Questions on the Indian PV Market
Dr. Tobias Engelmeier, Managing Director at BRIDGE TO INDIA presented on ‘The Indian PV Market: A 12.8GW Opportunity by 2016‘ as a part of a webinar with Solar Promotion on October 11th 2012.
Post his presentation at the webinar on ‘The Indian PV Market’, Dr. Tobias Engelmeier engaged with the attendees in a question and answer session. His answers highlighted the following:
- Main challenges faced by Indian solar module manufacturers are price, quality and innovation
- Solar energy, being more abundantly available in India than wind power can have better planning for its generation which would reduce grid challenges, making it more preferable than wind energy
- CSP continues to be valued as a technology with the potential for indigenization and storage options. This could make it more viable in the future
Q: What are the main challenges of solar manufacturers in India?
TFE: Indian manufacturers face challenges on two levels – the global and the national. On the global level, have the same trouble that everyone in the industry has: Great oversupply and, as a result, crippling prices. On the national level, Indian manufacturers have three challenges: price, (perceived) quality and innovation. They are not large enough (50-200MW) to compete on scale with Taiwanese or Chinese competitors. They are also not vertically integrated and thus not able to shift margins between different sections of the value chain. This has been explained further in ‘Status of PV Manufacturing in India’. On quality, they are often better than their reputation and many Chinese competitors. However, their branding is not strong. Innovation – making modules that suit India-like conditions (dust, humidity, low-tech construction, little water for cleaning, etc.) could be an asset, but at the moment there is almost no innovation happening. Like elsewhere, we will see a strong consolidation from the 20-odd manufacturers to two to five (if that). Hopes are currently placed in protective government measures. This is discussed in more detail in our INDIA SOLAR COMPASS, which can be downloaded for free.
Q: How does the product distribution work in rural areas?
TFE: There is no single solution for product distribution in rural areas. India consists of very diverse states and regions. The idiosyncrasies become very important when dealing directly with end customers and especially rural ones. There are hardly any established distribution channels (such as e.g. rural supermarkets). I would think, we are currently in the ‘exploration’ phase with respect to rural markets. There are many large and small companies that work here. They have in many cases moved beyond pilots and are beginning to scale. However, they still only reach a small segment of the rural population. And then, there is the payment question. Rural households have a – in pockets surprisingly high, but on average very low – disposable income. For this reason a number of sales channels are linked to microfinance.
Q: What makes solar power development more sustainable and competitive compared to wind energy?
TFE: Wind and solar bother have an important place in the Indian energy landscape. Wind power is, of course, cheaper per kWh than solar power by a factor of two. Wind also often comes in big ticket sizes (10-100MW plants) and can draw on 20 years of experience in India and the execution capabilities of large Indian and international companies. That makes it much more bankable. Solar is the newcomer and rising fast. It will be the preferred choice wherever the wind resource is insufficient and wherever smaller, de-central solutions are needed (2MW or less). Solar also has two important long-term advantages: the resource is more abundantly available in India and its generation can be better planned than wind, thus reducing the grid challenges. In the past year, the cost of solar PV has come down so rapidly that it shook up many energy calculations. Much will depend on whether that will continue. At the same time, India has not yet tapped into off-shore wind and is just starting to explore the options. The upcoming report on ‘Renewable Energy in India: An Overview’ written for the Indo-German Energy Forum and available on our website for further information will elucidate the above.
Q: What do you think about grid instability? Don’t you think that, until this is cleared, is not that easy to develop on-grid PV? Don’t you think off-grid PV is likely more promising at the moment?
TFE: I agree. Grid instability works in two ways: It will make large, unscheduled power generation feeding into the grid difficult especially in areas with much renewable power generation in bundled (Gujarat and Rajasthan for solar, Tamil Nadu for wind). We already see first local, significant grid bottlenecks. At the same time, the instability of the grid (remember the July 2012 power cut) makes power consumers very keen to increase their supply security. At the moment, they do so with diesel gen-sets. This is very expensive. In future, renewables (especially PV) will likely play a more important role, replacing diesel and also grid power. ‘Off-grid’ is a slightly more complex market. There are, broadly speaking, two types of customers: Firstly, economically strong customers that tend to have infrequent power demand (e.g. food processing) or such significant power demand that they build large fossil power plants (e.g. aluminium, steel). Secondly, there are the rural off-grid households. See answer above for details. Refer to the post on ‘Making unsubsidized PV work in India‘ to know more.
Q: What is the potential for Concentrating Solar Power (CSP) in India?
TFE: There was great initial enthusiasm at the beginning of the National Solar Mission, when India auctioned 500MW. Since then, the road has been rocky: site selection was often less than ideal, the learning curve in construction has been high, indigenization of parts has been slow, etc. Since the projects involve the who-is-who of Indian industry (Lanco, Relianc), they will likely be built. Whether the projects will be profitable is doubtful. As elsewhere, CSP has felt the competition from PV due to falling PV module costs. While the CSP share under the NSM Phase I was as high as 50%, it will be significantly lower for phase II. Nevertheless, CSP continues to be valued as a technology for the potential for indigenization and the storage options. The MNRE has recently initiated a number of large pilots to test different applications of CSP technology (low/high heat, hybridization, etc.). Refer to our article on the status of CSP in India we have written for the October 2012 issue of Sun & Wind Energy.
Q: Has the REC scheme taken off? If so, which are the states where this is attractive? Are the developers able to achieve the financial closure for REC projects?
TFE: The REC market has a solar and a non-solar component. The non-solar component has taken-off and significant volumes are traded at stable prices. The solar REC market is still at the very beginning. The Central Electricity Regulatory Commission (CERC) is very serious about getting the solar REC market to move. Much will depend on the penalization of Renewable Purchase Obligations (the demand side). While private utilities and captive consumers have been penalized, the large government-run utilities (around 80% of the market) have not. Enforcement will need to happen at the state level. Everyone is waiting and watching. To learn more about the REC market, please visit our blog or download our free <atitle=”opens target=”_blank” href=”http://www.bridgetoindia.com/our-reports/india-solar-decision-briefs” window”=”” new=”” in=”” link=”” external=””>INDIA SOLAR DECISION BRIEF on ‘The REC Mechanism: Viability of solar projects in India’
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Join our LinkedIn group ‘India’s Solar Future’ and get our team of solar expert to answer your questions on October 18th 2012 at 2:00PM (GMT + 5:30hrs).