In an interview to the Business Standard, K Subramanya, CEO, Tata BP Solar, shares his perspectives on how growth can be achieved in the renewable energy sector.
How has Tata BP Solar been approaching this sector and what do you feel will be the road ahead?
We have played a role in developing the Indian solar market over the last 20 years during the phase when only off-grid products such as solar lanterns and home lightings systems and solar street lights could be sold in India. While we have established that business to an extent, we have expanded in the rooftop and free field solar power plants and megawatt-scale grid connected solar power plants in Germany, Spain, USA, Australia and Italy. Now that the Indian solar market is developing the new segments of rooftop and mw-scale plants, we at Tata BP Solar are looking forward to establishing that business in India. As of now we have an existing cell manufacturing capacity of 84 MW and module manufacturing capacity of 125 MW. These will be increased in the coming years in tune with the expansion and development of the Indian and solar market.
What do you think the Government of India should further do for this sector?
The government needs to ensure that the feed-in tariff made available to the solar power developers is carefully set. If it is too high, it would be unsustainable and lead to price increase for the other consumers, if it is too low it would not attract serious investments. Competitive tariff bidding is a good idea in theory to discover the price of a commodity. But in a nascent sector like solar it can play havoc as it is likely to happen in the context of the bidding which has taken place recently in the award of the 30 solar projects of 5 Mw each by the NTPC Vidyut Vyapar Nigam (NVVN) wherein the new and inexperienced players have made such heavy discounts that these have resulted in unviable tariffs. At such low tariffs the projects will be forced to use cheap technology and equipment. They will have difficulties in getting financial closures for their projects because of the poor revenue streams due to discounted tariffs. Eventually, such bids might lead to failed projects. A much better idea would have been for the government to simply pick lots for selecting the 30 projects from a basket of 300 applicants. At least in that case, the projects would have got the tariff of Rs 17.91 as envisaged by the CERC. There would have been successful projects which would have led to the development of the next phase of solar mission by when the tariff would have been settled by market forces.
The second issue is for the government to increase off-grid deployment manifold given the vastness of India and the present state of electrification. There are 23 million households without electricity. Several 1,000 villages are not connected to the grid.and the present solar Mw allocations for this is measly. This is urgent and ensures semblance of energy equity. Our PM has promised one KwH per household by 2012.
How do you think India can learn from the Chinese example which has made good progress?
India has to match China in supporting local manufacturing and infrastructure development. This is important for the security of the nation in the longer term perspective. China has stolen a march over us and is several notches ahead of us though India started much early. We presently do not have a level playing field. In the present circumstances, it is difficult for local manufacturing to blossom inspite of their proven capabilities.Unless this is addressed seriously, local manufacturing will wither away or foldup leaving the field open for dumping by the Chinese. Lastly, the government has to undertake large scale training and development of technical manpower required for the large scale promotion of solar industry in India. There will be a substantial requirement of skilled and technically proficient personnel at every node of the value chain – from R&D to manufacturing to marketing and distribution to operations and maintenance.
As Panchabuta understands, most of the developers have definitely made ambitious and agressive bids in the first phase of the mission given the overwhelming response and potential that has been observed in the Indian Solar market. Further, to make the process transparent and clear NVVN had come up with a competitive bidding structure with very stringent bid bond conditions that all developers have adherered to. Also a lot of developers that Panchabuta spoke to that had bid and some selected for in the process, the discounts offered came down to two critical project parameters that include the capacity utilization factor of their selected site and consequently the potential generated units per year and the cost of debt financing in the overall project.
However speaking confidentially to Panchabuta, a number of Solar specific players and developers have mentioned that they see this as a huge opportunity to enter into this space in India and the opportunity cost has played an important factor in their decision making and bidding process keeping in mind the broader picture of the National Solar Mission and what it intends to accomplish. This can further be vaildated by premiums at which equity fund raising is currently being undertaken by some of the initial project developers with signed PPA’s.
However, inspite of all this, the risks and concerns that have been highlighted by Mr. K. subramanya still do exist and hopefully they should be addressed by the developers for the success of the projects under the prestigious and ambitious National Solar Mission in India.
The more interesting and important aspect that has often not been highlighted or discussed is that of the off- solar potential and deployment and as right pointed out by Mr. K subramanya, given the vastness of India and the present state of electrification this presents a huge opportunity and Panchabuta definitely agrees with him that the present solar Mw allocations for this is measly. This is urgent and ensures semblance of energy equity.
On the domestic content requirement in the National Solar Mission, there have been various discussions both for and against the same and it is generally agreed that had the mission allowed for import of module, the Indian producers would have found it very tough to compete with imports. In this context some of the arugments from the domestic players include the life of plant, reliability of Chinese suppliers,performance issues etc though the Chinese have proven globally that this might not seeem to be a challenge as big as it is made out to be. Some of the leading Chinese manufacturers have also since started interacting with some of the smaller Indian developers on smaller platforms and discussing some of these issues. Read detailed essays on domestic content requirements by Panchabuta( here ,here and here )