India’s Solar Sector | 08 Feb 2022

Why in News?

The centre is set to come up with rules to pool solar tariffs and is also aiming to increase bundling of renewable energy in existing thermal Power Purchase Agreements (PPAs) to boost the procurement of renewable energy.

• The government is aiming to boost installed renewable energy capacity to 500 GW (GigaWatts) by 2030.
• A Power Purchase Agreement (PPA), or electricity power agreement, is a contract between two parties, one which generates electricity (power generating companies (gencos)) and one which is looking to purchase electricity (Discoms).

What is the Issue?

• Solar tariffs have fallen consistently over the past decade to a low of under Rs 2 per unit (1 unit = 1 kWh) in December 2020 due to the falling price of solar panels and lower financing cost.
• The trend of lower solar tariffs has led to many many players waiting on tariffs to fall further instead of entering into long term power procurement agreements.

How can this Step be Helpful?

• A move to pool tariffs could help speed up procurement of solar power by addressing concerns among discoms of losing out on lower solar tariffs in the future.
  • The government is planning to pool all solar power procurement in a given period and ask that all buyers pay an average of all the tariffs that are contracted in a pooling period.
• The government’s step to bundle about 10,000 MW of Renewable energy based power with fossil fuel based power over the next 4-5 year would also help lower total cost of power procurement for certain discoms.
  • There are a number of old thermal power projects that are unviable because of high variable costs and don’t get dispatched in merit order and that discoms are forced to pay fixed costs due to requirements under existing PPAs.
  • The centre had in November 2021 issued guidelines which permitted thermal generation companies to supply power to customers from their renewable energy projects under the existing Power Purchase Agreements (PPAs) for coal-based electricity with gains from the bundling of renewable energy to be shared between generators and (discoms) on a 50:50 basis.

What is the Current state of India’s Solar Sector?

• About:
  • The country’s installed Renewable Energy (RE) capacity stands at 150.54 GW (solar: 48.55 GW, wind: 40.03 GW, Small hydro Power: 4.83, Bio-power: 10.62, Large Hydro: 46.51 GW) as on 30th Nov. 2021 while its nuclear energy based installed electricity capacity stands at 6.78 GW.
  • India has the 4^th largest wind power capacity in the world.
  • This brings the total non-fossil based installed energy capacity to 157.32 GW which is 40.1% of the total installed electricity capacity of 392.01 GW.
• Push to RE in the Budget 2022-23:
  • About:
    • To facilitate domestic manufacturing for the ambitious goal of 280 GW of installed solar capacity by 2030, an additional allocation of 19,500 crore for Production Linked Incentive for manufacture of high efficiency modules will be made.
  • Issues:
    • Budget estimate for the Union Ministry of New and Renewable Energy (MNRE) for 2022-23 showed that the investment in Solar Energy Corporation of India (SECI) has been nearly halved — to less than Rs 1,000 crores from over Rs 1,800 crore.
      • SECI is the only Public Sector Undertaking of the Union government working on solar energy and is currently responsible for the development of the entire renewable energy sector.
    • A primary issue with the manufacturing of solar PhotoVoltaic (PV) modules in India over the years has been a lack of quality.
      • This could have been addressed by enhancing research and development related to technological aspects of fully integrated manufacturing units from polysilicon to solar PV modules.
      • However, any separate allocation for such R&D has not been announced.
• Related Initiatives:
  • Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM)
  • International Solar Alliance
  • One Sun, One World, One Grid (OSOWOG)
  • National Solar Mission
  • National Offshore Wind Energy Policy
  • Roof Top Solar programme Phase-II
  • National Wind-Solar Hybrid Policy 2018
  • Hydrogen Based Fuel Cells Vehicles

Way Forward

• Identification of Areas: Renewable resources specially wind cannot be set up everywhere, they require specific location.
  • Identification of these specific locations, integrating them with the main grid and distribution of powers, a combination of these three is what will take India forward.
• Exploration: More storage solutions need to be explored.
• Agriculture Subsidy: Agricultural subsidy should be rectified in order to ensure that only the required amount of energy is consumed.
• Hydrogen Fuel Cell Based Vehicles and Electric Vehicles: These are the most suitable options when it comes to shifting towards renewable sources of energy, that’s where we need to work upon.

Source: IE