An ultra-mega opportunity or a headache?

The impression given by the Indian government that it had navigated the thorny question of whether to apply duties to solar imports by simply sticking its fingers in its ears was fuelled even further when its plans for giant solar parks became public knowledge.
Although details of the union government’s ambition for 20 GW of solar parks and “ultra-mega” developments over the next five years were published on the website of the Ministry of New and Renewable Energy (MNRE) in early September, that draft policy was published as a reminder to state energy departments to get their act together and offer up their thoughts.
The document made publicly available was an urgent appeal to energy departments and secretaries across the nation to make any suggested amendments after the new policy had originally been sent out privately to India’s solar movers and shakers on August 1.
In fact the MNRE may have decided to make its proposals public in frustration at the lack of response from its state counterparts and in the face of rising criticism of a perceived lack of action on solar from former PV poster boy Narendra Modi.
Local energy departments would have been entitled to question the wisdom of seeking their insights on the policy before the government had revealed which way it would jump in response to the demands from domestic manufacturers to levy antidumping (AD) duties on imported solar cells and modules. The deadline for that decision was not due to expire until the end of August so it is hardly likely that state energy officials would have been willing to back the ultra-mega vision without knowing where the 20 GW worth of modules to power them were coming from.
Now that the prospect of AD duties has disappeared – with the government finally having confirmed the decision against the complainants’ demands after days of silence running into early September – state energy departments can offer feedback on the fleshed out plans to develop huge centralized solar parks across the nation; although, having apparently failed to set any deadline for receiving comments, and given pv magazine’s negative experience in attempting to contact Indian public officials of any kind, finalizing plans for ultra-mega solar may be a drawn-out process.
On the surface, the argument for large solar parks – of 500 MW capacity – and for the flagship ultra-mega plants ranging up to 1 GW in size, is quite a seductive one.
In a policy that will run alongside the national Jawaharlal Nehru National Solar Mission (JNNSM), states will secure the huge tracts of land required – of at least 2,500 – 5,000 acres for each of the 25 planned schemes – prepare the sites and permits and provide grid connections and the other infrastructure required. In return for the considerable time and cost savings entailed for participating developers, solar companies will pay a premium to develop plots on such sites, securing a lower cost for the power generated under economies of scale.
Perhaps not surprisingly, developers have voiced enthusiasm for the INR 4,046.25 crore ($665 million) scheme, first name-dropped in prime minister Modi’s inaugural budget.

A PV deployment revolution

“At Vikram Solar, we welcome and support the government’s draft scheme on solar parks and ultra-mega solar power projects,” said Gyanesh Chaudhary, CEO of the Indian company, adding: “This is an idea whose time has come. After the success of the solar parks in Gujarat, at Charanka, and in Rajasthan, at Bhadla, the Indian industry has got a very good sense of what to expect in a solar park and we look forward to leveraging this experience to rapidly and significantly scale up our solar power development capacity through the solar parks and ultra-mega power projects being envisioned.” Paul Gupta, MD of Indian manufacturer Indosolar and one of the original complainants whom had called for the imposition of AD duties to level the playing field for Indian-made solar products, went further, claiming: “India is on the cusp of a solar deployment revolution.” A government hoping its own ideas on solar would placate manufacturers disgruntled by the AD verdict will be delighted to hear Gupta’s belief that “manufacturers in India will flourish with a huge pipeline over the next five years,” although the Indosolar chief’s confident prediction that a “consolidated comprehensive policy” to include distributed generation as well as large-scale schemes “will be announced soon” is yet to be evidenced. Maybe the MNRE has already outlined its plans to interested parties on that one and will play its hand if met with another wall of silence.
Indosolar was confident enough in the government’s solar ambitions to restart module production while the AD debate was still raging but there is precious little in the draft solar park policy referring to domestic manufacturing, other than the one-line note that says: “Manufacturing of solar products and components may also be allowed in the parks.”

No news on domestic content

The question surrounding the origins of the solar modules used in the 20 GW large-scale pipeline is an interesting one, with Indian consultancy Headway Solar claiming domestic content requirements would be incorporated into public tenders, ensuring the revised JNNSM,
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together with the new large-scale parks, would ensure a sufficient bounty for Indian manufacturers still playing catch-up with overseas rivals in production capacity.
Raveesh Budania, partner at Headway Solar, said: “The government representatives have assured that, to keep intact the interests of Indian manufacturers, public sector undertakings will develop PV projects to meet the aggressive targets of the pro-solar Modi government – to the tune of 5 GW per year – using indigenous modules. The current setup of the National Solar Mission will be left undisturbed, allowing imports.” There is no mention of any domestic content requirement in the draft ultra-mega policy document, although that may have as much to do with the ongoing complaint by the United States, Japan and Australia against such stipulations of the JNNSM at the World Trade Organization (WTO).
Budania explained that at current production capacity, Indian manufacturers would be unable to meet more than a third of the demand driven by Prime Minister Modi’s beefed-up JNNSM and, as such, domestic content would form part of tenders issued by the National Thermal Power Corporation (NTPC) and other public service users, although, in light of the ongoing WTO dispute, the Indian-made stipulation has not been announced as part of official public policy.
Quite how such informal arrangements will satisfy Indian manufacturers is unclear, particularly given the solar park and ultra-mega models, where private developers take allocations as part of the larger schemes, will apparently have no such protectionist requirements and, as such, are likely to be full of foreign-made modules. If manufacturers such as Indosolar have to rely on the domestic content requirements of the national policy for succor, the WTO dispute comes back into focus. The dispute panel secured by the U.S. is due to present its findings to parties in the argument in early January and to WTO members by the end of January with the conclusions potentially adopted by early April, so Indian manufacturers will be hoping the trade case came up for discussion when Modi went to Washington in September.

Centralized or distributed PV

Aside from the demands of a manufacturing industry desperate to catch up with its global peers, there is a more strategic question to be applied to the logic of the ultra-mega policy, when comparisons are made with China and the U.S.
The strength of third-party ownership in the U.S. and its growth in Australia is seeing individual solar systems beginning to outstrip utility-scale developments in new generation capacity and the huge potential of distributed generation (DG) has also not escaped the Chinese government.
Having powered through a vast expansion in large-scale solar developments, in part to eat up the mountains of panels being disgorged by its over-developed domestic manufacturers, the Chinese government has belatedly turned its attentions to solar rooftops with the introduction of DG pilot schemes a year ahead of schedule in an ambitious attempt to kick-start small-scale demand with 8 GW of DG by the end of the year.
Maybe those with their hands on the levers of power in China have been reading the recent predictions of investment houses like UBS Bank, that predict household solar – combined with electric vehicles and leaps forward in the battery technology needed to power such units – will be the spur for PV to dominate the future energy mix. Or maybe it is vice versa. Either way, with the International Energy Agency outlining a scenario in which it can foresee solar in all its forms being the largest single technology source of electricity globally by 2050, China, the U.S. and their global peers seem to be betting on DG at just the moment India is putting faith in projects at the opposite end of the generation capacity scale.
Although welcoming the advent of an additional 20 GW of solar as “very positive” news for Indian solar, Raj Prabhu, CEO of market intelligence provider Mercom Capital, questioned the scale of the new projects in an interview with pv magazine . “Since the whole world is going towards distributed energy because of the drop in prices, why is India going in the opposite direction?” asked Prabhu. “India has 25 – 30% transmission losses, among the highest in the world. How does it make sense to have these sorts of centralized huge projects?” The question is a timely one, but Headway Solar’s Budania says following the example of China and the U.S. in the less mature Indian market would be putting the cart before the horse. “While distributed generation is a key attribute of solar energy, the adoption rate will remain low for a few more years,” said the analyst. “Challenges related to net metering,
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along with low residential tariffs, mean grid parity for the segment which has embraced distributed generation elsewhere – homeowners putting solar on rooftops – would be delayed. By promoting centralized solar generation through solar park infrastructure, the government intends to deal with fewer parties, keep the cost low, minimize points of failure and attract bulk investments.” The solar park policy, he says, is also to do with hitting the country’s ambitious solar targets, something a newly elected PM cannot afford to ignore. “If the government wants to achieve a 20 GW target within a few years, it cannot do so by promoting distributed generation,” added Budania. “While the solar parks are meant to provide required infrastructure, the government will still want the private players to develop PV projects and purchase power from them at the lowest cost possible. “In my opinion, the policy makers have envisioned a road map under which large-scale projects would give way to a more mature market and capital inflow – which is difficult for any emerging market to come by – which will consequently lead to a parity-driven rooftop market segment at a later stage – say three to four years from now.” Whether ultra-mega solar is necessary to bring the Indian market to a level where rooftops flourish or not, states like Gujarat, Rajasthan, Jammu and Kashmir, and Madhya Pradesh seem set for an influx of huge solar fields along the lines of the Charanka Solar Park where, at the time the new policy went public, 224 MW of a 590 MW capacity had been sold to developers.
Quite where the new strategy, and pending WTO verdict, will leave Indian developers in the medium term is unclear but perhaps the state energy departments will have something to say about that. Or then again, maybe not.