India is on track to produce 700 megawatts of solar power at a cost of USD 2.2 billion by December 2011
India is on track to produce 700 megawatts of solar power at a cost of USD 2.2 billion by December, ahead of an initial target for an ambitious plan that seeks to boost green power generation from near zero to 20 gigawatts (GW) by 2022.
Under India's Solar Mission, investors bid to build solar power plants and the winning bids are determined by the electricity tariff that they accept as viable. Such has been the interest that the government has been flooded with investment pledges for the first batch of projects rolling out in December.
India's 20 GW solar plan is likely to attract overall investment of about USD 70 billion, the government has estimates. Issued in 2009, the plan envisages India producing 1,300 megawatts (MW) by 2013, another up to 10 GW by 2017 and the rest by 2022.
"The entire solar industry is no longer worried about the upheavals that are taking place in the European markets because they find a very new and very promising market is developing in India," said Debashish Majumdar, chairman and managing director of Indian Renewable Energy Development Agency.
IREDA, a state-run agency, is the leader in the country's solar energy financing.
"So far, every year the general mood was that nobody knew what would happen to the German policy or what would happen to Spanish policy," said Majumdar, who attended a global summit on clean technologies in Munich last week.
Germany, the world's top solar power producer with about 17 GW installed by end-2010, is considering cutting incentives for photovoltaic energy by an additional six percentage points in another step on March 1, 2012.
Germany, Spain, Italy, Japan and the United States are the leading producers of solar power in the world.
While India's solar sector remains a risky venture because of a shortage of data and trained manpower, such deficiencies also open up a huge market for expertise and technology such as Colorado-based Juwi Solar, Schneider, Schott Solar.
"The (Solar Mission's) second phase would create a very large market for service providers, especially EPC contractors and people who can analyse data to ascertain how much resources like sunlight are available and how much (solar energy) is going to be produced," Majumdar said.
"These agencies would get lots of business," he told the Reuters Global Energy and Climate Summit in New Delhi, adding it was still not possible to determine the size of such a market.
EPC contractors handle the engineering, procurement and construction of solar power plants.
If everything goes to plan, and the rollout of the first projects in December should be an indicator, solar would contribute the equivalent to one-eighth of India's current installed power base by 2022.
This will help the world's number three carbon polluter to limit its reliance on coal and ease a power deficit that has crimped the world's second-fastest growing major economy.
The Solar Mission has certain local content mandates, in other words some imports of equipment and technology will be allowed until 2013 after which capacity has to be built locally.
The special incentive package offers a capital subsidy up to 25% on investments for setting up solar cell manufacturing plants. A plant has to be worth at least USD 225 million to qualify.
With about 250-300 clear sunny days a year, India's solar power reception is about 5,000 trillion kilowatt-hours per year, meaning just 1 percent of India's land area can meet the country's entire electricity requirements till 2030.
Coal, available in abundance in India, provides power at about Rs 2 (4 cents) a unit, compared to a kilowatt hour of solar power at Rs 11-12.
The renewables sector comprises 6% of India's total power mix.
Consulting firm KPMG said last month aggressive policy implementation could see solar power prices decline at a rate of 5-7% annually over the next decade, ensuring "grid parity", or the point when solar power costs the same as conventional power, as early as 2017/18.