THE BRIDGE TO INDIA BLOG
According to the researchers at IHS, global solar might hit 500 GW in total installed capacity by 2019. This year, 2015, global solar demand is projected to increase to 75 GW alone, a 66% growth rate against 2014. In 2014, the largest markets were China and Japan. The researchers think that they will also remain the largest markets in the next 5 years. India, in their view, will be only the 6th largest market.
- 500 GW of solar by 2019 projected, in 2015, there could be an additional 75 GW of solar built
- Global demand for solar will stabilize as growth is driven by more markets and by economic fundamentals
- Our view on India in the next five years is more optimistic (30 GW) than that of IHS (14 GW)
If India were to grow its electricity system based on coal (as China has done), would it derail the global climate? According to our calculations, under a “coal-heavy” scenario, India would need to increase is coal-fired power generation capacity from the 156 GW in early 2015 to 677 GW in 2035. What would be the CO2 implications of such a strategy?
- Globally, we have used up 58% of the carbon space we have available to us, if we want to keep climate change to less than 2 degrees
- India’s share of the carbon space should be high, based on its large population and low historical emissions
- Still: a coal-strategy would break the bank, with potentially terrible consequences to the world and especially to highly vulnerable countries like India
On Thursday last week (19th March 2015), the Ministry for New and Renewable Energy (MNRE) called for a meeting to discuss how to best scale up rooftop installations in India to 40 GW (cumulative) by 2022 (refer). It was chaired by Upendra Tripathi, Secretary MNRE, and Tarun Kapoor, Joint Secretary MNRE, and was attended by approx. 300 representatives from the industry. The discussion began on the somber note that despite some existing government policies and the improving economic fundamentals for rooftop solar, the market has not yet gained momentum.
- Stakeholders proposed abolition of subsidies for urban grid-connected solar installations
- Most stakeholders proposed for standardization guidelines for components, installations and grid-interconnectivity to be followed by all installers
- Availability of finance and cost of finance was the third topic discussed
What is the projected growth of India’s electricity requirements in the next 20 years, i.e. until 2035? In 2012, the country generated 1,050 TWh of grid power. The government now wants to set in motion a process of accelerated industrialization to provide much-needed jobs, sustain growth and drive development. This will raise energy demand. To date, there are few reliable projections on future demand. So here are our own calculations.
- In a high-growth scenario, BRIDGE TO INDIA foresees 7.3% annual growth rate in power generation over the next 20 years in India
- It is more than five-fold increase to almost 5,000 TWh of electricity – just above what China or the US generate today
- In a business as usual scenario (coal-heavy) India would need to add 869 GW in the next 20 years
There has been much talk and an equal amount of confusion about the future of India’s solar market. It is not easy to predict the growth rates or future market character, because the market is neither fully in nor fully outside of the government’s hands. It comes down to what one believes in. I am here proposing three perspectives to take into consideration: The “Vision”, the “Reality” and the “Need” perspective.
- India’s government has announced a 100 GW solar target. The only policy that is in line with it the planned revision of RPO targets to 10%
- In reality, the Indian market is already a steady 1 GW growing to 3 GW in the next year
- The real question is, however, how will India satisfy it’s long term energy needs?
Over the past weeks, we have provided plenty of analyses of the different solar policies in India in this newsletter. Overall, we are not terribly impressed with them. This is partially because of the weight of expectations the government has put upon itself with its 100 GW target. In fact, growth in the sector is picking up significantly. It is just that this growth is not driven by sustainable policies, but by one-off measures, and that it is not enough to get near to the very ambitious target.
- The focus should be on the fundamental needs in a power deficit country like India
- Energy growth needs to enable economic growth that creates employment, allows for a significant increase in standards of living without destroying the country’s living environment
- We might be talking about more than 1,000 GW before 2035
In view of the BJP government’s strong commitment to the solar sector and the much trumpeted 100 GW target, there was mighty anticipation about what the budget would bring by way of cheaper financing, tax incentives and other promotional measures to grow the sector. But the budget turned out to be bit of a damp squib and it is not clear how the government hopes to realise its solar vision with the current, incremental approach. Here is our proposal for a big-bang financing solution to achieve India’s goals.
- Debt cost in India are too high and there is far too little of it available to meet the ambitious solar targets
- The government should provide low cost and long tenure debt through new, dedicated renewables financial institutions
- This initiative would cost less than USD 2 bn per year – a bargain, given the various political, social and environmental benefits of solar
Over the past several months, we had the impression that central government-led allocations would be the preference of the new government and that the role of the states would be limited to setting up the infrastructure of solar parks and procuring solar power. The central government would make that power cheaper for the state utilities either through bundling it with coal power or through Viability Gap Funding (VGF). This perception is now changing as the central government-led allocations lose steam due to delays in setting up the solar parks and a lack of funds for VGF.
- The document for implementation of 15 GW by 2019 has been released on March 9, 2015
- As nothing concrete has been proposed so far, BRIDGE TO INDIA does not expect new allocations based on such a mechanism any time soon
- Several states namely Telegana, Karnataka, Tamil Nadu, Maharashtra and Gujarat has announced their plans with respect to implementation