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India, where the renewable energy business potentialities grow aplenty

Jun 5, 2009 - Ramamathan Menon - Energy Pulse

Many reasons make India a great investment destination for new and renewable energy firms from all over the world, especially the size of its market, its speeding growth, its future potential and its political and economic stability.

India will be the second world economy, after China, to receive more Foreign Direct Investment (FDI) in the coming years, according to the World Investment Prospects Survey for 2007-2009, released by the United Nations Conference on Trade and Development (UNCTAD) on Nov. 1, 2007.

According to Development Counsellors International (DCI), a U.S. marketing company, India is the second-best country after China for business investment. DCI cites India's labor, including its supply, skills level and cost, as the main reason for this positive perception.

India's National Solar Mission

The Government of India has come out with a "National Solar Mission" along the lines of its Atomic Commission as part of the National Action Plan on Climate Change, to significantly increase the share of solar energy in the total energy mix. It also recognizes the need to expand the scope of other renewable and non-fossil options such as nuclear energy, wind energy and biomass.

The solar mission has a limited target of adding 1,000 MW of concentrated solar power (CSP) in the next 10 years. Yet many consider even the 1,000 MW target to be too ambitious. That's simply because in the past 60 years practically nothing has been done to build capacity -- either in collaborative research or in creating the manpower.

Another aspect of the solar mission would be to launch a major R&D program, which could also draw upon international cooperation, to enable the creation of more affordable and convenient solar power systems and to promote innovations that enable the storage of solar power for sustained, long-term use.

The mission is expected to come up with suggestions to ensure optimum utilization of solar energy, which has vast potential in the country, to bridge the energy shortage through proper applications.

India's Prime Minister, Dr. Manmohan Singh, has also shown keen interest in developing India's capacity to tap the power of the sun in order to increase sustainable sources of energy.

"The sun occupies center stage, as it should, being literally the original source of all energy. We will pool all our scientific, technical and managerial talents with financial sources to develop solar energy as a source of abundant energy to power our economy and to transform the lives of our people," he said.

Solar energy is gaining importance from every corner and scientists across the country foresee in it a solution to the energy crisis. Many of them have recommended that the immediate solution to India's energy problem lies in tapping of solar energy. Scientists believe that the government should concentrate on tapping the conventional sources of energy like wind and solar to meet the country's immediate energy requirements.

India receives clear sunshine for a major part of the year in most areas. However, only about 1, 748 MW of its power is produced from solar energy. This could be enhanced substantially. Solar energy, with an appropriate technology, would be one of the most replenishing, pollution-free and inexhaustible sources of energy.

Apart from the fact that India has the highest potential in the world to harness sun power, the country also has the potential to be the least-cost producer and assembler of solar cells. The Indian industry is now focusing more on R&D in areas such as raising the percentage of solar energy falling on the panels that is turned into electricity and bringing down the cost of production of its raw materials to make it affordable.

Most urban and industrial centers in India are facing electricity shortages of over 15 percent. Taking a cue from London, Tokyo, New York and Adelaide, the government of India has taken the initiative to develop 60 cities as "solar cities".

Through the use of solar energy, a minimum 10-percent reduction in total demand of conventional energy could be achieved after five years in each of these cities by efficiency and renewable energy measures. If these plans materialize, India will become a role model for solar cities worldwide.

It is believed that the proposed national solar mission would play a significant role to meet the energy needs in India in the years to come. Some progress has already been made in this area, and the new initiative would strengthen it further.

India, a manufacturers' hub

In March 2007 the Indian government announced a semiconductor policy under its Special Incentive Package Scheme (SIPS). According to this policy, the government or its agencies will provide 20 percent of the capital expenditure during the first 10 years for semiconductor industries, including manufacturing activities related to solar PV technology located in Special Economic Zones (SEZ), and 25 percent for industries not located in an SEZ. However, non-SEZ units would be exempt from countervailing duty (CVD) -- an additional customs duty equal to the excise duty charged on similar domestic products.

The policy has attracted a tremendous response, so far receiving nine proposals pertaining to solar PV-related manufacturing worth US$18 billion.

Inspired by the semiconductor policy, the Andhra Pradesh state government has set up FabCity in the capital, Hyderabad, at an estimated cost of US$3.18 billion. Spread over 1,200 acres (486 hectares), FabCity will house semiconductor manufacturing companies working to meet the needs of the electronic hardware sector and fabrication units for solar PV.

A company called FabCity SPV (India) Private Limited has been set up to implement the project. The Andhra Pradesh Industrial Infrastructure Corporation (APIIC), the government's industrial development agency, will have an 89-percent stake in this company. SemIndia Inc. will participate in the development of FabCity as an anchor industry with an 11-percent stake. To date, FabCity has seen nearly a dozen investments from the solar PV industry worth more than $7 billion and, according to APIIC, another 40 applicants have submitted proposals.

FabCity is the largest investment ever made in India in the technology sector. It marks the first step towards India becoming a $33.6-billion semiconductor market employing some 3.6 million people by the year 2015, as projected by consultants Frost & Sullivan.

Another southern Indian city, Bangalore -- the "Silicon Valley of India" -- will also witness intense activity in solar PV manufacturing, following a recent announcement on semiconductor policy by the government of the state, Karnataka. The state is examining the various semiconductor policies announced so far and wants to draft a policy which overcomes the ambiguities in some other state policies.

Along with government-backed developments, a number of individual companies are also making efforts to develop PV capacities in India. Reliance Industries leads the field with the highest volume of investment, although a company spokesman explained its plans are still being finalized. Reliance has, however, submitted an application for a 5 MW grid-connected solar PV project in West Bengal.

India's Moser Baer Photovoltaic Ltd (MBPVL), which manufactures 80 MW of crystalline cells, 50 MW of thin-film modules and 10 MW of concentrator modules, hopes to produce more than 600 MW of thin-film single modules and 500 MW of crystalline and concentrator modules by 2010. MBPVL plans to invest US$4 million in a PV and nanotechnology factory in Tamil Nadu.

The US-based Signet Solar has signed a memorandum of understanding with the government of Tamil Nadu to manufacture 300 MW of thin-film PV modules in a project worth an estimated $500 million. The plant will be located in the Sriperumbudur SEZ. It will initially export most of its production, but will serve the Indian market as domestic demand picks up. The first shipments from the plant are expected in 2010. Signet Solar plans to build three plants (1 GW) in India over the next 10 years at multiple locations.

Solar Semiconductor has an order book of $1.5 billion to $2 billion to be delivered in the next two to three years. It has orders to supply PV modules to leading players in the global solar market including Q-Cells AG, IBC Solar and ersol Solar Energy of Germany and Motech Industries of Taiwan. Solar Semiconductor's supply contract with Q-Cells is worth $170 million, for example. The company already has two operating facilities with an installed capacity of 60-70 MW on the outskirts of Hyderabad.

Mola Solaire Produktions GmbH, a manufacturer of multi-crystalline and mono-crystalline solar wafers, has signed a five-year contract to supply 125 MW of multi-crystalline solar wafers to XL Telecom & Energy Ltd between 2008 and 2013.

Sharp, the global leader in solar PV technology, recently made a foray into solar energy in India with its Sharp Business Systems India Ltd. subsidiary. According to a company spokesman, it will focus its activities on supplying large-scale grid-connected systems and targets 8 MW installed by 2010.

Centrotherm Photovoltaics AG of Germany plans to set up a 5,000-ton capacity (expandable to 10,000 tons) polysilicon processing factory at Haldia in the state of West Bengal in eastern India at an investment of US$8 billion. This is a joint venture with SREI Infrastructure Finance Ltd, Environ Energy Deck Services and US-based Perseus. The factory is likely to be the first such plant in India and the state government has already allotted a quarter of the land needed for the 790-acre (320 hectare) project. The factory will produce both electronic and solar grade silicon and will be equipped with a 100 MW captive power plant. SREI and Environ Energy together will have a 50-percent stake in the project, while Centrotherm is likely to pick up a 15-percent stake in the venture. In addition, the IBM Thomas J Watson Research Centre (the headquarters for IBM Research in the country) has also expressed a desire to participate in solar energy and silicon research in West Bengal.

It is not just foreign interests that are exploring the possibility of expanding solar PV capacities in India. Tata BP Solar, a joint venture between the giant Tata Group of India and BP Solar of the UK (and one of the oldest semiconductor manufacturers in India) is in the advanced stages of a $100-million investment in a 128 MW solar cell manufacturing plant close to its existing facility near Bangalore, which will eventually be scaled up to 180 MW. Tata BP Solar recently announced that it has signed an agreement with Calyon Bank (Credit Agricole CIB) and BNP Paribas to raise $78 million to fund further development. Tata BP Solar currently has a module manufacturing capacity of 85 MW.

Other national initiatives

To keep pace with the global trend of exercising feed-in-tariff solar power, the Ministry of New and Renewable Energy has produced a set of initiatives aimed at bolstering solar generation. Solar PV projects up to a maximum capacity of 50 MW are to be supported by financial incentives of a maximum of US$0.24/kWh for PV projects and US$0.20/kWh for solar thermal power projects for a period of 10 years. With investors rushing to set up solar power projects and adding up to 2,500 MW of capacity, the Ministry has asked the Planning Commission and the Indian Cabinet to expand the 11th Plan solar power program beyond 50 MW.

The solar energy industry in India has undoubtedly gained momentum and should be able to keep pace with the government's aim of achieving 10 percent of the country's total electricity requirements by 2012. India already possesses a balanced eco-system for the PV industry, a high-tech manufacturing base and skilled labor sufficient to make it a booming industry. Annual PV production has already reached over 300 MW, with about 85 percent being exported.

India receives solar energy equivalent to over five trillion MWh a year, far more than its total energy consumption, and should therefore benefit from economies of scale that are unavailable to smaller countries. However, it is necessary to address the availability and management of a strong infrastructure and the need to consider a long-term solar energy policy (20 to 25 years).

Rajesh Bhat, director and country manager for Sun Technics, says: "The government of India should consider feed-in-tariff schemes in excess of 1,000 MW per year against the present 50 MW, since the need of the hour is to support PV programs which are cost-prohibitive in comparison to other renewable technologies. This would further encourage local companies to consider investing in solar PV projects and can help in their economics. India currently has to depend largely on imports of raw materials and the rising currency rates make manufacturing a burden." With government support for PV growing, ample solar resources and both the labor and the market potential to exploit these resources, India is set to become a major force in the future PV world.

India's estimated energy requirement is about 130,000 MW of electricity per annum. Its current peak demand exceeds the available supply by a shocking 14 percent. In addition, at least 40 percent of the country's electricity supply is lost in transmission due to theft. Use of solar energy could help to check this loss and indirectly also contribute to the energy basket in a significant way.

The prospects of 100,000 jobs

The budding solar industry in India, somewhat pegged back by the poor economic climate, wants the National Solar Mission to be operative. The National Action Plan for Climate Change, experts say, is excellent as a program but the government needs to fix "quantitative goals". That would help de-carbonize the power sector to an extent, generate domestic demand, and propel the industry, while creating jobs.

The Ministry of New and Renewable Energy (MNRE) says that about 100,000 jobs can be created by the solar PV industry in India by 2020 -- the industry says the number could be even higher. However, that can only happen when India's installed power generation capacity for PV grows beyond the current 100 megawatt peak (MWp); grid-connected solar PV generation is now at 2.12 MWp.

The social benefit aside, there is a strong case for promoting the solar industry. Coal reserves may not last beyond 40 years and India's energy deficit situation implies the country may not sustain its current pace of growth, growing forward.

India's grid-connected power generation capacity will need to scale from 147GW currently to 460GW by 2030 while the country's primary energy demand is expected to grow from 400 million tons of oil equivalent to well over 1,200 million by 2030. India's power supply-demand gap has averaged between 8 and 10 per cent over the last decade where electricity access exists.

"About 51 percent of our households don't have electricity. They are not asking for grid electricity. They are simply asking for light; may be for watching television. Solar is the best way to do that," CEO of Tata BP Solar K. Subramanya says. His firm has electrified more than 30,000 homes.

"The major issue is cost per watt. You can bring that down through scale. The other imperative is the process technology manufacturers' use. The third is materials and panel sizes. You may bring the cost down by doing some clever things on the systems side," says Dr. Madhusudan Atre, president of chip and solar equipment maker Applied Materials India.

Indian technology breakthrough

While solar energy is renewable and eco-friendly, it is also an expensive affair. Now, that's all going to change. In a first-of-its-kind technology in the solar energy industry in India, the University of Pune's department of physics has developed a nano-crystalline silicon solar cell which promises to be at least five times less expensive than the current cost. The department is carrying out the project in collaboration with an Italian university and is funded by the Department of Science and Technology (DST).

Currently, a thin film is used in the solar silicon cell, and the project aims at replacing the film with nano-crystalline material which will reduce the cost to less than $1 from the present $5 to $6. As part of the joint collaboration, the fabrication work will be done in the department's laboratory while the testing will be carried out at the University of Camerino (UoC), Italy.

Titled "Synthesis and characterization of hydrogenated nano-crystalline silicon for solar cell fabrication", the project has been selected in the framework of the Indo-Italian program of scientific and technological cooperation for 2008-2010 by the DST. This is also a first-of-its-kind effort in India, while the U.S. is in the process of developing similar system for generation of solar energy.

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