Solar Energy Market: Paradigm Shift in India’s Power sector

Contributed By Gautam Das, CEO and Co-founder, Oorjan

Solar’s Time

Economy and the environment have to go hand in hand for sustainable growth. We have paid the price for economic growth at the cost of environmental damages. Fossil fuels, like petroleum and coal, are highly polluting and depleting at an alarming rate. Global warming and escalating pollution levels have endangered our future. Climate change and natural calamities are becoming new normal! This is the time to act before it escalates and impacts our future further.

Solution comes from renewable energy and solar energy is one of the most viable sources of energy. However, the solar energy ecosystem in India is new and evolving fast and still there is a long way to go. All partners like Discoms, solar power producers, financiers and consumers need to be part of the opportunity to make it grow fast. There have been significant improvements in efficiency and commercials of solar energy technology over recent years. The cost of production or procurement of solar energy is as low as Rs 2.5/ unit for ground mount solar. For rooftop, the consumer may enjoy a healthy return on investment as high as 40% depending on the existing tariff category. Adoption of solar is both commercially viable and environmentally responsible. It fetches healthy returns for the investor and/or consumers, and adoption of solar energy should be facilitated by the government and authorities.

The Discom Challenge

Discoms, in spite of having near monopolies over power procurement and supply for years, are financially weak and feel threatened by new energy sources primarily Solar. Financial health of these discoms are poor not because of solar or renewable energy but primarily for – 1) large capital investment in power generating infrastructure and maintenance with unviable economics, 2) subsidy burden to supply power to priority sector or segment at lower unit rate, 3) managing suboptimal utilization (scheduling) of generating facility vis-a-vis demand, 4) operational inefficiencies – to mention a few reasons. Discoms should not feel that solar will make their financial health poorer because solar is not the cause of their troubles in the first place. In fact, Discom should try to procure more power from solar IPP (Independent Power Producers) to reduce the average power procurement cost and avoid direct capital investment in generating facilities. Power sourcing at lower cost from IPPs would improve Discoms’ financial health and burden of higher capital investment in power producing facilities. So, collaboration between IPPs and Discom is a better way to move forward and co-exist.

Transmission is easier

With today’s advancement in technology, the procurement and transmission of renewable energy is anyway efficient. In the longer term, the distributed solar generation will increase operating efficiencies of the energy market as the procurement and supply can be better managed in smaller circles and transmission loss can be optimised. Discom at best may charge a reasonable fee (say less than Rs 1 / unit) for exported units in case of rooftop projects to move forward rather than opposing net-metering.

Achieving Solar’s Potential

India has been highly dependent on import of crude oil and has a high current deficit. Adoption of solar energy will improve the trade deficit, create new jobs and also boost the made in India mission. However, the new businesses (solar) are facing a few challenges like lack of uniform and predictable policies. Net-metering policies and timeline, and open access charges are unpredictable if not unfair today! We would appeal to the governments and/or nodal energies to make it pro-consumers and new businesses.

Solar energy has the potential to fuel the economy to a new height while protecting the environment, and we must adopt it. Power sector is witnessing a shift where dominance of discoms will go away, and collaboration amongst all partners like power producers, discom, financiers, consumers and co-existence will be the mantra to move forward. It’s just a matter of time and the earlier the better.