The year 2016 will be remembered as the tipping point for solar energy. For the first time, it would be cheaper to produce your own electricity than buying it from the grid!
Prime Minister Narendra Modi could not have asked for a better timing. The sharp drop in solar prices perfectly coincides with his first term.
His government’s vision of adding 100GW of solar generation capacity may in fact materialize as early as the year 2022.
What’s more, the macro environment for solar power looks poised for an upsurge. India has an abundance of two most critical elements for solar power – land and sunshine.
There is easy availability of affordable solar panels in China, while global developers are now quoting about 7 US cents per unit (Rs. 4.5 / kWh) to build, own and operate solar farms in India.
Therefore, it seems as if nothing can stand in the way of India’s charge towards solar power.
However, the power industry is forgetting or ignoring one important link of the value chain; which is power transmission.
The two major risks when it comes to evacuation of solar energy are ‘Cost’&‘Time’.
A 500 MW solar park generates about 30% of the energy as compared to an equivalent thermal power plant.
However the required investment in transmission is equal in both cases. This signifies that it costs three times as much to transport a unit of solar energy, as compared to a unit of thermal energy.
In order to compensate for the increased transmission cost, solar energy will need to be about a cent (Rs 0.65 / kWh) cheaper than thermal energy (at the bus bar).
However the greater risk lies in “Execution Time” of Transmission infrastructure. During the 12th Five Year Plan (2012-2017), India saw an addition of close to 80GW of thermal generation capacity.
The government had more than 5 years to build these systems, and due to coal shortage in many power plants, they were able to buy another year or two of construction time. Yet, the systems couldn’t be built on time due to rights-of-way and forest-clearance issues.
Now imagine a scenario where 10GW of solar plants can get created in a matter of 90-120 days!
Today, the speed at which gigawatt-scale generation capacity can be created, is unprecedented in the history of energy, primarily due to the modular nature of these plants.
Each time a gig of generation capacity is added to the grid, one needs to invest in upstream and downstream transmission systems.
However, the schedules for transmission projects are usually measured in years or quarters, certainly not in days! The average time taken to build an Extra High Voltage (EHV) transmission systems in India is about four and a half years.
The mismatch between Time to Market (TTM) for solar, and TTM of its corresponding evacuation lines is, in my view, the single biggest risk, facing the ambitious solar mission.
In order to address this discrepancy, the government has already taken a few significant steps to reduce the project duration of transmission projects.
The forest and environmental clearances have been decentralized and the government has also reduced the project award time from 250 days to 145 days.
Commissioning of lines before the scheduled date of commissioning is permissible under current norms. New guidelines for right-of-way compensation have been issued, linking it to prevailing land prices.
These measures can dramatically reduce the time taken to execute projects.
However this is not enough. Transmission lines need to be built in 12-14 months, as compared to the current norm of 30-40 months.
For this, the government will need to invite the private and public sectors to leverage technology and mechanized construction. Perhaps, the government can announce larger bonus clauses for early commissioning.
Or transmission developers could be chosen not on the basis of lowest tariff, but on the basis of the shortest completion time.
Tariff Based Competitive Bidding could be replaced by “Time Based Competitive Bidding”, as a 50% reduction in execution time of key links, is perhaps 10 times more beneficial to the energy system, than a 50% reduction in transmission tariffs.
In the next few years, India could undoubtedly stand-out as the first economy in the developing world to embrace clean energy in such a significant way.
I look forward to our able government taking proactive steps towards building evacuation systems and ensuring that every unit of solar energy produced, is actually delivered to the most underserved household in the country.
Vice Chairman, Sterlite Power Grid Ventures Limited (Sterlite Grid)