The solar energy space has witnessed dramatic changes in the last decade, with changes in policies, government initiatives, and holistic participation by all stakeholders. Even though there has been a government push and focus on solar energy through PLI schemes on the supply side or demand side, along with subsidies and incentives like PMSurya Muft Bijlee Yojna, KUSUM or SECI, and other government institutional purchases of solar energy, there have been certain drawbacks with respect to capacity utilization. These include grid constraints, DISCOM hesitation on PPAs, or even various state governments treating solar projects as cash cows to collect taxation. Thus, we can say it has been a mix of both positive and deterrent events for solar energy, which have posed financial risks for solar projects even before they are envisaged or executed. Considering the present condition, we can easily categorize three major factors which are impacting solar projects in India:
1. Regulatory Uncertainties
Regulatory uncertainties across various states, with no or very little synchronization among themselves, make it difficult to establish standard practice or visibility with respect to project execution and subsequent supply of energy to concerned customers. These difficulties are not only impacting the ongoing project but also for those projects which are already commissioned. A few regulatory initiatives that can strengthen solar energy supply include implementing a mechanism where banking is provided for energy utilization during peak hours, with payment of acceptable banking charges. All state regulators may come together at a forum of regulators to adopt standard values and terms of banking applicable to solar energy, in order to harness its maximum potential within each state. Regulator may also discourage state governments from imposing predatory charges on solar energy generation and instead consider all solar projects as national assets rather than profit centres.
Furthermore, various open access charges being levied vary year to year, create significant uncertainty for those consumers who seek atleast 15-20 years of visibility for purchase of power from renewable energy sources. Therefore, a stable and constant trajectory of charges over 15-20 year a period is the need of the hour and most expected from regulators across the country. Thus, all such agencies would have to start considering solar power projects as national assets serving all stakeholders of the country, and not as business centres meant only to generate profits for them. Only when such change in mindset occurs within government agencies will we truly see the solar energy flourish.
2. Technology Risks
Secondly, the challenge which the solar sector is facing has lot to do with the shift in technology over the last decade. Even though change in technology is increasing towards system efficiency, too much change in technology has led to disadvantages with respect to project costs, as solar panels are not able to achieve economies of scale. Considering the incentives being provided by the Government of India, linked to performance for manufacturing of solar cells / modules in India, the compulsion to purchase Indian made solar cells/ module for certain category of consumers is again a backdoor entry into trade restrictions, which should not be the case.
Experimenting with technologies must be promoted while also accounting the cost of such experimentation, as frequent changes in technology leads to significant disruptions in the supply of these solar cells/modules. Rather than focusing on a single solar based technology, we must focus on improving project management and implementation to reduce execution timelines in a conducive environment at both state as well as national levels. Moreover, we should encourage technologies that will complement solar technology, such as battery storage, PSP, or any other technology that can achieve economies of scale along with solar, to make energy available efficiently and reliably, even before sunrise and after sunset.
3. Market Fluctuations
Thirdly, the most important and driving force for solar energy is the price parity with conventional power. Though there had been lot of enthusiasm for purchase of solar energy, spot market fluctuations have been a spoilsport in this regard. The variability of spot prices is not only due to seasonal variations but it is also changes year on year due to fluctuating demand and supply. This variability has caused a lot of stress for these solar projects, raising concerns among various financial institutions and lenders, wherein the bankability of merchant capacity is in question.
However, the future still remains with merchant capacity, which shall help in compensating the inherent demands in the system, as and when the paying capacity of the consumer increases over time. Also, considering the rising conventional fuel charges, the main advantage with solar is that it is a one-time investment, and the generation is perpetual over the life of the project. Once the mindset of everyone changes from considering this as liability to viewing it as a must run source of energy – one that can complement other technologies or help in mitigate the sustainability requirements – its role will be better appreciated.
In the long run, price parity is always more favourable for solar sources compared to any other source of generation, whether for early installation or adaption at the grid level or off-grid.
Conclusion
Thus, considering all the above factors, solar wins for me. Though, there will, and shall always be another side of these factors – which is an important aspect of the discussion – without it, we will never be able to reach to a conclusion, that the coexistence of all is the best solution we could ever thought of. No one energy source alone is the winner, as in this space, there will always be a leader for certain period of time, and subsequently, someone else will emerge as a leader to take things further in this ever expanding space of energy requirements.
