India can build excellent rockets. Last September, it successfully sent a space mission to Mars – and that, too, at a slim $74 million. Now, India’s government is again reaching for the stars. Actually, it is reaching out for a specific one, the sun. Mr. Modi has announced that India wants to build 100 GW of solar power in five years. That is nothing short of spectacular. Only, we have no idea of what rocket will take us there. Now all eyes are on the budget, due on the 28th of February. What can we expect?
- The focus needs to be on building the solar market, not on building solar projects
- Building the solar market is directly linked to cleaning up India’s energy market and growing the economy
- Despite the government’s large announcements, we cannot expect a rocket to be built for us. But that is not needed, anyway
I know, it’s solar. But let me digress to another celestial object, the famous mission to the moon, the Apollo Program. It started with US President Kennedy formulating in 1961 the national goal: “Landing a man on the moon, and returning him safely to the earth”. The goal was accomplished in 1969, when three US astronauts landed on the moon’s surface and then came back. This moment of incredible achievement was televised throughout he world. Some say, it was a transformative event in human psychology – it gave us the feeling that everything is possible, if we only think large enough, then focus, fully dedicate ourselves and our resources to it, plan and execute well. Such great, transformative national achievements came to be known as “moon shots”. Today, they might refer to Germany’s energy transition, China’s high-speed railway program or the global eradication of certain diseases. India’s 100 GW solar goal is also such a “moon shot”.
The government has clearly defined the goal. That is a good start. Also, building a large backbone of solar power plants in India has a more direct relevance to people’s lives than the more phallic, original moon shot ever had. However, while the Americans immediately got down to work on the details of achieving the goal (as the Indians had similarly done to make the mission to Mars a success), there has been complete silence on how to achieve the solar target. Observers start to wonder: what’s next? Where, Mr. Modi, is our rocket? Will the budget provide it and give the industry a cozy ride to fame and fortune? I don’t think so.
So what can we expect? (I am now leaving behind the metaphors.) Anyone hoping for financial subsidies in the form of feed-in-tariffs, capital subsides or tax breaks will be disappointed. India cannot afford to subsidize even 10 GW of solar, let alone 100 GW. Keeping the budget deficit in check is key to stabilizing and growing the Indian economy, which, in turn, is key to driving demand for energy – including for solar.
Solar is one (very good) solution to India’s energy problem, not a national goal in its own right. India needs vast amounts of energy to make its industrialization and development happen. At the same time, India does not have to too many energy options. Solar PV – a rapidly built, modular and simple technology that can harness energy available in plenty on Indian soil and rooftops – is a logical winner. It will likely become the backbone of India’s energy economy within the next 20 years. In that case, we will not be discussing 100 GW (the equivalent of 20 GW of coal), but much more than that.
To get there, India’s overall power market needs to become ready for investment. That would take a couple of very ambitious reforms, mainly around power pricing: power tariffs need to reflect the cost of power generation and the cost of maintaining and expanding the grid infrastructure. That would mean rising average tariffs and perhaps reducing cross-subsidization between industrial/commercial and agricultural users. This is politically very hard to do, but extremely important. It’s a moon shot. It would ensure that utilities are healthy again, become bankable contractual partners, can buy more power, expand the infrastructure and invest into making it smarter (matching demand and infirm supply from renewables). It would also help solar reach parities quicker to become an attractive option for utilities and end consumers. At the same time, it would reduce the burden on the central government to regularly bail out state utilities. It would be unrealistic to expect such momentous change from one budget, but a clear signal that India is going in that direction would fuel the market. (I am not even going into land reform, here.)
A second key measure that the budget should provide is investments into the power infrastructure to make integration of large amounts of renewables feasible. It takes at least three years to build a new transmission line, but less than a year to build a large solar or wind park. Therefore, to avoid bottlenecks, the transmission infrastructure needs to be ramped up now.
A third angle is making the power market more conducive to solar investments. It needs to be genuinely opened up, allowing power consumers and generators to buy and sell freely (they can pay for using the grid). Time-of-day charges would help greatly, as would well-implemented net-metering policies. Another key driver is a flexibilisation of power sale: a solar generator should be easily able to switch between selling power to the grid, selling power to another consumer and captive consumption.
India achieved the cheapest ever interplanetary flight. It can now build the cheapest ever solar economy, if it only provides the ecosystem for the market to do its magic.