According to Bridge to Indias new India Solar Handbook, by the end of 2011, almost 250 megawatts (MW) of photovoltaic systems will be installed in the country, up from just 22 MW at the start of the year. By 2014, it expects to see around 14.5 GW of installed solar power. Meanwhile, it is anticipated that grid parity will be achieved in 2018. And, by 2022, 33.4 GWs of solar will be in place in India.
The "preferential" feed-in tariffs (FITS) offered under the NSM and Gujarats Solar policy have been cited as the keys to this impressive growth, which has thus far been focused on the grid-connected market. This, says the research company, will continue for the next three years, due to a "lack of incentives outside the policies and because solar power is not yet commercially viable on a large scale".
The NSM was launched in 2009. The aim is to install 20 GW of grid-connected and two GW of off-grid photovoltaics and concentrated solar power by 2022 across three phases. Under the first phase, which saw project sizes capped at five MW, around 333 project developers submitted bids in autumn 2010, worth 1.81 GW. This "unexpected oversubscription" led to the introduction of a bidding process.
While this has served to reduce project prices – tariffs have fallen by around 30 percent, to an average of RMB 12 per kilowatt hour (US$0.32/kWh) – there has been criticism that too many inexperienced solar project developers are submitting bids.
At the same time, a bundling concept was introduced, whereby the government, through state-owned power trading company NVVN, bought "expensive solar power from developers and then bundle it with unallocated cheap thermal power from the federally-owned power generator NTPC before selling it off at an average cost of around M4 per kWh ($0.10 per kWh) to the state utilities."
Bridge to India expects that by 2013, 480 MW will be installed under the NSM. Under the second phase, project sizes have been increased to 20 MW. The second bidding process has just been completed; record prices were recorded.
Also leading the way is Gujarat, which in 2009, became the first state to launch its own solar policy. The initial goal was to install 500 MW of solar by 2014. However, on the back of significant interest, projects worth 935 MW have been allocated. Bridge to India forecasts that by 2014, 700 MW will be installed under the program. Project sizes must be a minimum of five MW.
"The Gujarat Solar Policy is the only policy, which has awarded projects with a fixed FIT, on a first-come-first- serve basis. This has resulted in the allocation of a number of projects to in-experienced or unknown developers," explained the company. Land acquisition has also been identified as a problem.
Following this, the Rajasthan Solar Policy was launched this year. It has the ambitious aim of installing 12 GW of solar by 2022. The first phase will see 300 MW awarded to installers under a reverse competitive bidding process, expected to take place before the end of the year. Projects are then scheduled to be installed by 2013. A fixed limit of 61 MW has been placed on individual capacity allocation, to help foster a competitive developer landscape. Meanwhile, projects must be one MW or over, and under 50 MW in size.
Bridge to India believes that due to its high irradiation levels, Rajasthan is likely to become the "hub of solar power generation in India". Indeed, it points to the fact that under Batch 1, Phase 1 of the NSM, 70 percent of the 145 MW worth of photovoltaics projects awarded, will be built in the state. It expects that by 2013, 250 MW will have been installed under the program.
The state of Karnataka also introduced its solar policy this year. By 2016, it aims to have installed 350 MW of solar via a reverse competitive bidding process. Already 80 MW worth of bids have been called for. Like Gujarat, Karnataka has imposed a limit to the size of individual projects, meaning they can only be between three and 10 MW in size. Bridge to India believes around 100 MW will be installed under the program by 2013.
Other states, which should have their own solar policy in place soon, include Tamil Nadu, Andhra Pradesh, Orissa, Delhi, Jammu and Kashmir, Tripura, and Mizoram.
It has been identified that within the off-grid market, there is huge potential to install photovoltaics. "Off-grid captive commercial solar power is a 15 GW opportunity," says Bridge to India. It adds that its development will be dependent on the solar Renewable Energy Credit (REC) market.
However, the company says that the REC market is still to pick up, and faces challenges, including a lack of long-term pricing predictability and a current small market.
As with the rest of the global solar market, costs have fallen over 2011. The company estimates that the capital cost of solar power in India has decreased by between 16 and 20 percent in the last two years. As the industry develops, it believes that the costs will continue to fall for the next three years.
"At the same time," says Bridge to India, "the cost for fossil fuels such as coal is expected to increase and subsidies in the power sector in India are expected to fall thus driving up grid power prices. Given Indias high irradiation levels, solar power will soon become a feasible choice for captive generation in the future."
According to the research company, a unit of power from an off-grid solar system costs around US$0.28 to 0.30/kWh, excluding storage. While this is higher than grid electricity, it is said to be competitive with electricity from diesel gen-sets, which are between $0.25 to 0.38/kWh. "Therefore," it says, "in areas where grid power is erratic and diesel power is used extensively, solar power already has a strong business case."
It adds that solar captive power plants are "already a viable option in many locations to complement diesel or grid power". "Market participants estimate the payback period of solar captive power plants to be two to seven years, depending on diesel prices, location and system design. The main challenge is to find a financially viable business model with a long-term strategy for scalability. There are two main approaches to this: an EPC or an ESCO model," continues the company.
Meanwhile, the payback period for photovoltaic systems as power supply for telecom towers is said to be between two and four years. By 2014, it is projected that this will reach one year.
Watch out for an overview on the Indian solar manufacturing landscape, tomorrow.
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