Gandhigiri can make solar work for India

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In many ways, Indian leader Mahatma Gandhi, a proponent of nonviolence and truth, was an early environmentalist. He believed in a self-sustaining life, walked everywhere, and even spun his own cotton yarn. If he were alive, he would been a huge supporter of India’s efforts to use its abundant sunshine to generate clean, sustainable energy.
  
Today, India’s climate change mitigation strategy bears the unmistakable stamp of the father of the nation . India has a goal of achieving a five-fold jump in renewable energy to 175 GW by 2022 , the bulk of which - 100 GW - is expected to come from solar and 40% of that from rooftop solar alone.

Not surprisingly, this target was subject to much skepticism initially. Forget the quantum leap to 175 GW in seven years. At the time of the announcement, India was far from meeting its original target of 20 GW, because even just a few years ago, commercial banks considered solar a risky and ‘non-bankable’ technology.

Since then, of course, India’s solar industry has taken off dramatically.

In 2009, when the state of Gujarat launched its solar policy and laid the foundation for the country’s first solar park, the cost of solar power was around 25 cents (INR 15) per unit. This fell to less than 7 cents (INR 4.3) per unit when Madhya Pradesh and Andhra Pradesh launched their solar bids in January this year. Investing in solar power was once considered too risky by national banks and major corporations, but most are now clamoring for a piece of the action.  In fact, Japan’s Softbank is mulling a manufacturing joint venture in India to produce solar panels that the country needs to meet its ambitious goals.

As costs fall, India’s solar power capacity has also grown exponentially.  In just six years, capacity has multiplied from less than 50 MW in 2010 to around 8.7 GW in 2016. Moreover, the increasing pace of state and national-level procurement has meant that a further 10 GW of solar projects are in the pipeline. This rapid growth is being led by the development of some of the largest solar parks in the world such as the Pavagada Solar Park in Karnataka (2,000 MW) and Rewa solar park in Madhya Pradesh (750 MW).  Once completed, Pavagada is expected to reduce carbon dioxide emissions by 20 million tons , reduce the use of natural gas by 3.6 million tons and power three million households.

Catalyzing the rooftop solar market

While large-scale ground mounted solar power units have grown rapidly, the rooftop solar sector has lagged, mostly because commercial banks have been reluctant to provide loans due to perceived risks, preferring large-scale grid connected solar instead.

This reluctance seems misplaced given the fact that the business case for rooftop solar power already exists, especially for industrial and commercial consumers, for whom rooftop solar is cheaper at 6-8 cents (INR 5-6) compared to 12-24 cents per units (INR 8-15) for grid power in cities.

These competitive prices make India a prime candidate for a revolution in rooftop solar power. In fact, the World Bank just approved a $625 million project in India to install solar panels on rooftops across the country, supported by $125 million from the Climate Investment Fund (CIF).

So the day is not far off when rooftop solar products will be sold as commonly as TVs or cars . Consumers will be able to choose between different brands or pick from various financing schemes. Indian households could actually start using their roofs to generate much-needed solar power, not just dry laundry and spices. 

But the solar story cannot stop there.

What will be just as important is off-grid solar power for the nearly 300 million Indians who live in villages with no electricity , or have power for just a few hours a day. However, this remains the most difficult group to reach. Why?

The curious case of off-grid solar

Several private initiatives, including SELCO, Onergy, Boond Energy, Mera Gao Power and Husk Power, have successfully tapped into this market, but scalability continues to be a challenge. Incidentally, this phenomenon is not just limited to India -- many countries in Africa face similar issues. None of these companies have been able to expand their markets to more than a million households in India, and a business model that can be replicated has not yet emerged. Availability of financing has been the biggest barrier.

As off-grid solar projects are not considered bankable, commercial banks are not yet ready to fund them. These projects also don’t match the traditional requirements of venture capitalists or private equity firms in terms of the returns generated or exit timelines. The government too has demonstrated limited capacity in developing the off-grid market, both in terms of financial and human resources.  

Much has to be done to drum up investors’ enthusiasm but there is hope.

Meanwhile, Gandhi’s vision of self-sufficiency holds strong.  If Indian households were to channel him in thinking about electricity access solutions (and with the right financing mechanisms in place), they would not only generate their own power, but also income by selling surplus electricity to their neighbors, or even to an electricity company.
 
They would then be following a slightly amended version of Gandhi’s ‘three wise monkeys’ approach: generate your own power, consume your own power, and earn from your own power. That would be the best homage our country could pay to the father of the nation.

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Yao
December 09, 2016

good piece Amit! I love the "three wise monkey" metaphor at the end.