Category Archives: POLICY
The Maharashtra government remains uncomfortable with the idea of harnessing solar power from residential rooftops even as Delhi is raring to go.
The Delhi government on June 5 announced that it would unveil a detailed plan in 3-4 months for harnessing solar power from residential rooftops, in partnership with the Ministry of New and Renewable Energy.
Under the proposed policy, residents can get solar power plants installed on their rooftops by signing a power purchase agreement with the company supplying power to their area. For a rooftop of around 200 square metres, the cost is estimated to be Rs8-9 lakh. Residents can either lease out their roofs to a developer, who will then set up the unit, or pay 30% of the cost of installation. The remaining 70% will be financed through banks. The price payable per unit of such power will be Rs17.50, which the owner of the rooftop can sell to any power supply company. Details on the manner in which connectivity will take place are not yet available.
So what explains Maharashtra’s hesitation?
Part of it has to do with the reimbursement limit set under the otherwise-laudable Jawaharlal Nehru National Solar Mission (JNNSM). The Mission requires the states to generate 0.25% of the power purchased by them to come from solar power by 2012. The price fixed by the Mission is Rs17.90 per kWh, which is slated to come down to Rs15 per kWh next year. This is the price reimbursed to the states under the JNNSM —- anything over the 0.25% limit will not be reimbursed.
Somewhat expectedly, Maharashtra identified degraded government-owned land, lying idle around places like Dhule and Osmanabad, and got them transferred to its power generation company. It then floated a reverse bidding tender and aggressively brought down the purchase of solar price to under Rs14 per kWh and identified two players — Lanco Solar and Megaprojects — who would collectively supply the state 125 mw of solar power.
“We now have a problem,” said Ajoy Mehta, managing director of Mahavitaran (Maharashtra State Electricity Distribution Co Ltd). We would like to generate more solar power, but with the sanctioning of this 125 mw capacity, we have more than met the requirement of 0.25% of our total power purchase through the solar route. This is the power for which we are reimbursed Rs17.90 per kWh costs by the JNNSM (the difference between Rs14 per kWh and Rs17.90 will be kept aside to subsidise additional power generation).
If we now announce a rooftop solar policy today, who will pay for the additional high cost solar power?”
This is because the basket cost for Maharashtra’ power purchase is around Rs2.93/kWh, though the system marginal cost is a lot higher at Rs4.10. Solar power, Mehta believes, is unlikely to cost less than Rs13 per unit, which means the additional power costs will have to be pooled in the basket, pushing up its costs further. Since the JNNSM has added an incentive tariff of Re1 per unit for rooftop solar, the cost of purchase will go up further.
“Already, thanks to cross subsidisation of cheap power to agriculture and marginal users, commercial users are paying a price of around Rs9 a unit. Purchasing more solar power that cannot be subsidised by the Centre will require us to load commercial tariffs even beyond this unbearable level,” said another government official.
But couldn’t there be another way out? After all, the central government has mandated that all states increase solar power purchase from 0.25 to 0.5% of total power purchased by 2013. Shouldn’t the states then plan their future procurement in a way that all solar power is via rooftops?
This is precise what Germany did when it decided to popularise solar power. In ten years, it has seen solar power production swell to over 17,000 mw and counting.
To its credit, the rooftop route encourages every resident to participate in solar power production. Power generation is thus distributed, rather than a privilege enjoyed by a few producers.
By announcing a fixed purchase tariff, which would be constant for say 25 years, and by allowing agents to set up rooftop panels on the one hand, and act as power aggregators on the other, Germany saw most agents introducing innovations to bring down their cost of production and increase profits.
Increased volumes caused the solar panel costs to crash from $5 a watt to just around $1 a watt a month ago. And they continue to fall at least 10-20% a year, says a senior official at Wipro, which has just embarked on promoting solar power installations.
Maharashtra government officials are uncomfortable about this strategy.
“What if we announce a solar rooftop policy and the total offerings through this route go beyond 300-500 mw (which could be the case)? Who will bear the higher cost of solar power procurement?” asked an official.
But one area where the state is willing to look at solar power quite aggressively is rural communities where the cost of supplying power is very high, subsidies even higher, and collections quite poor.
For instance, the average cost of electricity supply comes to around Rs4.34 a unit, whereas it is supplied to agriculture at Rs1.50 a unit. Even so, the farmer pays just around 20 paise, while the remaining Rs1.30 is subsidised by the state government.
Thus, the total agriculture subsidy on account of power is in excess of Rs5,000 crore annually. More unfortunately, even at 20 paise per unit, only 20-30% of the farmers pay their bills, leaving some Rs500 crore uncollected.
That is why Maharashtra is looking quite favourably at providing a subsidy to solar powered pumps (manufactured primarily by Kirloskar) so that this subsidy can be reduced.
Another way could be to identify small villages where the cost of transmission causes the cost of supplying power to exceed Rs14 per unit. There, rooftop solar power could be extremely attractive and viable, reducing the pressure (and cost) on transmission grids and the temptation to steal power.
But will Maharashtra bite the bullet and announce such a policy? That remains to be seen.