Indian solar energy market

Mercom Capital Group provides an update on the Indian solar power market, including the funding status of current photovoltaic projects, accumulated capacity, and the country’s proposed pipeline.

The Ministry of New and Renewable Energy (MNRE) announced in August that 35 of the 37 photovoltaic projects amounting to 140 megawatts (MW) were able to submit evidence of funding, and that all of the seven concentrating solar power (CSP) projects amounting to 470 MW were able to secure funding under Phase 1, Batch 1 of JNNSM.

This is a very optimistic sign for the JNNSM solar program, as there were doubts about the ability to secure funding on most of the projects, due to the low bids submitted. What is not clear, however, is if these projects were mostly funded by banks and financial institutions as project funding, or if they were primarily funded through balance sheet funding.

All photovoltaic projects in Batch 1 are due to be commissioned around the second week of January 2012 and Batch 1 concentrated solar power  projects are due to be commissioned in May of 2013.

Jump to Phase 1, Batch 2

New guidelines for Batch 2 of the JNNSM were issued by MNRE. The present set of guidelines is applicable to the Second Batch of the photovoltaic projects, which will be selected during 2011-12 for about 350 MW. These guidelines will have no bearing on the projects selected in the First Batch in 2010-11. There are several changes in the guidelines for Batch 2, compared to the guidelines of Batch 1. (Download the Batch 2 policy factsheet)

Project sizes for Batch 2 have increased to 20 MW from five MW to facilitate cost reductions through economies of scale and companies (or a group of companies) can now each bid up to 50 MW worth of projects.

India chose to extend its domestic content clause requiring crystalline silicon cells along with modules to be manufactured in India. Its domestic content clause has already driven away project developers from crystalline silicon (c-Si) panels towards thin film. Adding the requirement of c-Si cells to be manufactured in India will only further drive the market towards thin film as long as thin film remains price competitive.

With high borrowing costs in India, project developers are increasingly looking towards U.S. and other foreign financial institutions for funding – the domestic content requirement will be a big obstacle, especially if these lender countries cannot sell their own products in the Indian markets. The U.S. Export-Import Bank, for example, has been very active, but will only fund projects based on equipment and panels being purchased from U.S. companies.

Bidding for Batch 2 is predicted to get very aggressive, as it did for Batch 1, especially since photovoltaic panel prices fell 45 to 50 percent since the last auction was announced. The challenge for MNRE will be again to balance the bidding range to encourage competition, but not drive it down to unviable levels.

One component still lacking is a qualification requirement. In Batch 2, anyone can bid, regardless of experience level. Until this element is corrected, there will always remain doubts as to the ability and quality of projects developed by inexperienced bidders.

Solar capacity in India

Cumulative grid connected photovoltaic capacity in India as of the end of September amounts to only 46 MW, and approximately 52 MW, if concentrated solar power  projects are included. However, projects announced under JNNSM, Gujarat State program and other state programs put India’s solar pipeline, including concentrated solar energy projects, to well over two GW.

It still remains to be seen what percentage of these projects will be successfully commissioned, but a growing pipeline like this could potentially place India in the spotlight as one of solar’s emerging markets.

Solar awareness in India

With policies like JNNSM being implemented and renewable energy gaining importance as a future energy source in India, understanding the perceptions of consumers about renewable energy is a vital factor for these policies to succeed.

Mercom Capital Group recently conducted a survey in India to gauge the awareness and perceptions of Indian consumers towards renewable energy and solar titled ‘India Renewable Energy Awareness Survey’. According to the survey results, only 56 percent of Indian consumers have heard of ‘renewable energy’ or ‘clean energy’, and only 27 percent of consumers have heard of ‘energy efficiency’.

Although awareness was low, 71 percent of Indian consumers surveyed are willing to pay higher rates for electricity from renewable energy sources, which is a big positive. Solar was the most identified form of renewable energy among consumers.

Watch out for the November edition of pv magazine which will include additional information on India’s solar energy market.