India with abundant sunlight, unutilized manufacturing potential, readily available labour and significant demand for power, is one of the most promising markets for solar energy. The country is currently the seventh largest producer solar photovoltaic (PV) cells and ninth largest producer of solar thermal energy. Most parts of the country receive 4-7 kWh of solar radiation per square meter per day. There are 250-300 clear, sunny days in a year. This puts country’s solar potential at around 600TW per year. Still, solar energy is not the most popular source of renewable energy in India. Wind at 9,522 MW, continues to dominate the renewable energy sector , accounting for over 70% of total renewable capacity of 13,451 MW as of Sept, 2008.
This sectoral report tries to cover the niche sector of solar energy in India which is still in nascent stage with very few detailed reports available. The sectoral report covers the size and growth of this sector & various government initiatives taken to ensure the growth momentum considering the fact that solar power is still quite costly as compared to conventional sources of power. Thereafter the various key success parameters in the form of various issues & challenges which decides the growth in this sector are covered like managing high cost, policy hurdles, environmental concerns, low land availability, power evacuation hurdles, profitability problems, entry barriers for new manufacturing facilities etc. Next the key enablers to sustainable success of solar energy sector in the form of technological innovations is discussed based on various factors. Here the focus is on various upcoming technologies in the solar sector like crystalline silicon, thin film, solar thermal/ CSP etc. Sectoral Report also give a brief overview of the key initiatives in the solar sector taken by a company which made it a leading company in solar sector. Finally the growth projection for the solar sector as a whole is being highlighted.
Size and Growth of Solar energy sector in India
The government of India started focusing on the solar energy segment when Ministry of New and renewable Energy (MNRE) launched a countrywide solar PV programme as a part of its renewable energy programme. It aimed to provide remote village electrification through decentralized distributed generation(DDG) using solar technologies and promote such technologies for urban, industrial and commercial applications.
India has since transformed into a low cost hub for manufacturing solar PV cells and modules, a large proportion of which is exported to other countries. For instance, according to a 2008 study on solar PV industry by Indian Semiconductor Association, India produced 335 MWp of PV products during the period 2002-07 of which 225 MWp was exported.
The annual production of solar PV cells increased from 9.5 MW in March 2000 to 110 MW in March 2000. The production of solar PV modules grew from 11 MW to 135 MW over the same period.
In 1982, the government launched the national solar thermal energy programme to promote solar technologies such as parabolic troughs, parabolic dishes and solar power towers for generating grid-interactive power. The programme involved increasing awareness about the use of solar thermal energy as well as encouraging the manufacture of solar thermal equipment. The government even subsidized solar thermal products like water heating systems and solar cookers. Since then, India’s solar thermal energy collector area (a solar thermal collector absorbs sunlight to convert it into heat energy) has increased significantly from 119,000 square metres to over 1.66 million square metres as of March 2007.
However the number of solar thermal installations (comprising parabolic troughs, parabolic dishes and solar towers) per 1000 people is still very low at 0.52. The MNRE has targeted installing 5 million square metres of collector area by 2012. In terms of end-use, there was area of solar water heating systems and 0.62 million box-type solar cooker units as of Dec, 2007.
Recent government initiatives
In June 2008, the prime minister launched the National Action Plan for Climate change (NPACC), which categorically targets an increase in solar based generation in country. As part of the plan, the government has approved the creation of national solar mission on the lines of the Atomic Commission. The mission has a target of adding 1000 MW of concentrated solar power in the next 10 years.
Also as part of government’s plan for solar energy segment is the launch of a major research and development programme which would enable the creation of more affordable and convenient solar power systems, and promote innovations for storing solar power for sustained, long term use. International cooperation would be an important part of R&D programme. The US government recently sent a delegation including fourteen US-based solar energy companies on its first trade mission on solar energy in India.
Till date the union government has made various concessions for solar energy development in India. The MNRE in an effort to promote large sized grid-interactive solar power generation projects, recently introduced a generation based incentive (GBI) of Rs 15 per kWh for solar PV and Rs 13 per kWh for solar thermal projects. Solar PV power generation plants with minimum installed capacity of 1 MWp per plant are eligible for the incentive. However, the incentive is available only for maximum cumulative capacity of 10 MWp of grid-interactive solar PV power generation projects in a single state, with the overall project size being limited to 50 MWp. Further, no single entity can achieve GBI for projects of more than 5 MW. The industry has been demanding the removal of the total capacity and per plant limits but, so far , no steps have been taken by the government in this regard.
The government has also sanctioned the Development of Solar Cities Programme for the Eleventh Plan Period. The programme will extend support to municipal corporations for preparing and implementing the plan to set up 60 solar cities at investment of Rs 5million, which will enable a minimum of 10 per cent reduction in total demand conventional energy by 2012.
The Forum of Electricity Regulators, headed by the Chairperson of the Central Electricity Regulatory Commission, is working on the road map to achieving the NAPCC’s target of sourcing 5% of total power generation from renewable sources.
Key Success Parameter for Solar Sector Growth: Handling Issues & Challenges
Despite these efforts, the solar industry still faces a plethora of issues including high production costs, lack of land, inadequate financing options and rising environment concerns. Moreover, despite the government offering many incentives, the industry is demanding more in order to be commercially viable.
According to project developers, further policy action is required on the solar energy front. There is still a cloud of confusion surrounding the policy framework. Developers have cited issues as lack of clarity regarding the clearances required to set up operations. Others complain that it takes excessive time to obtain the multiple clearances required. Many developers have also faced problems with state governments as the latter have not adhered to the power purchase agreements. There is also strong demand for removing the cap on MNRE’s GBI.
Despite costs coming down over the years, power generation from solar PV is still four to five time more expensive than fossil fuel-based generation. The estimated cost of generation from solar PV and solar thermal sources in India is Rs 12-20 per KWh and Rs 10-15 per KWh respectively. On the other hand, power from conventional sources can cost as little as Rs 3-4 per KWh.
According to industry estimates, the current tariffs for initial 10-year period are not sufficient to make solar projects viable. This combined with project financing at 12-14 per cent with a loan tenor of seven-eight years result in internal rate of return (IRRs) of 6-10 %. Attractive IRRs have been the single most important factor for growth for the solar PV industry in Europe, with developers receiving at least an incremental return of 4-6 per cent over the capital/ financing cost.
Several factors have contributed to this trend. With respect to crystalline solar PV-based power production, one of the most significant cost components is the high cost of energy, which constitutes around 11% of the total production cost (for a vertical integrated plant). Energy costs borne by solar power developers in India are especially high as industrial consumers are typically charged higher energy tariff to cross subsidize domestic and agricultural consumers.
Interest cost and depreciation are two other important cost components, comprising 15% of production cost. According to a presentation by Rajeewa Arya, Chief Executive Officer, Mosaer Baer Photo Voltaic , project financing for solar power developers is usually granted at an interest rate of 12-14% for a loan tenor of seven-eight years, making solar PV projects ‘unviable’.
Thin film based solar PV technology is a cheaper alternative to mono or polysilicon based solar PV technologies as it costs less to manufacture thin film modules. Thin film modules are created by coating entire sheets of glass or steel with thin layers of semiconducting materials, which obviates the need for large quantities of semiconductors, thus lowering energy inputs and, consequently, the cost of production. With thin film modules, there is also added opportunity of locally sourcing raw material.
The current cost structure of thin film silicon-based modules varies from Rs 50 to Rs 64per watt peak (Wp) depending on the efficiency (6 to 8.5%) of the module compared to Rs 88.7per Wp for silicon crystalline modules.
Entry Barrier against Competitors for Manufacturing Process
Solar PV cell manufacturing is a technology-intensive process requiring sophisticated expertise and know how. The technological landscape is changing rapidly. Moreover, as it is challenging for new entrants to replicate the success of companies having a long standing in solar PV market, competition is reduced to an extent.
Some of the raw materials used for producing solar PV cells, like cadmium , are hazardous. Other raw materials, like plastics are non-biodegradable. Although some of the wasted generated during the manufacturing process is recyclable (for example silicon), not all materials are recyclable . As a result disposal is challenge.
Low Land availability
Solar Power plants require large areas of land 35-40 acres for a 5 MWp installation. However suitable tracts of land are not always available and land acquisition is sometimes subjected to local resistance.
In the past, it has been often seen that a transmission line is required to be drawn from solar power plant site to the nearest substation, which is usually 4-5 Km away. The concerned power utilities generally insist the line be drawn by the promoter of solar project. Setting up a transmission line is not only unfamiliar work for solar project promoters or engineering, procurement and construction contractor , it also adds substantially to the capital costs incurred.
For conventional power plants, the respective transmission or distribution companies set up the line and purchases power from premises of the generating station. This is because T&D companies have the experience and legal support to tackle socio-political issues that arises while setting up transmission lines across land owned by multiple landowners.
In addition to raw material and project financing costs, Indian solar PV manufacturing companies face the problem of achieving profitability, as most companies are partially integrated. This means that they either buy wafers and convert them into cells , or buy cells and convert them into modules. In the value chain, 60% of value addition lies in the polysilicon and wafer manufacturing segments. In India, however cell and module manufacturing is largely carried out domestically, leaving polysilicon and wafers to be imported. This leads to a substantial loss in margins, increases the cost of the solar panel, and thereby increases the cost of the energy generated from solar power.
If it is assumed that both the partially integrated manufacturer and vertically integrated manufacturer can sell the module at around Rs 145( based on international pricing of a crystalline silicon module), this gives the vertically integrated manufacturer a margin gain of 42 percentage points over the partially integrated one.
There are however , several technical limitations as a result of which partial integration is more feasible than vertical integration. These include unavailability of technology and raw material. A key reason for this is high capital requirement for setting up such manufacturing capacities. In light of this , capital subsidies could boost vertical integration and reduce cost of production.
Advantages of Solar Thermal Power
Solar Thermal power exhibits a different set of dynamics from solar PV as energy storage is much easier in the former. Solar thermal power plants have systems for heat storage and , consequently , generate power even after sunset . Solar thermal technologies have the additional advantages of being able to generate electricity right after the construction of collector (in other technologies, there is usually a gap between plant construction and production of electricity , which increases the interest cost to investment made).
Limitations of Solar Thermal Technology
On the flip side, however the technology has two key limitations. First, while PV systems can be installed in proximity to customers , thereby decreasing transmission and distribution costs, concentrated solar thermal systems require optimal solar conditions and large open spaces, which are only available at a great distance from customers. The second reason, as is explained in a report by McKinsey Consulting, “The ability of concentrated solar thermal power to cut costs further may be limited because it relies on conventional devices such as pipes and reflectors whose costs will probably fall less significantly than those of materials used in semiconductor-based PVs”.
Issues & Challenges- Going Forward
Overall, solar energy costs can be expected to decrease significantly in the future. Capital costs have already declined over the past two decades, bringing down the cost of solar PV and solar thermal. Costs are projected to continue reducing to eventually compete with fossil fuel prices. With economies of scale and development of new technologies, the industry is targeting to achieve a level of Rs6-8 per kWh in three to five years.
Analysts have further advocated that developers undertake cost cutting measures such as sharing operational resources, and building the plant closer to consumers to save on transmission expenses etc. Moreover, a carbon tax on coal based generation could provide a significant boost to CSP technology.
Breakthroughs in nanotechnology also promises a significant increase in solar cell efficiencies from current values of around 15% to over 50%, which could subsequently reduce the cost of the solar energy produced.
Key Success Enabler for Sustainable Growth in Solar: Growth in Technological Innovations
The development of crystalline silicon technology took shape in 1976 when the government launched a five year programme focusing on indigenous commercial production of solar cells and modules based on crystalline silicon.
Advantages of Crystalline Silicon
Crystalline silicon technologies have several advantages. They are tried and tested and relatively more widely available in the Indian market, thus familiarity among groups and producers. Consequently, most applications for solar PV use have been designed on the basis of silicon-based PV characteristics.
The technology also has relatively high conversion efficiencies of 15 to 18% for the polycrystalline versions and 17-18% for the monocrystalline version. Hence, they are ideal for locations with space constraints as the size of the panels need not be very large.
Issues with Crystalline Silicon
On the flip side , however , crystalline solar PV technologies are heavily dependent on pure solar grade silicon which has limited supply. Though accessing high quality of sand for manufacturing silicon is not a constraint in India, production of refined metallurgical silicon is costly , complicated and energy intensive.
Crystalline technologies are also expensive, costing $2.4 and $2.15 to produce a 1 Watt monocrystalline and polycrystalline cell respectively. Crystalline technologies consume 8-9 grams of silicon per watt. However, silicon is a scarce commodity in India and these costs end up constituting a large part (40-50%) of the module costs. Over the years though, silicon usage in crystalline technologies (in terms of grams per watt) is expected to reduce.
Future outlook of Crystalline Silicon
The future of crystalline silicon technologies will be driven by technological advances that will establish new benchmarks in solar PV cell efficiency using materials that can trap a higher proportion of incident spectrum and convert it into useful energy and reduce cost by developing less energy intensive techniques of production and benefiting from decreasing polysilicon prices , and reduces waste.
In the future, though other emerging technologies are likely to gain prominence , industry experts expect that solar PV systems based on crystalline silicon will dominate the off-grid applications segment with small rooftop-based installations. Though crystalline technologies monopolize the solar PV market at present, they are expected to slowly be replaced by more cost-effective technologies such as those based on thin film. By 2011-12 , the market share of silicon crystalline is expected to decline to 65-70%.
Thin film-based solar PV technology is a low cost alternative to crystalline silicon. The market share of thin film technologies currently stands at around 8% but is expected to go up to 35%in the next few years in India. In contrast to silicon crystalline technologies, thin films are expected to be especially important for on-grid applications in India
Advantages of using Thin Film
The key advantage of thin-film technologies is that they are more cost effective than other crystalline-based solar PV technologies as they require fewer materials and energy.
Issues with Thin Film
However thin film-based technologies are still at research and evolution stage and have relatively lower conversion efficiency compared to silicon crystalline technologies. There are other future challenges. Although thin film technologies have revealed long-term stability, some degradation has been observed. This is yet to be properly understood and dealt with. Moreover, in the long term , the availability and price of tellurium ( a key raw material in the production of thin films) are likely to become a bigger concern when the production capacity level reaches tens of gigawatts.
Solar thermal/ CSP
In addition to solar PV, solar thermal technology is also gaining traction in India. For on-grid applications, concentrated solar power (CSP) systems use lenses or mirrors and tracking systems to focus a large area of sunlight into a small beam. This technology is commercially available with over 12 billion units of operation experience. The one drawback it faces is its use of an oil based heat transfer medium, which restricts operating temperature to up to 400 C , resulting in stream of moderate quality.
This technology is again suited for grid connected plants but with high temperature process heat requirement. The highest capacity achieved until now for a single unit with this technology is 10 MWe.
This technology is ideally suited for stand-alone, off-grid power systems or clustered to larger grid-connected dish parks. The highest single unit solar capacity achieved with this technology is 25 kWe. In some recent designs, a unit size of about 10 kWe has been claimed. However projected mass production goals and costs are yet to be achieved.
Status of Solar Thermal in India
The cumulative collector area of solar thermal thermal energy in India has grown steadily from 119,000 sq metres in 1989 to more than 2.6 million square metres in December,2008. Though this is substantial increment , the absolute number of solar thermal installations per 1000 people is very low at 0.52. In terms of end-use, there are 2.6 million square metres of collector area of solar water heating systems and 640,000 box-type solar cooker units as of January, 2009.
Issues with spread of Solar Thermal
The key disadvantage with all concentrated solar power systems is that the hours of power production coincide theoretically with hours of sunshine. However, with some adaptations , such as energy storage , it is possible to control the hours of power production.
According to the Ministry of New and Renewable Energy , India has a gross potential of about 30 million square meters of collector area. In fact , in its draft policy , it has target of installing 5 million square metres of collector area till 2012. However, given the current status, a lot of distance is yet to be covered.
However there are several key issues that needs to be addressed. Solar thermal power developers have to incur a high initial cost of equipment. Solar thermal equipment also requires a large quantity of space compared to conventional electric equipment. Currently , the number of equipment suppliers, spare part manufacturers and service providers for solar thermal equipment is limited. According to industry players , there is an urgent need for developing supply chain that can bring efficiencies to the system , from design to delivery.
Concentrated Solar PV systems
In order to tackle the above challenges, the industry is experimenting with concentrated solar PV-based systems, which use mirrors or lenses to focus light onto solar PV cells to produce electricity. This is in contrast to concentrated solar power using parabolic troughs or dishes that use heat from sun to produce steam, which turns an electric generator.
Concentrated solar PV systems are so far at an experimental stage. Spanish firm Solfocus is working on a 3 MW concentrated solar PV power plant in southern part of the country.
Future Growth Projections of Technological innovations in solar
Substantial research is being undertaken to come out with more cost-efficient and conversion-efficient versions of solar power technologies. Researchers are targeting conversion efficiencies between 30% to 60% , while using similar low-cost materials and manufacturing techniques.
In the solar PV field, new and emerging technologies are being designed to overcome the shortcomings of thin film such as poor electrical performance while maintaining low production costs. New solar cells made of nano materials are reportedly the next big advancement in the solar PV industry. Nano materials exhibit superior properties , such as high strength and flexibility , and trap more energy than conventional solar PV cells.
Leading Companies in Solar Sector
Applied Materials Inc.: Key success factors & Future Growth projections
Applied materials creates and commercializes nanomanufacturing technology that helps produce virtually every semiconductor chip and liquid crystal flat panel display in the world. Applied materials built on that expertise to enter PV cell manufacturing equipment industry and become the number one supplier in 2008 (Source: VLSI Research, Inc.)
For crystalline silicon, they have the best-in-class tools with a focus on thinnest wafers , highest productivity and higher efficiency . The Precision Wafering System division offers MaxEdge ™ using the dual wire concept to enable cutting large loads with thin wire along with wire saw systems for cropping and squaring. The Baccini ™cell division offers the industry-leading solution in line metallization and test that can handle ultra-thin wafers. Further the company’s Aton ™ offers the highest productivity and cost benefits for ARC deposition and passivation in cell manufacturing.
For the thin film market, Applied has developed the SunFab™ Thin Film production line , the world’s first line capable of producing 5.7 square meter solar modules.
As PV manufacturers seek to build highly automated , efficient plants, Applied Materials’ ability to commercialize innovative solar technologies and it’s unmatched global resources and service network bring the promise of a cleaner, brighter energy future.
Future Growth Projections in Solar Energy Sector
According to analysts and financial consultants, there may be temporary slowdown in the solar energy sector due to the current economic crisis. Funds have become restricted and companies are looking for safer investments. However the situation is going to turn around with increased government focus.
According to industry estimates, the total annual demand for solar energy (including solar thermal systems) in India will rise from current 30-40 MW to 700 MW by 2012 due to falling costs of solar systems.
The MNRE is targeting a solar energy capacity of 500 MW by the end of the eleventh plan period. However, this target is expected to be surpassed. By 2017, the MNRE expects India’s solar capacity addition is expected to rise from current 30-40 MW per annum to 70 MW by 2012, driven by decreases in the prices of solar PV.
Around 50% of capacity addition is expected to come from solar PV based grid-interactive generation. Solar based generation for the grid is expected to be 25 MW, 50 MW, 75 MW and 100 MW in 2009, 2010, 2011 and 2012. The increase will be partially drawn by generation based incentive, which has already led to companies such as Reliance Industries and Moser Baer expressing interest in setting up grid-interactive solar PV plants worth over 1000 MW.
All in all , the Indian solar energy industry is looking at busy times ahead.
List of References:
- Datamonitor- Online Library Resources
- http://www.business-standard.com/india/news/ – multiple news related to solar power sector
- Based on Three years of work-experience in power sector & related industry contacts
- Study of various textbooks & literature regarding solar energy while I was doing Post Graduate diploma course in Thermal Power Plant engg from an institute under ministry of Power