India solar power plans over-subscribed

NEW DELHI (Reuters) - India will begin rolling out hundreds of megawatts of solar power by December next year, ahead of an initial target for an ambitious plan that seeks to zoom production from near zero to 20 gigawatts by 2022.

Under its Solar Mission plan issued last year, India is to produce 1,300 megawatt (MW) of power by 2013, an additional supply of up to 10 gigawatt (GW) by 2017 and the rest by 2022 at an overall investment of about $70 billion.

Once implemented, the plan would see output equivalent to one-eighth of India's current installed power base, helping the world's third-worst polluter limit reliance on coal and easing a power deficit that has crimped economic growth.

Debashish Majumdar, chairman and managing director of Indian Renewable Energy Development Agency, told the Reuters Global Climate and Alternative Energy Summit that a strong investor interest in India's solar power indicated the goals could be met.

"We are over-subscribed for the first phase of 1,300 MW, and by December 2011 generation will have begun work for at least half of this target," he said.

"The rest could be done by December 2012 which will be ahead of schedule. There is no dearth of investors."

Going by current figures, for example, investments chasing every 1000 MW of photo-voltaic and solar-thermal power was almost four times the capacity.

With about 250-300 clear sunny days in a year, India's solar power reception is about 5,000 trillion kilowatt hour per year, meaning just 1 percent of India's land area can meet the country's entire electricity requirements till 2030.

Such potential holds huge attraction for firms such as Tata BP Solar, a joint venture between Tata Power (TTPW.BO) and BP plc's (BP.L) solar unit, BP Solar, and Bharat Heavy Electricals Ltd (BHEL.BO), a state-run power and engineering equipment firm, and Lanco Infratech (LAIN.BO).

POWER SHORTFALL

But these are early days and solar's steep costs, much like that of nuclear power, are a deterrent. The head of an Indian government panel has said renewables costs had to be brought down to near par with coal-based electricity by 2020 [ID:nSGE6940EP].

Coal, available in abundance in India, provides cheap power at about 2 rupees (4 cents) a unit, compared to a kilowatt hour of solar power at a range of 13.70 rupees to 18.80 rupees.

India faces a 12 percent power shortfall during hours of peak consumption, according to figures of the federal Planning Commission, which charts the country's growth path.

The government has scaled down its power generation target for the current five-year-plan, which ends in March 2012, to 62,000 MW from an initial estimate of 78,700 MW.

Which is why solar is a key thrust area in the renewables sector. Renewables contribute just about 6 percent of India's total power mix. Developing the sector is at the core of a national plan on climate change.

But Majumdar said while renewables were "obviously good" for climate, a concern for the environment was not the prime driver of the quest for "green" power sources in India.

"In developed countries the driver is basically environment. We would like to show it as environment but the hard fact remains that the driver is essentially a supply-demand gap (in electricity)," he said.

"And since the supply-demand gap is so large we need electricity in any form."

MANUFACTURING HUB

The Solar Mission plan is to make the use of solar-powered equipment and applications mandatory for hospitals, hotels and government buildings, and encourage use of solar lighting systems in villages and small towns with micro financing.

The plan also outlines a system of paying households for any surplus power from solar panels fed back into the grid.

Money would be spent on incentives for production and installation as well research and development, and the plan offers financial incentives and tax holidays for utilities.

"For a foreign company I see this huge base for setting up a manufacturing facility, so India could then become a manufacturing hub for not only the Indian market but also the (regional) markets," Majumdar said.

The Solar Mission has certain local content mandates, in other words some import of equipment and technology will be allowed until 2013 after which capacity has to be built locally.

"So we can have a whole lot of foreign companies who manufacture these things, who want to set up shops here," Majumdar said.

"There is a programme called SIPS (special incentive package scheme) for semi-conductors, and solar comes under that, which offers up to 25 percent capital subsidy on investment for setting up manufacturing plants."

A plant has to be worth at least $225 million to qualify.

(Editing by Ed Lane)