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The solar photovoltaic industry is passing through a phase of consolidation. It has led to mergers and acquisitions, drop in demand and fall in prices. This phase will continue before the sector gathers momentum again.
For all the buzz, however, the pace of implementation in India leaves much to be desired. Although the National Solar Mission has kicked up some action, the rooftop solar implementation programme has been slow off the blocks. While some States have got cracking, others are still in the process of working out modalities to attract companies to set up solar PV units.
Bettina Weiss, President of SEMI (Semiconductor Equipment and Materials International) India, which has been in the field for over 40 years and oversees the global PV Group, says solar PV installations and developers need to steer clear of purely cost-based considerations in selecting technology, components and installation partners. Power developers must be careful not to compromise on quality in the rush for lowest bids.The business case for getting into PV generation must be based on the sale of power, and not on financial delivery mechanisms, reiterates Business Line
Excerpts from the interview:
The price of solar PV installation has come down. From Rs 18 per unit, it is now down to about Rs 6.50-7 per unit. Are we close to grid parity?
This reduction has been due to a combination of factors: supply-demand dynamics, fiscal support, competitive pressure as well as reductions in the cost of PV power generation equipment and systems through technological innovations, economies of scale and efficiency improvements.
Grid parity is best understood as a band rather than a single point. Worldwide, grid parity will be achieved first in those areas that have a combination of abundant sunshine and comparatively high grid electricity prices. In the United States, for example, Hawaii and large portions of southern California are at wholesale grid parity and residential and commercial solar markets are at retail grid parity in much of northern California.
In India, in certain applications such as urban rooftop PV, especially at the higher end of the consumption spectrum, solar PV is already very close to parity. Power from diesel generation costs the consumer Rs 12 to Rs 15 per kWh, and contains a built-in subsidy component. In India, the energy price of gas and imported-coal based thermal power are also on a rapidly rising curve, without factoring in environmental costs. So the case for solar PV is very compelling in a host of applications ranging from urban situations to telecom and captive generation.
Banks seem to be wary of funding solar units?
With respect to PV power projects, we believe progress has been made. In 2010 at the launch of the Solar Mission, there were many misgivings about financing of projects, bankability of power purchase agreements (PPAs), flow of payments and so on.
However, India has made the journey to 1.5 GW (1500 MW) of grid-connected PV capacity today.
Overseas financing has played a role and domestic banks have seen that on each of these counts, projects are a viable proposition. Leading developers are building projects of over 100 MWp sizes in India today. The viability of PV projects, from a purely financial viewpoint, we believe has been established.
Most module and (the few) cell manufacturers have had to restructure their businesses, move into implementing projects to sustain their production or are operating well below capacity. Some have even exited manufacturing entirely.
Most projections suggest that PV module sales revenue recovery will begin in late 2014 and will grow steadily from there on.
Strong market drivers such as national and State policies, rooftop policies, the renewable energy certification (REC) mechanism, enforcement of renewable purchase obligation (RPOs) and the huge off-grid market will open opportunities again for domestic manufacturers.
Once businesses see recovery in demand there could be renewed interest in expanding solar manufacturing activity. This would make financing of manufacturing units come alive again.
In the backdrop of general slowdown in the global market, how do you see Indias growth?
Solar PV demand in India will keep growing across all segments off-grid, micro-grid, rooftop and grid connected MW scale in rural, urban and commercial markets. It will be impossible to ignore market for PV products, components, systems and services. Innovative solutions for lighting, electrical appliances, pump sets, power electronics and mounting/tracking structures can open up huge localised demand.
How does one accelerate the growth of solar PV units in the country?
Key demand drivers such as enforcement of RPOs, financial restructuring of distribution companies, enablement of the entry of independent power projects under the REC mechanism, the enablement of net metering to support rooftop PV with self-consumption, incentives for the use of solar to offset use of diesel for power back-up and irrigation pump sets are just a few of many measures that will expand the market.
Against the backdrop of dumping concerns, local units seem to be facing the heat. How do you view this?
India needs a large capacity, fully integrated domestic manufacturing capability (from materials to modules and systems) to innovate on price, quality and performance and become the go to choice for buyers. Costs seem to be high for individuals wanting to set up rooftop units.
For a variety of reasons rooftop PV systems are very suitable for India. An analysis of rooftop PV costs versus grid power tariffs shows that at the higher end of the consumption scale (upwards of about 500 kWh per month) its costs are already almost at parity levels in some cities and hence most attractive.
With further reduction in prices of PV installations, rooftop units will achieve parity for more segments of urban consumers. Capital subsidies have also been announced in some States (Kerala, Tamil Nadu, AP) to expand adoption.
Reports suggest that India will reach between 2GW and 5GW of rooftop photovoltaic (RTPV) installations in the next 3 to 4 years making RTPV a major market driver.
What is your expectation in terms of solar PV energy installation growth in the country?
We see solar PV growing across all segments and applications in the country. There is unlimited headroom for PV, given the power deficient situation and inaccessibility of the grid. PV installation can surpass the 20 GW figure called out in the National Solar Mission many times over. The need is to have market and policy visibility, continuity and regulatory enablement.
There is also a need to couple this with the development of a robust, complete and high quality manufacturing ecosystem encompassing materials, wafers, cells, modules and electronics. India has a great opportunity to deliver superb price, performance, quality and reliability, given its experience in PV manufacturing.
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