By Niharika Mandhana | February 13, 2012 | +
In 2009, when policymakers in New Delhi set a goal to produce 20,000
megawatts of solar energy by 2020, few gave India more than a slim
chance. The world�s solar-savvy countries put together were generating
that much solar power at the time, and India was contributing
virtually nothing. But today, with acres of land in its arid, sun-
drenched northwest carpeted with thousands of gleaming solar panels,
analysts say India is poised to exceed its target. And the most
tangible indicator of this makeover is money. In the last year,
funding for solar projects in India increased seven-fold, from $0.6
billion in 2010 to $4.2 billion in 2011, a new Bloomberg New Energy
Finance report said.
On paper, India has always had a good case for going solar. Several
parts of the country are endowed with an abundance of raw material �
as many as 300 days of sunshine a year � much to the envy of cloud-
enveloped Germany and Spain; it has vast tracts of under-utilized land
on which to embed rows upon rows of solar panels; the country�s
growing and grossly underserved population and expanding industry are
hungry for electricity. But the deal breaker, solar�s classic
Achilles� heel, had always been the cost factor; solar is expensive �
considerably more expensive than the alternatives, coal and wind � and
a seemingly extravagant venture for a developing nation struggling
with double-digit poverty and ruinous public health. For years, the
global solar industry has piggybacked on generous subsidies from
governments � inevitably developed and wealthy � willing to foot an
enormous bill to develop clean energy. India never quite fit into this
elite club.
But last year, the promise of affordable solar came one step closer to
becoming a reality. First, the global price of solar panels and
modules that turn sunlight into electricity plummeted 30 to 40
percent, triggered by a massive expansion in China � home to the
world�s leading panel makers � and a supply surplus owing to tepid
demand from Europe. While this brought doom to American manufacturers
unable to compete with China�s prices, it proved transformative for
the industry by making solar infrastructure more accessible. Germany
added a record 7.5 gigawatts of panels in 2011, more than double the
government�s target. In the United States, grid-connected solar
installations in the third quarter of 2011 grew 140 percent over the
previous year. Indian developers too decided to join the party.
Then India veered from the global story by departing from the fixed-
price subsidy framework. In countries like Germany, Spain, the U.K.
and U.S., governments subsidize solar power by agreeing to buy it at
fixed prices for several years � a model described by solar skeptics
as unsustainable and wasteful, the Economist writes. Backed by the
government, solar capacities have been ramped up exponentially over
the years. But this arrangement began to buckle when governments,
faced with growing budget deficits and an economic crisis, started
cutting subsidies, pulling the rug from under solar�s feet.
As early as 2009, Spain rolled back its subsidy program by reducing
the money it paid for solar electricity and capping the amount of
subsidized solar power installed each year, the Wall Street Journal
reported. Following the crash in panel prices, Germany and the U.K.
have been wrestling industry lobbyists to accelerate subsidy cuts. The
U.S. too grapples with solar�s classic chicken and egg conundrum:
developers say prices of solar energy will get competitive soon, but
to achieve this they need to scale-up, for which they need generous
government subsidies. Hitting at the heart of the matter, Spanish
minister Jose Manuel Soria recently said, �What is today an energy
problem could become a financial problem.�
India imported all these debates and problems when it entered the
solar subsidy game. Driven by its ambitious new solar policy, the
government agreed to buy solar power at 17.91 rupees (36 cents) for a
kilowatt-hour. (India�s coal-generated energy costs 3 to 4 rupees, one-
fourth the cost of solar.) But to their surprise, they received an
overwhelming response from developers � Indian and overseas alike.
That�s when India set up a reverse auction process, making developers
compete for its business. In an auction in December � the second of
two � over 100 producers bid to sell solar power to a state-owned
utility. The lowest bid was 7.49 rupees (15 cents) per kilowatt-hour,
less than half of what the government had offered in the beginning and
about 30 percent cheaper than the global average for solar projects,
Bloomberg writes. The average bid price was 8.77 rupees (18 cents) per
kilowatt-hour. Germany, the world�s biggest solar-power user, pays
upwards of 17.94 euro cents (23 American cents) per kilowatt-hour,
according to the New York Times.
�The Indian experiment has been very successful,� says Tobias
Engelmeier of Bridge to India, a New Delhi-based consultancy. Not only
has India made its solar program viable, he said, but has also set a
precedent by increasing competitive pressure on developers who he
believes have been far too comfortable for way too long. He expects
solar power in India to become competitive as early as 2016.
While solar energy is getting more attractive, what�s tilting the
Indian energy market further is that coal is becoming more elusive. As
the Economist notes, by 2017 domestic coal production in India will
meet only 73% of demand, making imports imperative. Some $7 billion
has already been spent in the past six years on acquiring coal pits in
Australia, Indonesia and Africa. To ensure energy security, many in
India also rely on back-up generators powered by diesel that costs
between 12 and 25 rupees (24 and 40 cents), prices solar has already
defeated.
This dramatic fall in prices has, however, raised some questions: are
these projects, almost too good to be true, financially feasible?
Analysts warn a weeding-out process is in the offing. Lured by solar�s
glowing prospects, dozens of inexperienced developers and start-ups
bid aggressively in the auctions and may not be able to deliver the
goods at those prices, they say. Add to that the typical menu of hick-
ups and teething problems: licenses and permits, land acquisition and
evacuation, and financing.
Nevertheless, solar �looks like it will be a significant source of
energy� going forward, says Alan Rosling, co-founder of Kiran Energy,
a solar developer whose story mirrors India�s own growth trajectory.
Just over two years old, the company now owns plants sprawled across
125 acres and has bagged contracts (a majority of them through
competitive bidding) for 75 megawatts of solar power. Setting the bar
high, Rosling says solar will have �truly arrived� in India when
developers can sell it to anyone at a competitive price without
relying on the government exchequer.
Read more: http://ecocentric.blogs.time.com/2012/02/13/bright-days-how-india-is-reinventing-solar/#ixzz1mHduuK4m
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