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India for Green Technology

UNEP logo.

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United Nations has declared the year 2011 as the ‘International Year of Forests’. This year on World Environment Day the UN will reinforce this global concern with the official tagline — Forests: Nature at Your Service. Today we truly need technologies, which run on green technology systems. India has initiated several projects on the lines of green technology to save the environment. On February 22, 2011, the United Nations Environment Programme (UNEP) announced that India, one of the fastest growing economies in the world, is fast moving towards a green economy.

It will be for the first time that India will host World Environment Day 2011 (WED) on June 5, 2011 in New Delhi. The theme of this year is ‘Forests: Nature at Your Service’ and it emphasises the intrinsic link between quality of life and the health of forests and ecosystems.

During the event, the 11th Conference of Parties to the Convention on Biological Diversity will be held. It marks the beginning of an international decade for bio-diversity. It also proves India’s commitment towards biomass economy.

Two of India’s most prominent cities — Delhi and Mumbai — are the venues for this year’s global celebration of the environment. A myriad of activities will be organised to create awareness among masses regarding conservation of the environment. In order to conserve ecosystem, Government of India has initiated projects, which will keep track of the nation’s bio-diversity parks and other natural resources.

Emphasis will be laid to make people aware about how individual actions can have an impact, with a variety of activities ranging from tree-plantation drives to community clean-ups, car-free days, photo competitions on forests, bird-watching trips, city park clean-up initiatives, exhibits, green competitions, nationwide green campaigns and much more.

The Government of India is actively introducing programmes, which will ensure a clean environment for its people. India has also launched a Compensatory Afforestation Programme under which any diversion of public forests for non-forestry purposes is compensated through afforestation in degraded or non-forested areas.

For this programme, a body has been formed by the Central government to make environment conservation  projects a success. India is one of the fastest emerging economies in the world.

However, India still continues to be the front runner in generating green technology. Amid all the discussions on green technologies, the Government of India has recently decided to conduct an assessment of the impact of GDP growth on ecology using Green Accounting System.

India is currently planning one of the largest green energy projects that will generate 20,000 MW of solar power and 3,000 MW from wind farms on 50,000 acres in Karnataka.

The first phase of the US$50 billion project will start in the year 2012.

This is underlined by India’s introduction of the Clean Energy Fund into its national budget, which provides subsidies for green technology and has been the basis for a National Action Plan on Climate Change, which sets specific targets on issues such as energy efficiency and sustaining the Himalayan eco-system.

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Solar power prospects brighten

Research into new materials and structures is under way. Innovative technologies are being tried out. But it has to result in large-scale manufacturing applications. DR. MADHUSUDAN V ATRE, PRESIDENT AND M.D., APPLIED MATERIALS, INDIA

The Jawaharlal Nehru National Solar Mission (NSM) and its guidelines have created significant excitement in the industry with the announcement of new projects, setting up of assembly units and States vying with one another to offer incentives. With critical mass coming in, several large players are looking at backward integration, possibly manufacture of wafers.

Dr. Madhusudan V Atre, President and Managing Director, Applied Materials, India that is among the top suppliers of equipment and technology for solar industry and semiconductor segments, provides insights into the way forward.

Applied Materials and IIT-Bombay have joined to set up National Centre for PV Research and Education and a Clean Lab to work on new materials. Dr. Atre, who has been appointed a member of the advisory committee to drive the sector’s growth, touches upon prospects and challenges in an interview to Business Line. Excerpts from the interview:

What is happening in the solar industry? How do you perceive some of the changes and challenges?

A lot of developments have taken place since the Solar Mission. Various projects have been finalised. On the photo-voltaic side, projects ranging from 1MW to 5MW and on the solar thermo lighting, 50 MW to 70 MW have been finalised.

Many projects approved under the NSM have achieved financial closure and completed land acquisitions.

Apparently things are moving. From the Government’s perspective, it must be reasonably satisfying.

Apart from solar cell manufacturing and utilities, backward integration into wafering and polysilicon is also under way. All this will lead to the creation of a very vibrant solar ecosystem in India.

There have been developments at the Central and State Governments. Gujarat continues to drive a lot of solar-related projects.

What about the semiconductor business?

The Government wants to pitch in $5 billion on setting up infrastructure. The modifications in the Semiconductor policy in 2007 will be reviewed. Many changes are proposed in the policy. It is good the Government is thinking seriously about fabs.

That would be good from a manufacturing perspective but depends upon the local market. Areas of healthcare, automotive, and industries will need them.

These are big guzzlers of semiconductor chips. The changes recommended in the policy can probably make it a little more practical with the perspective of helping set up a fab.

Many companies are getting into an implementation mode. Some of them are raising finances and setting up units, such as Lanco and Moser Baer. What stage are they in capabilities?

Many have attained financial closure and acquired land, approved either by the State or Central Government and started their projects. The manufacturing technology is not a widely prevalent expertise. They have to depend on established technology and Applied Materials is one of the players.

Besides just the cell and module manufacturing which is usually thought of in the solar arena, some want to go a few steps aheadin terms of either manufacturing polysilicon itself or taking polysilicon blocks and making wafers out of them. Till now wafers needed for the crystalline silicon solar cell manufacturing are imported. Some are considering why not bring the silicon and do wafering.

Why should we bring the silicon and do the wafering , why not manufacture the polysilicon here is another line of thinking.

If you look at the chain which essentially comprises silicon, wafers, cells and various utilities, there are players who are now looking across the chain, and not just at a cell or a module. That is important.Through vertical integration, you can bring down costs. If you import a wafer, you are not only paying the guy from whom you are buying the wafer for his manufacturing cost but you are also paying for imports, logistics and transport. Internally, there is an inherent nailing down of costs.

This will be a domain only for serious players with deep financial resources. Backward integration brings about a cost and investment escalation. In the long run, serious and non serious players will get segregated.

Two years ago we were talking of Rs 19 crore for 1MW of installation; now they are saying Rs 15 crore and some of them a little lower than that. What is your assessment of ground reality?

They are talking of Rs 15 crore per MW, the figure has been arrived at after extensive study and with industry inputs. The cost will go down as a function of time, technology escalation, efficiency escalation. That is why now the tariff stands at Rs 12 per kilo-watt. That will decrease year on year as the technology goes up and cost goes down.

Do you see some new technology challenging usage of solar devices? What is your assessment from a research perspective?

Huge amount of research on technologies and devices is under way into new materials and structures.

Some are doing the corrugation of a solar cell on a certain dimension to capture more sunlight, so as to increase the efficiency. Innovative technologies are being tried. But it has to result in large-scale manufacturing applications. R&D to manufacturing process is a significant step.

For instance, flexible solar cell is something that can be used to wrap around objects. This will increase the mobility of solar units. Many new technologies and applications can come up. At the end of the day, it depends on how much of it can be scaled up in terms of size, manufacturing and scaling down of the cost.

We are talking about large installations, what about small units?

Power plant utilities are as important as standalone distributed solar applications. The policy lays a lot of effort on rooftop, lighting applications and other commercial applications.

The higher the utility, the cost and investment is that much more. There is a lot of focus on this by distributors and small scale plants.

The Solar Mission had taken out a directive that out of the 1 Gigawatt generated 100MW has to be diverted towards roof-top applications.

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Making Investments While the Sun Shines

As the country suffers through another blistering summer, it only makes sense that this abundant resource is put to some use.

Venture capitalists have raised $24.5 billion since 2009 to invest in clean technology or renewable energy in India, and would like to invest more than a fifth of that capital in solar-energy projects, according to researchers VCCEdge and Preqin.

A worker cleans solar panels at the Thyagraja stadium in New Delhi.

Their investment is based on the thesis that India will need more energy than it now generates if it is serious about maintaining its economic growth rate of 9%.

The nation’s existing fossil-fuel-based power plants cannot keep up with current demand as evidenced by the frequency of power cuts across the country. And, proven coal reserves are expected to last only up to 50 years more. Against this backdrop, the 300 sunny days that the country gets in a year looks like a huge resource boon. Estimates say this free source can be used to generate five trillion megawatts of energy, a huge surplus considering India’s annual consumption is about 848 million megawatts.

While this opportunity to be part of a new and rising industry has attracted droves of investors—domestic and foreign—attractive targets are in short supply. Funds such as Blackstone, TPG Growth and Reliance Venture Asset Management Pvt. Ltd. have all paid high premiums on portfolios that involve long developmental pipelines and few operating assets.

The solar sector has seen only eight transactions amounting to $100 million in the last three years—a fraction of the money that has been raised to invest in this sector.

Shivani Bhasin Sachdeva, chief executive of private equity fund India Alternatives, says solar-power-based power generation needs greater economic support than say, wind-based and small-hydropower projects, as the latter sources are on the verge of reaching grid parity—the point at which an alternative means of generating electricity is economically on a par with a conventional technology such as coal-based-generation.

The Indian government is doing its bit. In 2009, the Central Electricity Regulatory Commission—which promotes efficiency and competition in bulk electricity generation and transmission— launched the ambitious Solar India Initiative to be deployed over 19 years. Its three-phase plan works toward generating 20 gigawatts of solar energy within 12 years.

“When the solar policy was announced 15 months ago, there was a kind of gold rush into the sector,” said Alan Rosling, founder and chairman of Kiran Energy Solar Power Pvt. Ltd.

His company received $30 million this year from New Silk Route Advisors Pvt. Ltd, Bessemer Venture Partners India and Argonaut Ventures LLC and is engaged in developing solar projects.

Initially, new entrants thought it would be easy to reap quick returns but the first round of bidding, led by the government, for the purchase and sale of power under the National Solar Mission (dubbed the Vidyut Vyapar Nigam scheme) “was a very good way of shaking out players who were not serious,” Mr. Rosling said.

Indeed 418 applicants competed for 30 government contracts for the purchase of solar power from private industry, said Sanjay Chakrabarti, leader of the national clean technology practice at Ernst and Young. This indicated a high level of interest in a relatively underdeveloped sector that had few experienced players, he said.

Government-backed incentives, mandatory use of locally manufactured equipment and solar purchase obligations for utility companies have helped the Indian solar sector emerge as a safe bet as investors are assured of long-term annuity returns, said Yogesh Mathur, chief financial officer at Moser Baer Group.

The maker of compact discs and electronic devices decided to take the plunge into solar power and is, today, the country’s second largest maker of solar cells and the fifth largest maker of solar modules—panels that convert sunlight into electricity.

Despite government support, execution of these plans is plagued by delays. For investors, the buzz fades somewhat when they realize that initial returns are less than expected due to gestation periods of up to 25 years, and a complexity of implementation that’s greater than expected. But there are benefits too.

“Projects in clean tech (including solar energy) are often subsidized via government grants, which reduces the capital expenditure burden for private investors,” she said. “Further, investors can choose… across a spectrum of clean technologies, which diversifies their risk.”

That’s why there’s more money likely to come in with another 29 India-focused funds looking to raise $6.79 billion for investing in companies that produce energy using renewable sources or engaged in activities that have a minimal or beneficial impact on the environment.

Where they will put all this money isn’t clear but in a few years, India is on track to “emerge as one of the biggest solar energy markets globally,” said Moser Baer’s Mathur.

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India’s solar potential remains untapped, but the future’s bright

A recent KPMG report finds that the Indian economy faces increasing challenges in terms of energy policy, and that the seeds have been sown for a rapid and scalable solar sector “in the very near future”.

Picture of photovoltaic domestic installation in India.

India‘s photovoltaic potential requires $110 Billion in capital. Image: Flickr/Barefoot photgraphers of Tilonia.

India’s growing economy and energy demands are increasingly reliant on energy imports, in the form of coal and oil. Coal dominates India’s energy mix and the economy writ large faces constraints in the form of unreliable and fragmented electricity supplies. The Indian Planning Commission has forecast the country faces 12 percent electricity shortfalls during hours of peak consumption. In this environment, and with reliable year-round sunlight in some regions, solar and photovoltaic generation has the potential to take off and save the country $5.5 billion in coal imports over the next decade, write KPMG’s report authors.

$110 billion in Indian solar investment opportunities and vast domestic market expansion

The Indian solar sector is yet to become mature and replicate the nation’s successes in the information technology (IT) and auto industry. However, with significant investment it could be transformed. The KPMG report, The Rising Sun, breaks down the investment in solar required to facilitate such a transformation into five year periods, coming to the conclusion that $20 billion is needed between 2012 and 2017 and $92 billion between 2017 and 2022. These figures combine both small-scale and off-grid installations, and large-scale solar farms.

In the photovoltaic sector, KPMG predicts that with such investment levels, the Indian vendor market would increase correspondingly by over $14 billion over the next decade. In industries related to photovoltaics – but not exclusive to the field – the vendor forecasts are also for rapid growth to reach $9 million in 10 years.

KPMG also sees room for growth and investment in photovoltaic related technologies in India, including storage technologies; non-module equipment such as inverters, which are not presently manufactured in India; and integrated systems and applications, such as agricultural pump systems. Furthermore, the report identifies great potential in India as a low cost photovoltaic manufacturer.

The report authors conclude that financially, “the solar sector has the potential to transform the Indian economy in a way the IT sector transformed the Indian economy in the 90s. Industry should grab this golden opportunity, thus benefiting themselves and the overall economy.”

Environment right for rapid solar expansion

The report also found that solar and photovoltaic industry trends favor a rapid expansion in India with falling costs and technological advances facilitating growth in both large scale and rooftop generation installations. In both cases, grid parity in India, as projected in the KPMG report, could be achieved in as little as six to eight years. Using this timeline, the report forecasts exponential growth in both the annual and cumulative solar markets.

Off-grid potential is also seen to be great with the report highlighting the potential of telecom towers as photovoltaic installation sites. Many are situated in areas with “limited or no grid connectivity” and at present rely on diesel fuel. With projected expansion in the number of such towers in rural and urban areas, the fuel requirements could amount to 3.5 billion liters per annum by 2020. At present, photovoltaic installations are price competitive with diesel and if a projected 30 percent reduction of diesel reliance is achieved, a saving of 5.4 billion liters over 10 years could be delivered.

Government role in India’s bright solar future

KPMG sees the role the government could play in realizing India’s solar potential as being crucial, and the report was supportive of the Jawaharlal Nehru National Solar Mission (JNNSM), which was launched in late 2009. The JNNSM set a target of a 22,000 megawatt production capacity in on- and off-grid production, to be realized by 2022. Regional governments also have a role to play in realizing India’s solar potential and KPMG reports that the states of Rajasthan, Gujarat and Tamil Nadu have significant potential in that their solar installation rates are high as are their conventional power costs.

Subsidies in the form of a feed-in tariff (FIT) scheme are noted and the structure of the German FIT program is cited as a workable model delivering, “innovation and rapid growth in the solar sector.”

Securing funding for the Indian solar sector is crucial, write KPMG, and government here is an important player. While solar technologies are yet to be widely proven in India, their may be a reticence in the banking community to provide funds and the Indian government has moved to educate the sector’s potential.

The KPMG report also highlighted the potential of Indian manufacturing, and research and development facilities. Here, a governmental role could be decisive, on both state and national levels, and time delays in pursuing tax credit or support schemes in this field could be crucial in reaching the envisage significant solar potential.

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