest India Solar Handbook (download here).

Look to the solar market beyond government policies

The IEA predicts India to be a largest solar market in the long term

But even today, there is growth and a professional eco-system

This is the bad news: Regulations and policies are often confusing, non-transparent or unreliable. Competition is fierce and sometimes irrational. Most customers are highly price sensitive – often at the expense of a minimum of quality. Financing solar plants is challenging, as banks are still reluctant to provide non-recourse or consumer loans. Legal risks around PPAs are difficult to manage in a country where court cases drag on for years. In addition, many international investors have been unsettled by the fluctuations of the Indian Rupee.

In 2010 and 2011, when the National Solar Mission was announced and the European markets dipped, India was viewed with great enthusiasm by the Indian and international solar community. This enthusiasm has waned over the following years, often leading to disappointment. Other markets, such
 as Japan, Chile, the US or China have taken the limelight. In the meantime, however, India has built its case: it has achieved a base of 2.5 GW of solar PV, evolved its policies and created a solar ecosystem of installers, manufacturers, developers, financiers and researchers. Yet, for a country of India’s size and promise, this can only be a first step.

And this is the good news: India is a “new” solar market. One, where the certainties of government support are exchanged for a fundamentally sound, but more complex commercial proposition. This new market place is in flux and not yet fully developed. There are still government incentives, such as capital subsidies or renewable purchase obligations. And they sway the market in their direction. At the same time, solar is beginning to play a role independently from them, by replacing expensive diesel or grid power. The task for all market participants is to focus on the end consumers and to develop business models that create value for them. This will unlock a vast long-term opportunity.

Projected year-on-year solar PV capacity additions in India, China and the US till 2035 (GW)[1]

We have made this point many times before: India is a strategic market. The question is: when will the bright solar future arrive in the present? Our view is that it might still take another two years or so, before we will see a hockey stick uptake in solar demand. Until then, there will still be steady growth of around 1 GW per year. The result of the elections that were just held, will certainly help. The new Prime Minster Narendra Modi has a very robust mandate and the political will to reform the Indian power sector, to bring more solar power to the people and make the country less dependent on fossil fuel imports. This is a good time to engage with the Indian market.

[1] IEA Energy Outlook; bit.ly/1g2oAch

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

The global markets are gung-ho on solar PV. The US aims to bring the cost of distributed solar power down to USD 0.06/kWh (INR 3.5/kWh) in the next six years under its SunShot program (refer). China wants to increase its installed capacity to 70 GW in the next four years (refer). Most large module manufacturers are turning a corner and coming back into profitability.

India to be a key solar market in future

Currently, Indian lags behind due to policy uncertainty, regulatory confusion and lack of synergy between state programs and the national mission

Now, the proposed imposition of anti-dumping duties provides a crucial testing period for the sector

Expectations in India too have been high as the new government was sworn in last month (refer). No one disputes the fact that India is going to be a key solar market of the future. The International Energy Agency (IEA) even predicts that in terms of yearly installations, India will overtake the US by 2023 and China by 2029. However, as of today, India is underperforming. Policy uncertainty, regulatory confusion and lack of synergy between state programs and the national mission has led to dampening of enthusiasm. The international interest that had come to India around the time projects were being installed in Gujarat is fading. Several large equipment suppliers and even some Indian and international project developers are trying to diversify their focus away from India. Now, the proposed imposition of anti-dumping duties provides a crucial testing period for the sector (refer).

With firm opposition to the duties from the project developers as well as from MNRE, there is still hope for a turnaround in sentiment. The Indian market has always needed to be approached with grit and patience. This is true for all sectors, not just solar. The fundamentals for mass adoption of solar in India are still in place and becoming even more pronounced by the day. The current Prime Minister, Narendra Modi, and the new government have sent out several signals that solar is going to play a crucial role in India’s energy security. If Modi’s track record on solar in Gujarat is anything to go by, the government will soon take the market out of its current policy limbo.

Jasmeet Khurana is the Sr. Manager- Consulting at BRIDGE TO INDIA.

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.

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

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.

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.

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 1, link 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.

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.

The election season in India is drawing to a conclusion. Most observers agree that while the overall performance of the UPA-II government has been checkered at best, one area where it has had some degree of success, is solar. The party manifesto takes credit for launching the Jawaharlal Nehru National Solar Mission (‘NSM’) and aims to lead a renewed push for renewables. Although unlikely as per most political observers, if the Congress was to lead a government for the third term, we would expect it to play a crucial role in helping transform India’s energy future.

The Congress wants to accelerate the implementation of the NSM target of 20 GW ahead of the 2022 deadline. The manifesto promises ‘a new thrust to new and renewable energy, including hydel, solar and nuclear energy’.

The manifesto can be said to lack the ambition and vision needed to make India a solar leader

The Congress could leverage its focus on the common man to accelerate the spread of distributed generation – but has so far not done so.

The Congress can credit itself with ushering in the solar revolution in India – at least at the national level. When the UPA-II government came to power in 2009, the installed solar capacity in India was less than 10 MW, today we are in the region of 2,300 MW. (It should be noted that nearly 40% of installed solar PV capacity in India (around 850 MW) is in Gujarat, a BJP bastion and a model state for solar energy.)

One of the key problems with NSM has been the lack of coordination between the MNRE and state governments. Renewable Purchase Obligations (‘RPOs’) have not been enforced in the manner they should have and the Renewable Energy Certificate (‘REC’) mechanism was pretty much dead on arrival.

Would the Congress be able to tackle the shortcomings and build on its achievements, if it comes back to power? Though solar finds a prominent mention in the party’s election manifesto, the language remains vague. Accelerated implementation of the NSM target is good. But how will it be done? And is it enough? The Congress could think further. In fact, sources indicate that the PMO has been considering revising targets to 100 GW of solar by 2027.

The party’s focus on social empowerment programs and Below Poverty Line (‘BPL’) families/ farmers could lead to an enhanced focus on distributed generation through decentralized solar, solar pumps, micro-grids etc. The Rajiv Gandhi Grameen Vidyutikaran Yojana, a flagship Congress program, is focused on electrification in remote villages and solar plays a key part in the scheme. Further, the Congress-led UPA-II did create SECI, with a stronger focus on rooftop solar solutions. So far, however, the government has not been ambitious enough to transform India’s energy story. SECI just allocated just 25 MW in the last and a mere 50 MW this year to rooftop solar projects. The target should to be at least 10 times as much. Kerala, a Congress ruled state, has shown the way by implementing the ambitious 10,000 solar rooftop scheme.

All in all, even though the Congress has tried its best to introduce schemes, it has lacked motivation to implement them successfully or achieve ambitious targets. If it comes back to power, the Congress will have to do a lot more than just ensure accelerated implementation of the NSM. It will need to recognize the importance of solar in the context of India’s energy security and drive and manage a complex and vast transformation of the energy future. This is a tall bill – but it would be a worthy political project.

Karan Raj Chaudri is ‘Manager- Consulting’ at BRIDGE TO INDIA.