Indian solar 2015: A breakthrough year?
The
ever-shuffling pack of leading PV nations welcomed India into its fold sometime
around 2012, and has since seen solar growth in the country ebb and flow like it
has in many others.
From
Italy and Germany’s early-adoption rise and recent fall, through to China’s
stunning growth and slight stutter at the end of 2014, solar fortunes the world
over are inextricably linked to a series of seemingly arbitrary external
factors.
For
India, the situation has been no different. Having enjoyed an encouraging 2013,
experts in the solar industry were confident that 2014 would see India add more
than 2 GW to its overall capacity. The reality was a little less illuminating:
research from Mercom Capital Group suggests that India installed around 800 MW
of solar PV capacity last year as the industry waded through the syrupy waters
of elections and anti-dumping concerns.
However,
the characteristic bullishness of the Indian solar market has shone brightly so
far in 2015. On a seemingly daily basis news emerges from the subcontinent of
yet another deal, yet another pledge, and yet another piece of encouraging PV
progress.
Before
the turn of the year, India’s Prime Minister Narendra Modi upped the country’s
2022 solar PV target to 100 GW – a move that prompted a raft of multi-GW trade
announcements, many from foreign investors, as word spread that India was once
again open for business.
U.S.
solar company SunEdison has been particularly active so far this year, signing
two memorandums of understanding (MoU) that both have the potential to propel
India’s solar sector into a market-leading position. The first – plans to build
a $4 billion, 7.5 GW solar fab in
Gujarat – was swiftly followed by a 5
GW solar and wind investment MoU in Karnataka, which itself echoes an earlier
pledge in fall 2014 to develop 5 GW of
solar in the state of Rajasthan.
However,
Raj Prabhu, CEO and co-founder of Mercom Capital, is a little skeptical about
these announcements. "The $4 billion Gujarat announcement was struck at a state
investment conclave, which happen across India every year with the goal being to
bring in foreign companies and have them pledge investments," Prabhu said. "But
looking at market fundamentals, I’m left wondering, ‘where is the market for
such a big manufacturing plant?’"
Prabhu
added that the manufacturers he speaks to on a regular basis talk of idled
capacity, which hints at slack levels of demand. Perhaps, Prabhu suggests, these
announcements are done to test the waters as part of a wider pro-solar PR
strategy. "A similar thing happened with SunEdison’s Rajasthan announcement in
October. These are all just MoUs, and the last time we had contact with the
Rajasthan government to find out how serious this was, they told us that there
is no obligation [to develop] just yet.
"So
I don’t see these early announcements as overly serious at the moment. Karnataka
does this every year, and perhaps just 5% of the announcements turn into
something concrete."
Growth
predictions
Despite Prabhu’s caution, the analyst is confident that 2015 will be a year of real expansion for India's solar industry, with around 2 GW of growth expected – around double the capacity added in 2014 and the first tangible growth in around three years. "From here on we will see the new solar policy take effect, and this is the year that there will be more pivotal phases coming out with auctions and so on."
Despite Prabhu’s caution, the analyst is confident that 2015 will be a year of real expansion for India's solar industry, with around 2 GW of growth expected – around double the capacity added in 2014 and the first tangible growth in around three years. "From here on we will see the new solar policy take effect, and this is the year that there will be more pivotal phases coming out with auctions and so on."
The
Jawaharlal Nehru National Solar Mission (JNNSM) was launched in 2010 and has
been instrumental in underpinning India’s solar direction. Its latest
iteration – not-so-snappily titled the JNNSM Phase II, Batch II, Tranche I –
outlines the amount of solar PV to be added between now and 2017, and how and where it
must be done.
One
of the key battlegrounds for growth will be in manufacturing. India’s domestic
solar industry has been hamstrung by what it claims have been ‘dumped’ solar
produce entering the country in recent years, triggering the inevitable
anti-dumping investigation, which was later dropped. Then there has been a push
among local manufacturers for domestic content requirements (DCR), which may
have prompted SunEdison to explore the prospect of building a fab in India.
"SunEdison
have kept their plans vague," said Prabhu. "They haven’t revealed exactly when
they will complete their 7.5 GW plant, but then, if the Indian government says
the plan is to install 100 GW by 2022, it makes sense to construct a
manufacturing plant in the country."
The
question is, muses Prabhu, when and where is the pace of demand necessary to
keep a 7.5 GW fab running going to come from? "Right now, only two countries are
installing at that pace, and that is Japan and China. Nowhere else is doing
that, and it is going to be a while for India to get there.”
The
way in which Indian companies prefer to do business also makes it difficult to
properly gauge the need for added manufacturing capacity. "Domestic
manufacturers were pushing strongly for AD tariffs last year, and have also
backed DCR – basically they are saying that they do not have a market because
they cannot compete," said Prabhu. "But when you talk to individual
manufacturers, they tend to say they are doing OK. As an association they give a
bleaker view when they lobby the government, so it is difficult to assess what
is happening."
Prabhu
did confirm, however, that a number of local companies are looking to begin
exporting their products to Europe and elsewhere, although Chinese competition
remains a threat.
Climate
change and DG solar
Two potentially pivotal developments could shape India’s solar landscape in the coming years – climate change and distributed generation. U.S. President Barack Obama is due to visit India in late January in order to meet with Indian Prime Minister Narendra Modi to discuss matters on climate change. This meeting could lead to some interesting developments on climate change action, believes Prabhu.
Two potentially pivotal developments could shape India’s solar landscape in the coming years – climate change and distributed generation. U.S. President Barack Obama is due to visit India in late January in order to meet with Indian Prime Minister Narendra Modi to discuss matters on climate change. This meeting could lead to some interesting developments on climate change action, believes Prabhu.
"Traditionally,
India has always opposed climate goals, but with China recently signing such an
agreement with the U.S., the country is likely to want to follow suit." Air
pollution and environmental matters are not as pressing a concern for India as
they are for China – the issue does not regularly make headlines nor impact the
public on a daily basis – but Modi remains an avowed activist for change and
sees future in renewables. That future can be augmented by binding climate
change targets, stresses Prabhu.
"India
has been increasingly reliant on imported coal after its own coalmines were
suspended following the discovery of irregularities in the auction process," he
said. "This is steering the country towards renewables and, with it, the desire
for U.S. investment."
Equally
urgent is India’s need to plug the gaps in its grid infrastructure. With
distribution losses of around 25%, India’s grid is one of the world’s leakiest.
"Without fixing that problem, and at the same time investing heavily in solar,
then India would be wasting even more energy," said Prabhu. This all hints at
the transformative potential of distributed generation (DG) – something that
Modi appears to have recognized following his recent approval of a loan scheme
designed to help Indian homeowners and businesses install rooftop PV systems.
"The
distributed nature of solar power is a huge positive in India because you do not
need to build a large-scale plant and because a lot of rural areas have poor
connection," said Prabhu. Talk of the Indian government cutting the rooftop
subsidy from 30% to 15% may even accelerate rooftop adoption, rather than slow
it, suggests Prabhu, because the subsidy scheme has historically proven
unreliable in the past.
"At
30%, many developers have not been paid by the government, which has negatively
impacted a lot of companies and forced many to go out of business. This has
created a lot of talk about how it is not even worth having a subsidy if you’re
not going to get paid. So the idea now is to figure out a way to install solar
without subsidies, and it will be interesting to see how this approach pans
out."
According
to Jasmeet Khurana of Bridge to India, around 40 GW of the 100 GW solar target
is earmarked for DG. "This is fairly significant," Khurana told pv
magazine. "In the past, the focus has been on large-scale PV
projects as they helped bring in economies of scale, creation of ecosystem and
reduction in overall costs of installation and generation. Modi’s government
realizes the benefits of DG and is looking to keep a healthy mix between it and
large-scale solar."
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