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It's important though to understand what's really happening in India to help decide where it figures in comparative global PV growth forecasts. Is there merit in asking PV sales teams excessively focused on The Mediterranean region, Germany and select states in the USA to divert resources to India? This article attempts to drill down to what is possible in that country as well as where and on what the potential investor should focus. Lastly, should anyone up there be listening, we'll attempt to suggest what the government could do to make the buzz a reality.
India has that perfect mix of demographics, sunshine and a colossal 15% nationwide power shortage, making solar energy a sensible alternative. But investing in India is an art form. What makes sense in China would most likely be futile in India. Centroterm Photovoltaice AG for example announced plans to set up a 5000-ton polysilicon plant in Halida, West Bengal. The project is a go in reports as late as August 2009. I'm trying to figure out why they'd want to do that, this late in the day. The Chinese are already making the raw material in quantities that boggle the mind and at rock-bottom prices. There's a growing surplus in the market, which is why Trina Solar cancelled plans for a billion dollar refinery in China. Centroterm is already rattled in a slump augmented by Chinese oversupply. For them to go ahead with setting up a competitive facility in an Indian state with the world's worst labor relations is doing themselves and India a disservice by pouring money in a project with feeble chances to succeed.
The demographics, sunshine and reigning power shortages, also doesn't mean the investor should immediately put his dollar into PV cell manufacture in India. Once again, it's too late to simply import standard PV cell production equipment, install it in India and compete against Chinese volumes and pricing. The market doesn't work that way, though I wish it did. Ask Q-Cell who are pulling back on their plans to produce PV cells in Malaysia in spite of the fact that the Malaysians gave them free land, bank guarantees, loans on capital equipment and cash subsidies along with the usual tax holidays, benefits, etc. Now if you can do 1000MWs of production like the First Solar plant in Malaysia, using a technology that is different and which you alone have really mastered, go ahead and compete with the Chinese.
So where should all those solar funds put their money? Into solar panel production and Indian domestic power generation, that's where. Lets understand why.
First, solar panel production. Assemblies of PV cells make up solar panels, solar modules, or photovoltaic arrays. There's a large skilled labor component in panel manufacture giving India a potential edge. Importing low cost PV cells in large volumes to make PV panels is a good business. Mind the quality through, because China is already in trouble in Europe with theirs, though their quality issues are restricted to the panel manufacture and not the quality of the Chinese PV cells going into the panel.
Second, domestic power generation. This is the big enchilada. The investor's holy grail. This is what will make money in India if solar is your thing. Not just because of the sunshine. Malaysia has sunshine. Lots of it. But no power shortage. So the argument for domestic solar energy production in Malaysia is the conventional rant against fossil fuel use. The argument is solid and the real reason solar energy must happen. The argument finds huge favor in the West, in Japan, South Korea, Singapore, Hong Kong. But to Malaysians, it's like espousing the benefit of carrots and broccoli. So Malaysia is a huge exporter of PV cells and panels but domestic use is yet to show up in the global pie chart.
No reason why India would be any different except for its excruciating power shortages. A mind numbing and growing power shortage is the reason why large-scale deployment of solar powered electricity generation could eventually happen in the sunny subcontinent. Government policy is the reason why it may not.
In January 2008, the Union Minister of New & Renewable Energy announced there would be feed-in tariffs (FITs) for solar PV projects up to a maximum capacity of 50MW. Such projects were to be supported by financial incentives of a maximum of Rs 12/kWh (28 US cents) for PV projects and Rs 10/kWh (24 US cents) for solar thermal power projects over a period of 10 years.
There was a rush of investors a la Spain 2008, filing paper to set up solar power projects and adding up to 2500 MW of capacity. That's where the Spain analogy ends. A year later to the best of my knowledge, nothing substantial has been deployed or any FIT earned.
Going into 2009, we hear from the National Solar Mission announcements that FITs would be set for various applications by the respective state regulators. So what happens to the FIT the Centre is to disburse as mentioned above? Do we get both? Either/or? What?
Various states have indeed announced their FITs. A year into the Union Minister's declared FITs, the Gujarat state government announced their FITs on 6 January 2009, capped at 500MWs. A total of 3275MWs of paper was filed for this FIT benefit, to be made available until March 31 2014.
Spain's FITs policy of 2007 -- 2008 drove global PV sales through the roof. PV sales to Spain went from 600MWs in 2007 to 2511MWs in 2008. In contrast, 2500MWs of paper filed for FITs with the Indian Union government and 3275MWs worth of applications filed with Gujarat state have collectively not even registered a blip in global sales, that too in a slump year. Investors are making all the right noises but not showing the money and the government needs to ask why. The slump itself could be a good reason but I for one, would be wary putting money into a fenced PV facility in the face of conflicting FIT related announcements and streaming red tape.
This is unfortunate because if there is a large scale potential anywhere in the world, its in India for the reasons cited in this article. Having slammed them enough, let me say that the Union and State plans to disburse FITs come conjoined with a requirement for state electric utilities to either self-generate or purchase a percentage of their billable production from green sources. This potentially, is huge. Once they figure out how to actually disburse intelligently capped FITs.
So what is the investor to do? My advice is to wait until mid-2010. By that time we'll know if the National Solar Mission announcement was real or meant to play to the gallery in the Copenhagen meeting on climate change slated for the end of 2009. The Indian government is pretty open about its intent to ask Western countries to pay for India's foray into renewable energy if they want India to carbon down.
If the National Solar Mission announcement is aimed at Copenhagen and not the market then that poises a problem for the investor. So, best to wait. Should however, the investor be hell bent to do something now, cozy up with one of the better managed states like Gujarat, Andhra Pradesh or Tamil Nadu, do your paper work and have them patch you into their state electricity utility. After that, smooze.
