Is the sun finally shining on solar power? - Views on News from Equitymaster

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Is the sun finally shining on solar power?

Dec 13, 2011

Solar based electricity has been around for quite some time. But its presence has been inconsequential limited to the solar powered traffic lights we see at traffic junctions or at most the solar powered heating and cooking systems installed at select places including the famous pilgrimage centre at Shirdi. Therefore, it is no surprise that the solar power generation capacity in the country stands at mere 50 MW, a minnow in the country's total installed power generation capacity of 1,82,690 MW. The majority 55% of the installed generation capacity continues to be fuelled by coal.

Source: Central Electricity Authority (as on 31/10/11)

As India struggles to meet the widening energy deficit due to shortage in the availability of coal, solar energy remains out of bounds of mainstream electricity generation due to high costs of production. Reportedly, solar powered electricity costs Rs 14-16 a unit, against Rs 4-6 a unit for conventional electricity. The high costs arise as most of the components used in solar projects are imported. Solar power can be generated either by using photovoltaic cells or concentrated solar power (CSP). The first technology using photovoltaic cells is established and uses silicon panels, glass and a switch yard that help put together a heat-trapping mechanism. The second technology uses a combination of mirrors and glass tubes generating superheated steam from sunlight to run turbines and produce electricity.

To encourage the development of solar energy in the country, the government launched Jawaharlal Nehru National Solar Mission (JNNSM) in January 2010. JNNSM has set a target of generating 20,000 MW of grid connected and 2000 MW of off grid solar power by 2022. This programme aims to bring solar costs in line with the cost of other sources of power by 2022. Under the scheme, the government awards solar projects by the auction process. The recent round of reverse bidding under JNNSM was a landmark as it set the lowest tariff at 7.49 per unit, by French company Solairedirect, which almost neared conventional coal-based tariffs. Encouraged by the steep fall in tariff bids, the Ministry of New and Renewable Energy has advanced the date for achieving grid parity to 2017 from the earlier target of 2022.

The winners in the auction process are required to buy photovoltaic cells domestically. The Indian companies present in this space include subsidiaries of well-known business groups such as Tata BP Solar India, Moser Baer Photovoltaic and Reliance Solar Group. The other players are Indo Solar, PLG Power, Central Electronics, Maharishi Solar Technology, Titan Energy Systems, Websol Energy Systems and Gautam Polymers. Thus the government's green initiative through competitive price-discovery mechanism will benefit domestic solar cell manufacturers. At the same time it will develop solar-based electricity in the country without resorting to costly renewable-energy subsidies.

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