In view of the acute shortage of land, the cost of floating solar is in the range of Rs 6-6.5 crore which is cheap, J P Gupta, Vice President (Engineering) Waaree Energies, said at the conference. R Srinivasan reports.India's National Solar Mission aims to increase solar capacity from 250 MW at the end of 2011 to 20 GW of grid-connected solar alone by 2022. The total installed capacity of grid-connected solar power in India is reported to be 503.9 MW so far. In view of all the developments in solar, the 3rd Round Table conference based on the theme 'Solar: Towards Grid Parity' was held at IMC, Mumbai, recently. Excerpts of the round table:The participants were Umesh Agrawal, Associate Director, GRID, PwC, JP Gupta, Vice President (Engineering) Waaree Energies, Mukti Marchino, Assistant VP, PXIL, Shirish Garud, Senior Fellow, The Energy and Resources Institute (TERI), Ramesh Vyas, Director, Solar, International Marketing Corporation, Sourabh Jain, Vice President, Solid Solar, Gautam Polymers, Kunal Chandra, India head, Proinso, Satish Kashyap, Co-Founder and Director, General Carbon, Vikram Shetty, General Manager, Twincity Sunlife, Ashutosh Dravid, Assistant V-P and Head- Business Development, PXIL, Pallavi Bedi, Partner, J Sagar Associates, Kolan Saravanan, GM, Centrotherm Photovoltaics, Sandeep Mahajan, Dy GM – Business Development, Sterling and Wilson, Ajit Habbu, Regional Manager - Environment & Energy Services, TUV SUD South Asia, Pratap Padode, Editor-in-Chief, Power Today, Shashidhar Nanjundaiah, Group Executive Editor, Power Today, who was also the moderator and R Srinivasan, Senior Assistant Editor, Power Today. The observers of the proceedings were Priti Gandhi, Head – Corporate Communications, PXIL, Ajay Mishra, Executive – Marketing, Waaree Energies, Navneet Gupta, Sr Manager – Solar, Business Development, Sterling and Wilson and Siddharth Panicker, Account Executive, Edelman, Nimish Vora, Sr Consultant, Advisory, Energy and utilities, PwC.After welcoming all those present, Pratap Padode, said, "Germany gets 40 per cent of its power from the solar sector and they have done it despite oil being around and they have reached that stage. I think we too are not far away and that should be a big boost for the solar energy."Beginning the proceedings, Shashidhar said, "The bidding for solar (Rs 7.49) has been very aggressive but is it going to work? We are supposed to achieve 1,100 MW and we are getting there. The first phase is not going to be a problem but the second phase is going to be a litmus test. What can we do to get to the point where we can do away with the subsidies and when are we going to achieve grid parity?"JP Gupta: Grid parity is basically the cost of electricity what we call 'pooled price' and it is not the electricity that we pay from our house. Suppose somebody in Uttaranchal is paying Rs 3 rupees per unit, somebody is paying Rs 5-6 in Maharashtra, Rs 6.30 in Tamil Nadu and somebody is paying Rs 2.50 in Arunachal Pradesh for the same unit. The unit is one but everyone is paying different prices right from Kashmir to Kanyakumari and from Gujarat to Arunachal Pradesh. So grid parity means the average pooled purchase cost (APPC). Also my country has 120 crore population which is almost 18 - 19 per cent of the world population of 700 crore but my country has only 2.5 per cent of land and is carrying 18 per cent population, which is highly unimaginable. So where is the land to do business? So we must go for alternatives like floating solar. There are about 400 dams in India and all the dams have reservoirs and they simply store water in it. But there are technologies available now, Tata has introduced it and Gujarat has come up with a different kind of floating solar. So the cost of floating solar is in the range of Rs 6-6.5 crore, which is cheap. And with this present technology we can say that we are already with grid parity.Shashi: The technology is available but do we have the kind of widespread use of scales that might get us there and have they been tested enough?Kolan Saravanan: I think Gupta was referring to the efficiency that you put on the solar cells that you set up on satellites. That is available but the question is how do you get the cost down? For now the commercial guys are working on how do you make the dollar go from 90, 80, 70 to 60 and get it down to that level. Even if you look at the challenge which was started by the US Department of Energy, their target is 50 cents a watt. There is a slow progression that people want to make to get the cost structure down.Shashi: Do the bids reflect the kind of growth or scale or are they unrealistic?Umesh Agrawal: The prices have moved down. From 2 years back it has come down from Rs 15 to Rs 8 and if you look at the component of cost it is primarily the photovoltaic (PV) cells, inverters and other components. PV has come down drastically, about 50 per cent in the last couple of years. Other components too have come down but not as significantly as PV. Also there is a lot of undercutting. About the bids, it would be difficult to comment since everyone will have their own stand with respect to not only pricing but also financing. With commercial numbers available in the market, Rs 8 - 8.50 is feasible for most players. That is not too far away… The power purchase basket is closer to Rs 3 and inching forward because in many cases we have not absorbed the increase in coal price, increase in imported coal price, etc. So we have a scale effect on the price of solar modules as well as the rest of the components and it is coming down and you have another push from coal-based plants so the prices are going to go up both on the capital side as well as the side of the fuel price. If you look at a meeting point of Rs 6, then what has been projected in a variety of studies we should achieve grid parity in 2017. But that grid parity may or not fully factor in some issues. There are issues in solar and other renewables that is the intermittent nature of generation. The price or cost of that is not factored in when you talk about grid parity. Without factoring that in, may be grid parity should be there by 2017.Shirish Garud: We can generate solar at the point where we need it. That is why they are initiating rooftop, which is very important. We are talking of generation cost and I am talking of purchase cost because ultimately it is for the purchaser at what rate he is going to get it. It is different what rate the utility is going to get it, add their inefficiencies in operations and losses and they give you at Rs 8 or 13. In Mumbai people pay Rs 13, so where is grid parity? If he puts rooftop solar he is getting it at Rs 8. There are these markets which are opened up and we have to look at it in a decentralised way. On the issue of land, if I am putting a plant somewhere in Rajasthan and expecting power to reach Delhi with 40 per cent T&D losses it is criminal. Why not use that land for some other purposes and you have rooftop or water top. So it is very important how you holistically look at it.Shashi: Does the government subsidise rooftop enough?Sourabh Jain: I would like to categorise rooftop solar into two segments. For example if you look at using rooftop solar to distance power from diesel gensets (DG sets) then the capital subsidies, etc, will make it viable. Yes there is a supporting structure and framework available for these kind of projects and one estimate suggests that 30,000 MW generation is taking place through DG sets in India and that is a huge capacity that is currently viable in terms of being replaced by solar rooftops. The current rooftop installation capacity is less than 10 MW. In Germany around 80 per cent of rooftop installations are on roofs of SME's and commercial enterprises and 20 per cent is on individual rooftop owners. Assuming that this is going to be replicated in India the current framework is not sufficient to give a boost to individual rooftop owners to put it on their rooftops. I may be willing to do it on my company's rooftop but as an individual user it is not currently too attractive for me.Shashi: By incentives, what are we talking about?Vikram Shetty: As a system integrator we have come across so many such people. So if we have models like this, then a case study is like somebody has a roof but he does not have the money to invest in to a system, he gets to lease it out to another company who is ready to invest but he does not have the space, so it becomes a whole team who together invest in to solar and make it work. All the advantages of distributed generation bringing down the cost because you have big companies setting up hundreds of MW all in distribution so the volume is taken care of and the cost comes down by volume. Majorly everybody benefits. Today in the government policy you have very few 100 or 200 MW companies where the whole policy or funds allocated for the solar business is not distributed throughout the system. The rooftop business if we start with feed-in tariffs as an example the money percolates into the entire system and every individual who wants to set up solar power and gets the share of it, gets to feed in units and gets to make money out of it, which encourages more business and more entrepreneurs into the solar segment which is lacking today. It is only the big players who take the cream out.Shashi: Why are RECs and other incentives not available for rooftop?Ramesh Vyas: We need to look at the total energy consumption pattern of the country today. We can look at Tamil Nadu as an isolated case and then extend it to other places. Tamil Nadu for various reasons has acute power shortage and also has huge industries. Diesel generation as a captive requirement, it is said that the all-India capacity could be in the region of about 40 GW. Now we are already at grid parity vis-a-vis diesel which is one part, there is shortage of power which is another part and the third thing is that the consumer who is using captive diesel generator is generally having some roof available. Now if the policies come they would like to have a particular focussed approach for all the industrial rooftops to encourage that even if it does not replace, and solar is never intended to replace other sources of power, it is the third supplement.Shashi: In the equipment import issue, how can we strike a balance between domestic manufacturing capacity versus bringing down the prices?Kolan: The big companies are crying to the government saying put a duty of 25 per cent on equipment that they have been making for years together and they are not able to compete with the Chinese then how do you expect a small company which is just getting started to go compete with these Chinese banks that have loaned up to 40 million dollars over the last 3-4 years? So the domestic industry needs some time to develop and mature and that is the whole point.Vikram Shetty: In favour of the solar industry growing we should support anybody (China, Korea, Taiwan, etc) who can manufacture at a cheaper price and support the cause of achieving grid parity but having said that we also need to support the domestic market. If somebody wants to import the raw materials and manufacture the modules then that module is going to be more expensive because of the duties on the raw materials. So it should be fair for both.Pallavi Bedi: Domestic content and manufacturing definitely needs a boost. That is why imports have a 30 per cent requirement. That is good enough. There needs to be more incentive for promoting the industry set-up here for manufacturing as against putting anti-dumping duties against the Chinese. That is not needed at this stage and that is something that can be pushed for later. At the moment we need to bring down the cost and to do that you need to get the equipment cheaper. So that should be the focus right now - to bring down the cost. I will add on to the R&D development because the main motive of the mission was to get technological advancement and in time that will bring cost down. For the government to step in and do things to promote technology advancement in India and fund in some subsidy there so with the technological advancement probably the cost will go down and that is when you could get things like anti-dumping on Chinese equipment.Kunal Chandra: When you look at a product like a module, which is the heart of the system, performance price ratio is very important. The reason why most of the projects have been taken off the ground is financing. What we see from the West and now the East is that modules have come in with financing from Exim banks etc, which is the key factor. Now you look at the domestic manufacturers - their history or background in the solar space of manufacturing is not as strong. There is a reason why the top 10 manufacturing modules - most of them are Chinese. But there is a strong presence of quality in China and you have to make sure you deal with it.Shirish: Our manufacturing cannot survive because raw material is coming from Western countries, China, etc. We do not have proper home-grown technology in thin-film technology. So the government can keep certain market segments reserved for the domestic market - may be small rooftops for example where you give better subsidy. That is what Europe is trying to do.Mukti Marchino: That way you can have segregation and also give some encouragement to domestic manufacturers. You should not restrict anything which brings down the cost.Satish Kashyap: Earlier we talked about the way windmill development had happened compared with solar. We have realised that the market is a reasonable leveller of technology and over some point in time we have figured out who is good or bad. Why do we want to reinvent the whole process for solar right now and try and create artificial barriers? It seems to be very obvious. Let everyone come in. If the Chinese are able to bring in more quality technology but their banks are willing to finance them at the percentage points let them do it, because there is someone who is willing to back their project finance on it. It may not be an Indian bank but a Chinese bank which is willing to back that technology. Someone is willing to take a call on that and our banks are not willing to take a call on it.Kolan: I do not think we should say that whatever wants to come in so come in, just so we get the cheapest price. So we are saying okay we do not care if anybody else in other parts of the world are following WTO rules or not as far as we get the lowest cost. Then we should never go back to WTO and complain about anything else, just open up everything. You need to figure out if you are going to follow the rules or not, then why do you need a WTO?Sourabh: We should have some technology specifications for example Tier 1 imports from China. I would like to borrow an example from my association with some biomass power projects and some Indian IPP's in the wind industry. There are a lot of over-zealous entrepreneurs who get into the game with the aim of raising money from private equity investors. Because these quality checks are not in place. For example the blades of Chinese turbines giving off because the actual metal alloy composition was not checked. It leaves a bad taste in the mouth of private equity investors, the entire investor community and also it may not be good for the industry.Shashi: What will be the implication of exchanges specifically for RE?Ashutosh Dravid: As far as viability is concerned we are definitely open for renewable power to be traded on the exchange. One can be a green aspect and second is the normal power aspect. As far as normal power is concerned in green it is already on the cards but vis-à-vis solar we are seeing a little far away... At present if you look at the sheer number of quantum which has been asked by the market it is nowhere near the reality. There were hardly 300 certificates in the market last month vis-a-vis buyers of 10,000 certificates.Satish: A large chunk of what we are talking in renewable power is wind where scheduling is a big challenge. They have now brought out rules which say we will do within a 30 per cent range. You go to any reasonable wind developer and he will tell you during peak season may be I will be able to do within the 30 per cent range but during the non-wind season you ask me to do scheduling within 30 per cent it will be very difficult. Wind by its seasonal nature roughly 60 per cent of its generation happens in a matter of 3-4 months and the rest of it gets spread out in the remaining months. In solar also we will have solar challenges with scheduling. You just need a little cloud cover, etc., and you can't schedule power to that extent. So selling wind or solar power which you cannot schedule on the exchange where you have to ask for allotment based on hours or a 15-minute window. If I say for the next 15 minutes I want X units then it makes it more speculative.Ashutosh: There are some genuine players who are there to buy REC's but a sizeable portion of utilities are there only to merely mark their presence so that they can prove that they participated in the trade. There is a certification from power exchanges so they say please give us a certificate to show that we have participated in the trade.Shashi: There is a move by seven state governments now to install solar panels mandatorily in government installations. Has that taken off in right earnest?Sourabh: Gujarat has initiated two projects. Nagaland has recently announced one such project. But these are all relatively new measures. It is just notification that has come out. We are yet to see positive development.Shirish: The REC scheme has a lot of potential but it is right now in a very limited way you cannot sell REC more than once and to anybody else other than utility and once in a month. There are a lot of restrictions and it needs to be overhauled. But that is the starting point. That is why the project becomes unviable. If you look at REC costing and power purchase, for example in wind, you can sell power at Rs 2 and you can sell REC at around Rs 2.5. In solar REC is Rs 12 and power is again Rs 2. So your chunk of money is coming from REC which is an uncertain market that is why the project becomes non-bankable. In wind if I do some tweaking with allotment of capacity toward PPA and some capacity towards REC then the project still becomes bankable.Shashi: Why is forward trading not allowed?Ashutosh: As far as this market is concerned, we are seeing in the REC segment itself last year almost 10 lakh REC's were trading. This year we are seeing a huge jump in this quantum. So hopefully with the liquidity coming into play these products will obviously be at a profit.Mukti: It is not a question why REC's will not do well. The problem is that in the scheme itself you have got a generator and an obligated entity. If that obligated entity does not abide by the rules then it will not work. So we have to tackle that. Once you tackle it what will happen? The demand will be generated, the REC producer will come and if the price of REC goes very high, more and more players will come in REC and solar and non-solar and then there will be equilibrium. We have to tackle this market dynamics and whatever rules are framed have to be followed very strictly. This is a state subject so every state will have their own thing. Is that also not in the interest of the whole market?Shashi: Are these issues faced by the solar segment seen as threats or are they mere hurdles?Pallavi: These issues are probably faced by each industry when it is at the starting stage and because solar is still in the nascent stages and is seeing the policy framework grow, people learning from it and each different technology advancement, tariffs, etc. These are hurdles which ought to be dealt with but they are not things which can probably completely block the growth of the industry but it is something which can dealt with in time with a right amount of focus, policy infusion and right kind of government involvement.Sandeep Mahajan: We are going through a growing stage so it will definitely take some time for standardisation of the world market and it will take another 2-3 years.Shashi: In view of these hurdles, do we see grid parity happening by 2015 or 2017, and at what tariffs?Umesh: Demand might build up in the next 3-5 years and that is when you will see prices crashing much lower than what it is already so may be by 2017 you will have some kind of grid parity. But this will be possible without factoring in the intermittent nature of the resource… How much solar you can have in the grid is constrained until and unless you find a solution to the storage and other power technologies. 2017 there should be grid parity in the range of Rs 5.50 – Rs 6.Shashi: Is Rs 5.50 – Rs 6 optimistic or a little on the weaker side?Satish: Grid cost is taken from the concept of average increased cost of coal and increased cost of natural gas. So where do we see this number going over the next 3-5 years that is one side of the story. Do we see it multiplying by 2? I don't think so… My assessment is Rs 4.20 – Rs 4.30 of where pooled costs should be going forward.JP Gupta: With this state of affairs, Rs 2.30 and maximum Rs 3 seems unimaginable, with this it should go up to Rs 6 - Rs 8.Mukti: When we see the economy as a whole we should also take into consideration what is the demand of power and what have we met through solar and we kind of apportion some cost of demand which is not agreed by conventional energy then we can reach that grid parity. I cannot estimate but it could be around 30 per cent.Shirish: You can come down to Rs 6 or so which is today's wind power so by 2015 it is possible. It depends on the second phase of JNNSM because there you are targeting 4,000 MW and that is the real game-changer.Sourabh: There may be some abnormal factors that are giving us an impression that Rs 8 is viable. With the current policy set-up it might be difficult for solar costs to go down but if we can work on policies for example propagating rooftop solar, making it so obvious that every household wants to install it.Navneet Gupta: In Haryana every time they have elections, the bills will be removed and they will take free connections and we have 30 per cent T&D losses. So what they effectively do is charge people who are paying the bills more and more. If you look at it, rural India does not pay electricity bills at all. It is urban areas that are paying the bills and maximum we tax the industry. Power in China is Rs 2 rupees and in India it is Rs 6.Kunal: Solar is a new industry and we are learning as we grow along with it. The first power plant was set up a few years ago and now there has been exponential growth. I believe Rs 7.50 is a very aggressive price. In the off-grid market the opportunity is massive and the advantages too are immense. If something like that pushes or drives the market, 2017 seems a little realistic.Satish: I am not so confident on grid parity in solar, not even in 2017. If you take wind energy in the last 7 years the price per MW in 2005 was around Rs 4 crore and today it is nearly Rs 6 crore per MW. So it has actually gone up. For a technology you would always say it has to go the other way. So if wind has not been able to achieve parity over so many years, what makes us believe that solar will? In solar you can say that there is grid parity because you are replacing diesel cost. So it is more a question of perception but trying to equate that to the cost of power from fossil fuel and saying that that is grid parity, I don't see it happening, not even in 2020.Vikram: We have seen a lot of German, European and American companies shutting down which is the phase of the business. You will have next generation investors like Mitsubishi, Honda, etc, pumping in fresh investments and starting with new technology manufacturing facilities. So first we should not restrict import of any foreign technologies because it is only going to do justice to the business and help solar grow and come closer to grid parity. Coming to grid parity, it is much more than just the pooled price or trying to compete with the conventional power price. Grid parity for me would be that the cost of solar power is at the same price that I would buy conventional power. So it is more tariff-related. I want to talk about the masses. So for example the rooftop systems should have REC's starting from 100 KW and should go to 5 MW from 2 MW. Similarly on the other side it should come down to 100 KW systems so the REC trading starts from 100 KW systems and as we move forward every year we bring down from 100-90-80-70 and even rooftops of 10 KW should be able to get into REC trading. So what happens is everybody turns into an entrepreneur and everybody looks at an opportunity to invest into solar, to have solar systems on their rooftops and this would actually drive the market. There was a question you had that 'besides tariffs what would drive the solar market'. I think this would be a major driving factor other than megawatt power plants. So grid parity has to be for everyone and every individual should benefit from it. It is not grid parity for a few companies that bid at Rs 7.50 or Rs 7. It cannot be only for them it has to be for the masses.Pallavi: It all depends on how Phase 2 pans out, how technology advancement is linked to cost reduction, whether the government can get its act together and offer incentive schemes, how the world market pans out and if there can be schemes to promote smaller solar power plants. We could get to grid parity, post the second batch in 2017-2018 and the tariff would be close to about Rs 5.Kolan: PV prices have crashed and we cannot have that expectation going forward because right now it is pretty close to cost and a little below cost for some. So modules are setting for 80-90 cents a watt depending upon how good the manufacturer is. Our roadmap says we will be working on increasing efficiency by half per cent every year. So when we have such an incremental technology improvement and companies are already operating close to their cost you can see prices drop down may be 10-15 per cent over a period of time and then you are going to hit a wall and think what are the new technologies that are going to come in?Ashutosh: I think grid parity should be by 2020 and the price will be around Rs 6 – Rs 7.Sharing an experience, Sandeep Mahajan said, "We were in discussion with a client over prices we had quoted for the civil part of a 1 MW solar power plant. He was a transporter who had the money but he was not aware of anything. He said our bid was higher and called another party. It took us 5 hours to convince him. So people are compromising on quality since they are unaware that the installation has to run for the next 20 - 25 years as they just want to set up a plant. How this module is installed is very important, otherwise it may collapse within 3-4 years."Pratap: So they would rather invest in the technology but the civil construction can be as cheap as possible. It is good that the industry is not in a state of boom or you would have every company renaming their company with something in solar and the industry would have gained a bad name even before it had begun.Ajit Habbu: As he has rightly pointed out, the engineering aspect of the plant is very important. It has to be designed very well. We are working with Mahagenco right now for their 25 MW power plant and we are working on the engineering design for the last 2 months because the land is rock solid. In some way it helps and in some ways it does not. Coming back to solar parity, even if the cost of solar remains the same, we will achieve grid parity by 2017-18 and it will be priced around Rs 6.50 – Rs 7.Summing up the conference, Shashidhar said, "This was a fascinating debate because the kind of facets that were brought out were far beyond the scope of what we had actually thought. In sum it is safe to assume that grid parity will be achieved at some point but A) how do we define grid parity and B) the caution to everybody all developers and certainly EPC players that the grid parity would be at a much higher level than what it is right now or the conventional prices right now is cause of caution to the extent that the industry should not believe that the prices will keep on declining at all points. And therefore bid with that presumption. Especially for things like PPA's where it is going to be a long-term contract so there may be the curve may not necessarily keep on going down. The larger picture is that while supply of solar energy per se has been exponentially growing it is the demand side that needs to be really addressed going forward especially in Phase 2. I think that might remain the key issue for policy makers as well as the industry to think about."
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