Solar PV ahead of coal,gas & hydro based power generation

We have seen many ups and downs in power sector during the current five year plan period. But record capacity addition in solar photovoltaic power projects is a surprising development.

In just one year, India’s installed SPV capacity has risen from 22 MW to 143 MW and is expected to extend up to 400 MW within next one year. The number of projects is continually growing and India’s pipeline is expanding explosively. By 2014, India is expected to have 14.5 GW of installed solar PV capacity. Some experts have predicted that this base will hit 33.4 GW by 2022.

Installed grid connected renewable power generation capacity of India has reached 21.12 GW. This is more than 11% of the total installed capacity base of the country. The demand for power has been increasing in India due to the growth in the Country’s economy. Over the last 10 years, energy and peak demand shortage averaged around 10.3% and 12.9% respectively. In meeting this growing demand, renewable energy is playing an ever increasing role.

The availability of abundant solar energy has prompted policy makers of the country to frame favorable policies and regulations to develop the solar energy resources. India has today only around 42 grid interactive solar photovoltaic power plants with aggregate capacity of around 143.5 MW, that generate around 240 million units of electricity in a year, in sharp contrast to the estimated potential of 50,000 MW. Most of the existing capacity today is off-grid and for standalone applications in lighting, telecommunication, small power requirements, battery charging, water heating, cooking etc.

Under the JNNSM scheme of MNRE, NVVN Phase I, Batch II bidding results shows that there will be addition of near about 350 MW of Solar PV within next one year if all of the selected projects are executed successfully. The present central and state policies for Solar Energy is developing favorable conditions and various new business models are emerging which reinforce the exponential market growth for solar projects. The current opportunities are attracting intense excitement from entrepreneurs and investors to be a part of the solar growth story of India. However, these opportunities are not without challenges. There are various types of contractual structures and financing mechanisms to contend with. Technologies, business models and market dynamics are evolving. The success or failure of solar projects depends not only on getting units installed, but learning how to financially structure projects.

However the worsening of the already existing issues for gas and coal based power developer has left a black mark on the sector’s performance. The uncertainties with regard to availability of coal and gas, the two major fuels for power generation have become a major concern for project developers who are now in a dilemma over the viability of power projects. India plans to add nearly 235 GW (1 GW = 1000MW) of thermal capacity addition till the end of the 15th plan period. To fuel this increased capacity addition keeping in mind the current shortages, a well defined path for development needs to be taken  which will incorporate a multi dimensional approach.

In such a scenario looking at the past precedents, the risks associated for the developer especially in the case of fuel sourcing is too high. Nearly all other major activities of setting up a power plant depend on the finalisation of a firm fuel linkage or captive allocation (in the case of coal). Multiple projects in the country have been stalled primarily because of non-availability of fuel, both coal and gas.In such a scenario of scarcity, sourcing of fuel from abroad has become a major alternative for developers. More and more developers are now opting for sourcing fuel from abroad for power generation. Even CEA has in the case

of coal recommended blending of imported coal for power plants. However this has brought in a question mark on the viability of running both old and upcoming power plants at increased costs with no assurance of the recovery of costs incurred. The country needs to have adequate infrastructure in place to support such imports along with a deeper understanding of the risks associated with using imported fuel. Despite increased focus on alternate sources such as renewable energy sources, coal and gas together will continue to dominate India’s power generation portfolio in the coming decades as well. In such a scenario a question rises on the sustainability of the ideal fuel mix for power which is best, as well as the affect on the future development of the sector? Further will sourcing of fuel from abroad be a viable option in a resource rich country like India?