Towards the end of last year, a report emerged that India houses the world’s largest solar power plant in a single location. The 10 sq km power plant located in Kamuthi, Tamil Nadu has a capacity of 648 MW and the project is spearheaded by the Adani Group. This is almost 100 MW higher than the Topaz Solar Farm in California, which held the top spot before Kamuthi.
According to Piyush Goyal, the Power and Renewable Energy Minister, India’s renewable energy target is 175 GW by 2022 and the solar power target stands at 100 GW by 2022. It does not get more ambitious than that because the total solar power installed capacity in India till April 2017 was around 13 GW. That still leaves over 80 GW worth of solar energy installations over the coming five years. Out of this, the government has plans to have around 40 GW as installed rooftop solar panels.
While the Kamuthi plant certainly helps India in its race to achieve its installed solar panel goals, there are still a lot of challenges ahead. Despite ample sunlight available throughout the year, India is just about getting started with fully realising its potential. In fact, a look at this report makes it clear that despite India being in the top 10 list when it comes to installed solar photovoltaics capacity, it still lags behind Germany (a nation which gets just a couple of months of sunny weather), when it comes to per capita solar photovoltaics (PV) capacity. At 511 Watts per person, Germany is much higher than its closest competitor, Japan. Germany generated enough renewable energy in 2016, to cover 32 percent of its electricity consumption needs.
Yes, it is unfair to compare Germany and India when it comes to the use of solar photovoltaics and solar energy in general. The population of both countries are quite different, to actually evaluate things on a per capita basis. Add in the fact that Germany has been proactively using solar energy since the 2000s, one can definitely cut India some slack.
But unlike India, the majority of the installed solar photovoltaics capacity in Germany is not under the control of large energy conglomerates. A look at this chart from 2016 shows that in India, majority of the solar installations are courtesy the major energy companies. In Germany, it is the other way round. And that is one area where India can definitely learn a lot.
Energiewende powered by the German citizens
Energiewende or the energy transformation, is a term you will often come across in the German energy debate. It is basically the transformation of Germany from using nuclear and fossil based fuels to using more renewable sources of energy such as wind power, solar power, biogas and so on.
Renewable energy generation by individuals and co-operatives in Germany comprised over 50 percent (in 2015) of the total renewable energy production. So instead of having the renewable energy pie distributed among three or four energy corporations, it is quite a fragmented situation in Germany. A lot of citizens have also created energy co-operatives, and then there are crowd funded energy co-operatives as well, which help realise larger projects.
The Renewable Energy Act of Germany (EEG) proposed a feed-in tariff which was a set fee that producers of renewable power would receive per kilowatt-hour (KWh). The time period for this was 20 years, thereby letting renewable energy producers recover their investment costs and in some cases make a good profit. According to the Clean Energy Wire, this is one of the main reasons why small investors such as households, farmers and energy co-operatives got on to the renewable energy bandwagon. They looked at it more from an investment perspective, than from the clean energy lens. It caused the German electric renewable energy consumption to rise from 7 percent in 1990 to over 32 percent in 2016.
Of course, over the years, because of drop in solar PV prices, the feed-in tariff has also seen a drop from 51 cents to around 13 cents per KWh, and maybe even lower in some parts. And from this year onwards, larger than rooftop installations (or more than 100 KW capacity) will have to switch from feed-in tariff to ‘contract for difference’ system going forward. Which means that their tariff will be decided by a bidding process.
“The 2017 revision of the Renewable Energy Sources Act rings in the next phase of the energy transition: from 2017 onwards, funding rates for renewable electricity will no longer be fixed by government, but will be determined via a market-based auction scheme – a fundamental change in funding renewable energy,” according to the Federal Ministry of Economic Affairs and Energy.
According to Marco Guetle, Project Manager at Bündnis Bürgerenergie, an energy co-operative, “Auctions will decrease citizen participation in the Energiewende, especially direct initiatives by citizens, if the laws are not modified.”
Situation in India
“Renewable energy movement in Germany has a lot of historical context,” says Siddharth Singh, energy policy and climate change expert, currently working with the Wupperthal Institute which is an energy think tank in Germany. He is referring to the anti-nuclear movements that started in Germany in the late 1970s.
“This citizen-participation model is difficult to replicate in India so soon. Going by the current scenario, it looks like most of India’s renewable energy demands will be met by large conglomerates,” says Singh.
He also goes on to add that unlike in India, German citizens are wary of big conglomerates taking over, even when it comes to supplying energy. That is one of the main reasons why there are more citizens and citizen groups with larger installed solar power capacity.
Venkatraman Nagarajan, a solar and thermal power project consultant, says India does not have an energy co-operative system on the same scale and philosophy as the German energy co-operatives.
While solar panel prices are falling in India, it is still expensive for many citizens to set up a rooftop solar system.
“In India for instance, to get a rooftop lined with solar you have to spend a few extra lakh rupees. Moreover, solar panels are one part of the ecosystem, you also need to invest in batteries, which will require another huge investment,” say Singh. The cost for 1 KW of solar power would need investments between Rs 85,000 to Rs 1 lakh.
Add in the fact that energy from traditional source such as coal is cheap, it is difficult to convince someone to make the transition to solar so easily. Also a lack of a clear off-grid solar policy means that a lot of investors, who may want to set up an off-grid solution to take care of remote areas, are not feeling secure.
“Right now it is very difficult to have a thriving energy co-operatives ecosystem in India as there is no clear off-grid policy in India. So say for instance, if a startup adopts a small village and sets up a small grid to distribute and take care of the energy need of the villagers. As of today, there is no guarantee that sometime in the future, the government may not decide to set up a grid there. Investors are reluctant to invest in such projects as there is no protection on the policy front,” weighs in Singh.
His views are echoed by Nagarajan, who also adds that there are problems with the energy distribution companies or discoms. They have to deal with the subsidised agricultural power. The state governments are not always very pro-active when it comes to compensating the discoms for the subsidy according to Nagarajan.
“To put it simply, the discoms are not fond of renewable power in the current format of implementation wherein the benefits to discoms are not significant. Only way for energy co-operatives to succeed under this scenario is to devise a new kind of business model which can benefit both discoms and the cooperative members,” says Nagarajan.
Craig Morris, co-author of Energy Democracy: Germany's Energiewende to Renewables and currently a fellow at the IASS institute in Potsdam says that there need to be regulations in place which will make it easier for a lot of players to get involved. “If you pass something like a feed-in tariff, which was implemented in Germany, then you end up with a new law that allows a lot more players to participate in the market, including a lot of energy companies. So you have a lot of diversification. For instance, banks could ease off financial difficulties by offering interest-free loans for households investing in solar energy,” says Morris.
The prospect of having an off-grid solution or energy co-operatives is quite advantageous as well. The German example is something which has a lot of lessons on how an effective environment can be created to ensure there are energy co-operatives.
Nagarajan gives a good break up of how this could work in India. “A 100 MW solar power plant costing about Rs 500 Cr can only be set up by few corporates. However, 100 numbers of 1 MW plant with each costing about Rs 5 Cr can be easily set up if 100 groups consisting of about 50-100 people in each group, were to join together with an investment (without seeking any bank assistance) in the range of Rs 5 lakhs to Rs 10 lakhs each, which is within reach of large percentage of population.”
A promising future
With the US out of the Paris 2015 climate accord, reports claim that solar power tariffs will further decline in India. The reason being, the Chinese manufacturers wanting to drive sales in India as they may not have a sufficient US market anymore. Another good sign is the cancellation of a lot of coal-fired power plants recently. Analysts claim that the solar power tariff could go under Rs 2 per kWh in the near future. The lowest value reached so far is Rs 2.44 / kWh.
That could be a double-edged sword as any discussion on the matter online will reveal.
“It is not easy to answer that question now. We will have to wait for 10 years to see which solar power companies are strong enough to still stand on their own, rather than merging or being acquired by the bigger players. One of the reasons why solar power prices are also low is due to the cheap financing the solar power companies are getting,” according to Singh.
As for the ambitious targets, Singh has an interesting theory. “I do feel it is important to have unrealistic goals at times, so that even if you don’t necessarily reach those, you will at least be closer to reaching them, which would still be a significant amount.”
There is a lot of promise in this field as far as India is concerned. It’s about time that suitable environments are created to ensure that energy co-operatives thrive and individuals start taking interest in this energy opportunity that is knocking on our doors. Feed in tariff has the potential to incentivise the generation of solar energy across the country. Energy generators could feed all the solar power generated into the grid and get a fixed feed-in fee or save some money on their electricity bills by using some of that solar energy. It is not a pan-India option yet, but Tamil Nadu Electricity Regulatory Commission (TNERC) is planning to introduce it in Tamil Nadu.
According to Morris, there are two ways to look at it. “Solar power is not as polluting to the environment as coal-powered electricity. Secondly, even with solar panels imported from China, things such as installation, maintenance, cabling and so on, are things that will lead to a creation of sustained job sector,” he says. These perspectives address two major issues: the first one can bring down air pollution and second one can lead to job creation, the bedrock of the Make in India initiative.
In villages where there is enough sunlight and the electricity grid isn’t that well developed, it is a no-brainer. Financing problems could be taken care of if people pool in resources, or if banks get in on the act and provide easy loans, if one is not able to bear the costs individually. This is a good example of how a village co-operative in Rajasthan pooled in the resources to make a solar power plant to take care of their needs. We need more such examples.
Germany has demonstrated how it can be a win-win situation for citizens generating energy. With the Indian government looking at a 40 GW rooftop solar installation, it is high time regular citizens also got in on the act.
“Citizen participation is crucial for the energy transition. Don’t stymie it, encourage it. Predictability is very important for citizen energy companies. Furthermore, it is important that marketing renewable electricity is simple and transparently designed,” says Buetle.
Will India emulate the German success story? Only time will tell.