Can CSP Settle in India?

Coal dominates the Indian power sector currently, with a large portion of the fuel supply being imported; however, there is diversification to natural gas. Biomass use, for cooking and heat, has traditionally been a large fraction of primary energy, but is essentially static in absolute terms and so is becoming a decreasing part of the total. Oil consumption, largely for the transport sector, is growing at a commensurate rate and the country is heading towards relying on imports for 90 percent of its oil. Natural gas consumption is also growing; it is understood that domestic sources are constrained and imports now account for approximately 25 percent of consumption.

SOLAR RESOURCES

Maps from NASA and Meteonorm show a range of approximately 1800-2200 kWh/m2/year for DNI across India, an annual DNI resource comparable to the best European sites such as Spain, though lower than the best sites in the USA and Australia. Abengoa Solar considers sites with an annual average DNI above 1900 kWh/m2/year as potential sites for CSP plants.

The northwest of India is widely recognised as having the best sites in the country. Jodhpur, on the edge of the Thar desert, is almost exactly comparable on an annual average basis to Granada, one of the best Spanish sites at which the Andasol power plants are located. However, the impact of the annual monsoon season is noticeable with July to September being the months of lowest DNI.

ENABLERS FOR CSP DEPLOYMENT

India is one of the world leaders for installed renewable generation with a total capacity of almost 17.6 GW as of June 2010. (This figure does not include about 37 GW of large-scale hydropower.) There is a thriving renewable energy sector with strong growth in PV manufacturing that offers opportunities for synergy with the CSP sector. The Electricity Act of 2003 reformed the power market to encourage competition and allow for open network access for renewable generators. India's existing capability and potential for innovation is supported by a well-educated, professional and skilled workforce.

The country has the world's first Ministry for New and Renewable Energy (MNRE) and the Indian Renewable Energy Development Agency (IREDA), administered by MNRE, was established in 1987 to operate a revolving fund for development and deployment of new and renewable sources of energy. MNRE also administers national institutions such as the Solar Energy Centre (SEC) and the Centre for Wind Energy Technology (C-WET).

CLIMATE CHANGE POLICY

The National Action Plan on Climate Change (NAPCC, 2008) includes the main enabler for PV and CSP projects, the Jawaharlal Nehru National Solar Mission, which has a target of 20 GW of grid-connected solar to be installed by 2022. This is generating interest from all the major international players. State based RPOs and feed-in tariffs (FiTs) are emerging to also assist in building renewable energy industries. The overall environment is assisted by a small tax on coal and by the Clean Development Mechanism (CDM).

The Solar Mission promotes the use of PV and CSP generation for both grid-connected and off-grid locations. In its first phase, 1 GW of grid-connected solar is targeted for 2013, with an approximate 50:50 split between CSP and PV expected. Manufacturing capabilities in PV, CSP and low temperature thermal are to be built with the help of incentive packages, soft loans through IREDA and mandating a level of technology transfer for government and private procurements of foreign technology. R&D is to be supported via a proposed Solar Research Council.

The guidelines for phase 1 of the Solar Mission include a 30 percent local content requirement and the need for technology to have been demonstrated in operation at a scale of at least 1 MWe for at least 12 months. A tariff cap of Rs.15.3/kWh (approximately US$0.34/kWh) is on offer, with a reverse auction system required if proposals with more than the capacity target are offered. The Request for Selection closed in September 2010. In October 2010, the Hindu Business Line website reported that 77 CSP proposals totalling 1815 MW were received. In November 2010, The Indian-Commodity website reported that seven CSP proposals had been selected totalling 470 MW with significant tariff discounts of up to Rs.4.82 (more than 30 percent).

BARRIERS TO DEPLOYMENT

The Indian Renewable Energy Status Report notes that there is no established capability in India for CSP manufacture and there is a gap in Engineering, Procurement and Construction capability for setting up and running CSP plants. In examining the barriers to technology transfer for renewable energy technologies for India, the report identifies: product suitability to Indian conditions, difficulty in accessing market information for foreign companies, limitations in infrastructure availability, and difficulty of financing.

There are a range of sources of data available on insolation; however, like many places in the sunbelt regions of the world, there is not as much accurate ground-based data as investors desire. Predictions of future plant performance can probably only be made to an accuracy of 10-15 percent.

Published cost estimates for India vary by a factor of nearly 80 percent from lowest to highest. High current costs are an immediate barrier. India, with its exemplary and ambitious Solar Mission, has indicated that it intends to take a leading role in adopting policy settings that lead to the necessary deployment.

Prior to the closing of the Solar Mission's phase 1 applications in December 2010, potential developers suggested that the Solar Mission CSP tariff was not sufficient. The fact that the Request for Selection was oversubscribed and that the shortlist of developers offered discounts on the tariff ranging from around Rs.3 to 5 off the Rs.15.3/kWh cap would suggest that some developers believe that cost is not an insurmountable barrier. However, until these projects achieve financial closure and begin construction, there remains the major concern that the discounts have been offered to speculatively secure a place in a competitive process and that the projects may turn out to not be viable.

The World Bank's analysis of CSP costs versus the Solar Mission phase 1 tariff cap concluded that with either tower or trough technology and either wet or dry cooling, projects would not be viable even under the maximum allowed tariff. If this is the case, then cost remains a large barrier to CSP in India. On a positive note, a range of financial and regulatory incentives were analysed and it was concluded that all measures taken together were sufficient to make projects viable. Also, India's large-scale renewable energy support initiatives are just beginning to take effect. If the other factors needed to make India an attractive investment proposition are in place, it should be feasible to attract investment and see the levels of investment growth that the EU and US had in 2004-2006.

CONCLUSIONS

Whilst the grid in India is extensive, there are many regions where the load density has not justified the necessary substations for full grid connection. Within these non grid-connected areas there are industrial sites with captive power generation in the MW range that would be candidates for small off-grid CSP systems.

The Solar Mission is a visionary and inspiring policy measure that has the potential to be a leading example for the world. Features like the eligibility requirement that CSP technology must have been demonstrated for at least 12 months at a scale of 1 MWe or above are sensible and should be maintained. No doubt many lessons will be learned as the phase 1 process unfolds. The reverse auction approach to tariff determination carries considerable risk of allocations being made to 'adventurous' bidders who may ultimately be unable to deliver, and various stakeholders have indicated that the timelines for obtaining financial close, construction and commissioning under phase 1 are likely to be almost impossible to meet. It remains to be seen how this unfolds.