Does the German
experience aimed at promoting renewables such as solar and wind to
replace fossil fuel capacity and nuclear energy, have any relevance
in India’s case?
On March 20, the day
a major solar eclipse was predicted, electricity grid managers in
Germany weathered three extremely nervous hours — the duration of
the eclipse. At 38.5 gigawatts of capacity (1 GW is equal to 1,000MW
or mega watt), Germany has nearly half of Europe’s total of 89
gigawatts of solar capacity and accounts for more solar PV installed
than any other nation. For a nation that, in theory, has solar
capacity that is enough to meet half of its peak demand, a solar
eclipse posed a litmus test for grid operators in terms of how they
manage the sudden drop in solar output. Especially since the region’s
last notable eclipse was way back in 2003, after which Germany’s
solar power output has expanded sharply.
The March 20
eclipse, which cut off 65 to 80 per cent of incoming sunlight across
parts of Europe, tested the engineers at Germany’s four big
electricity network operating companies, who had to make sure that
the resultant fluctuation in solar power production would not
destabilise the grid. The German grid managed to tide over the
challenge by drawing on alternative power sources, including coal,
gas, biogas, nuclear and pumped storage hydroelectric energy,
alongside a commensurate cut in demand from industry including four
aluminum plants.
GERMANY’S
ENERGIEWENDE EXPERIENCE
Does the German
experience with ‘Energiewende’, its flagship programme aimed at
promoting renewables such as solar and wind to replace fossil fuel
capacity and nuclear energy, have any relevance in India’s case?
Two weeks back, the NDA government announced plans to raise the
country’s solar power generation capacity addition target five
times to 100 GW by 2022, which will entail an investment of around Rs
6 lakh crore.
The revised target,
up from 20 GW earlier, will principally comprise 40 GW (solar)
rooftop and 60 GW through large and medium scale grid connected solar
power projects. To put the target in perspective, a solar capacity of
100 GW is about 40 per cent of the country’s current installed
capacity. While going solar is, in some ways, a growing fad among
government seeking to make an emphatic green statement, there might
be some relevant concerns as well.
Going back to
Germany’s case, there are fundamental question marks that countries
with large solar generation base are faced with. Germany’s
residential electricity cost is about $0.34/kWh, one of the highest
globally. An estimated $0.07/kWh reportedly goes directly to
subsidising renewables, which is higher than the wholesale
electricity price in Europe. In India, the focus on solar power has
been largely limited to the last seven years. In 2009, the the
Jawaharlal Nehru National Solar Mission (JNNSM) was launched with a
target for grid-connected solar projects set at 20,000 MW by 2022.
In the last
two-three years, the sector has seen renewed activity, with the
installed solar capacity increasing rapidly from just 18 MW to about
3,800 MW during 2010-15. Encouragingly, the price of solar energy has
come down significantly from around Rs 17.90 per unit in 2010 to
under Rs 7 per unit, thereby reducing the need of viability grant
funding or VGF per MW of solar power. With technology advancement and
market competition, this green power sources is expected to achieve
grid parity by 2017-18. It is in this context that the Cabinet gave
its approval for the setting up of over 2,000 MW of grid-connected
solar photo voltaic power projects on a Build, Own and Operate (BOO)
basis with VGF funding under the second phase of the JNNSM.
COST BREAK-UP
The fine print of
the project shows that the government has estimated the cost of a
solar project at a ballpark estimate of Rs 6 cr/MW — including VGF
at Rs 1cr/MW for the open category and Rs 1.31 crore/MW for the
Domestic Content Requirement or DCR category (where domestic
manufacturing is mandatory). A pre-defined tariff of Rs 5.43 per kWh
has been provided for projects under the scheme for the first year,
with an escalation of 5 paisa per kWh each year till the tariff
reaches the level of Rs 6.43 per kWh. This would take 21 years and
the tariff, thereafter, would remain capped at Rs 6.43 per kWh. The
levelized tariff would be
Rs 5.79 per kWh.
Out of 2,000 MW, 250
MW will be developed with mandatory condition of solar PV cells and
modules made in India. This will be called the DCR category and
remaining 1,750 MW will be in open category.
The total investment
in setting up 100 GW of solar capacity is estimated at around Rs
6,00,000 cr, excluding the cost of transmission, which would be in
the range of Rs 1.5 cr/MW for land-based (non-rooftop) solar plants
to be connected with the main grid. It is not clear out of 100GW, how
much capacity will be mandated through the DCR category.
A breakdown of the
numbers, though, poses somes questions. For instance, the land
required for 60,000MW of solar plants at about 5 acres per MW comes
to a whopping 3 lakh acres. Add to this the cost of inter-state and
intra-state transmission at Rs 1.5 crore per MW comes to Rs 90,000
crore. Since the solar plants will be located in barren and remote
areas away from load centres such as Kutch, Barmer, Jaisalmer and
Ladakh, and voltage compensation devices such as reactors and static
VAR compensators would also be required, the cost of transmission
escalate further and the wheeling cost would be even higher because
the energy produced by a solar plant in a year is about 25 per cent
that of a thermal plant of the same capacity and 50 per cent of a
hydro plant of same capacity.
STANDBY CHARGES and
GRID SECURITY
Then there is the
issue of standby charges for thermal plants, precisely because the
actual output of a solar plant is not so smooth. Solar power varies
over the day depending on time of the day, location and weather, and
needs conventional power as back up until viable mass energy storage
devices are invented. So, the electricity distribution companies or
discoms needs to pay the standby charges of coal-based generation.
If one were to add
the transmission charges and losses, and standby charges to the
levelised solar generation cost of Rs 5.79, experts contend that the
landed cost would go up to about Rs 9.00 per unit, excluding the cost
of capital subsidy and tax benefits. Now the impact of the 100 GW of
solar power plan on the financial health of the debt-ridden discoms
could be catastrophic, and question marks remain on how the domestic
consumers pay these higher electricity prices.
There is also the
issue of grid security. In order to deal with the variability of
renewable generation, forecasts are crucial for resource adequacy
during operation and grid security. In order to absorb 100 GW of
solar power in a day, the output of conventional generation would
have to be varied in tandem to match the 100 GW, failing which other
grid security could be endangered. This, most industry players
contend, is a daunting task. All developed countries in the world
including China have Automatic Generation Controls, something that
India lacks. That makes the challenge of operating the grid even more
daunting.
MANUFACTURING
IMPETUS AND EMPLOYMENT
Germany may top in
terms of solar capacity, but the Chinese solar plants are, by far,
the cheapest in the world and the Chinese are the biggest
manufacturer of PV panels. Going by the current trend, industry
estimates peg that 80 per cent of the Rs 6 lakh crore solar business
may be bagged by
China. So, despite the ‘Make in India’ push, more jobs will be
created in China that in India from our solar push.
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