An enabling ecosystem is needed to fuel solar energy

With sun taking the centre stage, India is seeing a sharp rise in interest in solar energy. An aggressive target of installing a generation capacity of 20 gw by 2020 has been set under the National Mission on Solar Energy.

Though the country has the advantage of being an established, high quality, low-cost manufacturing base for photo voltaic (PV) cells, it has yet to see replication of sound business models to attract venture capitalists. One of the strong demands by the industry is to constitute a PV technology help fund to support industry-government research programmes.

VCs are exit focussed and look for clear exit path in a period of five to seven years. Hence a lot of investment is focussed on shorter-term products and ideas, but PV business has a much longer cycle. Industry sources point out that there have been VC investments in PV not in the manufacturing space per se but in companies engaged in innovative R&D for enhancing cell efficiency. A robust PV ecosystem is the need of the hour to meet the country’s energy needs, opine industry players.

In order to achieve widespread adoption and stimulate demand, incubating solar industry is critical. As solar projects are capital intensive, it is therefore critical to develop financing mechanisms and promote investment in solar power projects, R&D and manufacturing to lower the cost of solar energy and for its widespread adoption. This creates opportunity in the financial sector to develop financial innovation for solar investments and creating funding opportunities for banking and financial institutions, opine industry analysts.

The country is home to nine PV cell manufacturers and 20 module manufacturers. Sathya Prasad, president, Semiconductor Equipment and Materials International (SEMI) India, say that there is an enormous potential for off-grid PV deployment in the country such as rural lighting and electrification, powering irrigation pump sets, back-up power generation for cellular towers, captive power generation, urban applications and highway lighting. (SEMI PV group, part of SEMI, is a special interest group to serve the PV manufacturing supply chain).

The global solar cell production capacity stands at about 11 GW and is projected to increase to about 25 GW over the next five years. China and Taiwan, which produce over 40% of global solar production, export most of the output and Japan, which is the largest producer of solar cells claiming over 42% of market share, has declined to below 20%.

India has a manufacturing capacity of about 700 mw. The solar PV manufacturing base in India comprises, primarily, of cell and module manufacturing, with the bulk of the value addition taking place outside the country. Additionally, the current scale of manufacturing in India is small in comparison to global standards. Hence, there are two issues to be addressed which are scale and integration.

Says Ravi Surapaneni, vice-president, Solar Semiconductor (P) Ltd, ?It is necessary to create an ecosystem for increasing the demand stimulus to catapult solar energy adoption and manufacturing to help lower the cost of solar energy in the country.?

The solar industry is at a nascent stage and has not enjoyed the benefits of economies of scale and scope that are enjoyed by other developed energy sources. The upfront investment in the technology is high and that determines the cost per unit of energy generated as there are no fuel costs and operating costs are minimal. In order to promote adoption and simulate demand, various governments are incubating the solar industry by providing tax breaks and subsidies to solar energy generation. This has a dual impact of reducing cost by economies of scale and creating sustainable jobs, Surapaneni explains.

?A diversification of the market is taking place with countries adopting appropriate support policies. These policies include Feed in Tariff (FIT) programmes, renewable portfolio standard as well as federal subsidy in form of investment taxes credits or grants and upfront rebate and tradable carbon credits,? he adds.

Incidentally, the pace at which the Indian solar industry is growing does not compare to global standards. One of main reasons for this is the lack of adequate investment in solar PV manufacturing and R&D. Solar R&D remains one of the most neglected areas in the country. Emphasis should be laid on R&D and innovation in solar PVs as they are the key drivers for the development of the solar PV industry.