Bridge India

How should India drive its solar transformation?

Today, India’s power mix is still dominated by coal, which makes up around 60% of installed capacity. Solar stands at just around 1%. With the National Solar Mission, launched in 2010, India defined an ambitious national goal of installing 20 GW of grid connected solar power by 2022. Since 2010, however, the fundamentals of energy supply in India have changed significantly. Solar was around seven times as expensive as coal to produce per kWh in 2010. This has changed to a factor of less than two.

  • India’s power mix is still dominated by coal but solar is ready to go mainstream
  • If India truly wants to step change and go big on solar, what would be the optimal way to achieve it?
  • Initially, ultra-mega power projects will help to bring down the cost at a faster rate; but greater emphasis needs to be on distributed solar

While many coal projects are mired in planning, supply and infrastructure bottlenecks, solar can be deployed in a fast and modular manner, with little complexity. Globally, solar PV has been incredibly successful. Installed capacity has increased by 51% p.a. from 2010 to 134 GW at the end of 2013. China has proclaimed a goal of installing as much as 70 GW as soon as 2017. The US aspires to reduce the cost of solar to only M3.6 ($0.06)/kWh by 2020, making it a very competitive choice for consumers and utilities. There is a shift in the way solar is perceived globally and in India: it is no longer a niche technology in need of immense government support. Rather it is a very attractive energy choice for consumers worldwide. The new government in India is aware of that and is willing to target much larger goals than those of the current National Solar Mission.

Space is no constraint to making solar a key building block of India’s energy future. In a thought experiment, we estimate that 0.5% of India’s land mass would be enough to build as much as 1,000 GW of solar, from which India could meet its entire current electricity demand9.

In reality, of course, the picture is much more complex. Solar comes in many different shapes and sizes. Currently, grid connected projects are typically in the range of 10-50 MW. In addition, there are GW scale projects in the pipeline. At the same time, solar is deployed at thousands of sites, near consumers, across the country in kW sizes (typically on rooftops).

We asked ourselves a simple question: if India truly wants to step change and go big on solar, what would be the best way to achieve it? Should it be through a handful of ultra-mega plants, through thousands of MW sized plants or through millions of distributed plants?

In our recent report titled, “How should India drive its solar transformation? Beehives or Elephants”  which is a joint effort  by BRIDGE TO INDIA and Tata Power Solar [Download Here], we compared four scenarios, each for 25 GW – small rooftop systems, large rooftop systems, utility scale projects and ultra-mega scale projects. We first examined if there is enough potential (especially on the distributed, rooftop side), and then compared them according to the landed cost of power (LCOP). This is the cost of generating the power plus the cost of delivering it to the point of consumption. This measure allows us to compare large but remote plants with on-site and rooftop installations. While the larger plants benefit from economies of scale, they need huge additional investment in transmission and distribution. In India, transmission and distribution losses can be more than 30%.

For each scenario we looked at the infrastructure challenges (especially for the GW scale plants), execution timelines and the net effect on job creation. Job creation by installing 100 GW through the four scenarios put together would be over 675,000. Most importantly, we found that solar can easily contribute 100 GW in the next ten years.

Our analysis shows that the LCOP of small rooftop systems is the highest. LCOPs for large rooftop systems, utility scale projects and ultra-mega scale projects are very close together and they are already competitive with coal- fired power plants using imported coal. By 2021, they will also be competitive with domestic coal. The job creation potential is highest in the small-scale rooftop segment, driven by thousands of local installers. This contrasts with the handful of large infrastructure companies’ ability to deliver utility or even ultra-mega scale projects. In terms of timing, ultra-mega scale plants require years of planning and development. For other scenarios, in comparison, execution can begin immediately.

As the Indian political and bureaucratic decision-makers set out to plan India’s next big solar leap, they will have an array of objectives to keep in mind. The lowest landed cost of power (in 2024) would be achieved by large rooftop systems. Job creation would be highest (and most dispersed) in the small rooftop segment. Implementation challenges are lowest in the established utility scale market, while new infrastructure requirements are least for the small rooftop scenario.

This report finds that India needs both “beehives” and “elephants”. The government should continue to encourage utility scale and targets for these can be increased substantially. Along with that, however, a much larger emphasis should be given to the rooftop solar market, as it will provide long-term, organic growth drivers. Especially the small rooftop market holds significant potential for creating new businesses and jobs across the country.

Initially, ultra-mega power projects will help quickly bring down the cost of solar power and create large jumps in additional capacity. However, in the medium term, as solar will become cheaper, rooftop generation is expected to take over and create an organic, stable, consumer-driven (rather than policy- driven) market. India would by then have one of the largest solar markets in the world. This market would not rely on subsidies anymore and will have the potential to entirely change the game for power generation in India.

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

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