India?s Concentrating Solar Power Market

Today the question on everybody’s lips is: Will India be a bigger CSP power than China?  As the founder of CSP Today and organizer of the 1st CSP Today India conference in New Delhi, I am often asked about the future of the CSP industry in India.

Having lived in India for 2 years, it is difficult for me to be impartial when assessing the opportunities in the CSP industry. I believe very firmly in the great capacity of Indians to learn fast and reduce costs –they are specialists in making things cheaper maintaining quality standards. Much as I try, I can´t think of anything that the CSP industry is more in need of.

While last year there was very little talk of India becoming one of the biggest markets for CSP, today the question on everybody’s lips is: Will India be a bigger CSP power than China?

From an economic and development perspective, India’s economy is performing very well, averaging 8.5% growth this year. Its growth rate could overtake China’s by 2013 – if not before – according to a recent article by The Economist.

While China’s growth has been largely state-directed, India’s is driven by 45m entrepreneurs. Private firms have had to compete with the world´s best – and many have discovered that they can.

Some of India’s largest companies have already taken an interest in CSP and have been working aggressively to understand the technology, to set partnerships with the right companies and to drive down costs.

Consequently, India is emerging as a key market for CSP industry development, holding immense potential that concentrating solar thermal companies cannot afford to ignore.

Serious and dedicated local developers like Cargo Motors, Coramandal, Enam Infrastructure, Electrotherm, Entegra, Lanco Solar, SunBorne, Suryachakra, Welspun and Acme have emerged in last 2 years. These are promising, financially stable companies, that have long-term growth plans with land banks at their disposal.

Similarly, large domestic construction companies are picking up the pace in CSP. These include publically-traded EPC companies include like BGR, Essar, Gammon, GMR, GVK, Jaypee, Lanco, L&T, NTPC, which have robust balance sheets and large order books.

New Solar Mission

A few months ago, the Ministry of New and Renewable Energy announced the New Solar Mission, which aims to generate 20 GW of grid connected solar power by 2022, of which 50% will be CSP electricity.

The target for the first phase (up to March 2013), under the Mission is to set up 1,100 MW grid-connected solar power plants. Grid interactive power systems can be used to supply electricity to an industrial unit or a home. It is no different from a normal grid connected power except that there are solar panels on the roof.

NVVN is the designated the nodal agency to procure solar power from PV and thermal project developers under the Mission at a tariff set by the Central Electricity Regulatory Commission (CERC) for the first 3 years. NVVN will bundle 4 units of traditional power with each unit of solar power to bring down the final cost. The tariff rates notified by the CERC for 2010-11 are Rs 17.90 a unit for PV and Rs 15.40 for CSP.

The implementation process has started and during the first phase, 500 MW of power will be developed. 55 requests have been received for CSP, 5 of those for combined thermal and PV projects. The government will shortly announce the companies to whom these projects have been awarded.

Concentrated solar power the Indian way

There is a buzz word that you often hear in India – indigenization. Indians use this word to refer to establishing local manufacturing facilities, and in doing so, to achieve cost reductions. The mobile communications sector provides a good example of this

In mobile telecommunications technical know-how, supported by local enterprise, paved the way for industry to become the 4th largest network in the world within a short span of 10 years. The sector has been doubling in size every second year and now boasts a subscriber base of over 165 million. India’s mobie phone tariff is currently the lowest in the world, at less than 1 US cent per minute.

With very low CAPEX costs enabled via the New Solar Mission, there is no room for expensive components profiting from a tight bottleneck of supply. The first phase will pull the trigger for India’s CSP industry to seize the opportunity in manufacturing components. Indians are expecting to commoditize the whole solar field – and to export it in due course.

However, low CAPEX is not the only challenge ahead of developers hoping to succeed in the Indian market. Another major challenge is project financing. Equity and debt funds first need to be organized if developers are to cash in on the new opportunities.

Selected projects run a fair chance of ultimately finding funds, however, the rules for raising debt (roughly 6 months, with penalties for delays on financial closure) are stringent. Banks have yet to get comfortable with some of the clauses in the model PPA, and to study the yet-to-be released payment security mechanism.

As such, Indian financial institutions must first gain experience and become familiar with the project appraisal techniques. Meanwhile, debt seekers have little knowledge of the yardsticks to be applied by the financial institutions on the processing of financial sanctions.

While India’s state governments have committed to providing the required quantities of water, their commitment will be put to the test during summer months. Uncertainty and adhoc policies concerning water allocation threaten to conpromise the viability of solar thermal plants.

Alternatives such as dry cooling and hybrid wet/dry cooling systems are to be considered in the long run in order to mitigate the risk of limited or non-availability of water. But at present, cost constraints render these options temporarily unviable.

Although reservations based on past experiences are understandable, India is a key market for industry development and holds immense potential. India is a key piece in the puzzle that will change the industry going forwards; it is absolutely instrumental to CSP industry growth and development.

So add the words Namastei and Shukram to your vocabulary and off you go. I don´t remember any time in the CSP industry more exciting than the one we are currently living. So let us take advantage of this opportunity and move swiftly to turn the Indian dream into a global reality.

By Belén Gallego, founder and director of CSP Today,