Solar energy is slowly but steadily making inroads into the energy sector and human lives even as fossil fuels like oil and coal are depleting faster than anticipated due to unlimited consumption by humankind that has already ensured the extinction of many living species. Powerhouse countries around the world — be the powerful or weak — are realizing the necessity of switching over to a perennial source of electricity called solar power that will never deplete or fade away, alongside others like hydro, wind and waves.
Dr Rajendra K Pachauri, Director-General, TERI India and Chairperson of the Intergovernmental Panel on Climate Change, recently gave a clarion call for adopting solar technology in a greater way when he said “Solar energy has a unique quality of transforming lives of people where conventional power cannot reach, such as the interiors of the North-Eastern region. India today receives the highest amount of solar radiation throughout the year. Therefore, we should efficiently harness this energy resource and utilize it in areas where there is shortage of conventional power. India is fortunate to experience such magnitude of solar energy and with other forms of energy in short supply, solar energy is a great blessing for all of us.”
The occasion for Dr Pachauri’s speech was the 6th edition of Intersolar India 2014 — in the economic hub of Mumbai — that is recognized as an integral part of the power industry in India by the various associations and the industry at large. Over 200 exhibitors from around the globe including the UK, Germany, China, Japan, Singapore, USA, Netherlands, Greece, Spain, Belgium and Korea, besides India, showcased their products and technologies for the solar industry, while various national pavilions provided all including small and medium companies from abroad the opportunity of highlighting their products and services to the Indian solar market.
Katharina Schlegel, Deputy CEO and COO, Messe Munchen International, said, “It has been proved
without doubt that solar power would provide the vital link, which would bridge the gap between the nation’s demand for power and supply. Recognizing that need, Intersolar India 2014 would provide the perfect platform for stakeholders from the solar community to come together and address challenges that have acted as speed bumps to this growth.”
For the first time, the show also featured a state pavilion of Madhya Pradesh, which showcased its latest developments and policies for solar space in view of its achievements during the past one year. Major solar developers like Welspun, SunEdison and Ujaas were among the many companies in this pavilion and dotting the event landscape.
“The Indian government has declared its commitment to raise the share of renewables, particularly solar energy, in the total energy mix of the country from 20 Gigawatts now to 100 Gigawatts by 2020, marking a five-fold expansion from 6 per cent to 15 per cent,” Piyush Goyal, Minister for Power, Coal, New and Renewable Energy, Government of India, had declared recently. “A $100-billion investment in the expansion of renewables is doable and fundable for which a viable business model would have to be devised to make bankers want to lend for the development of the sector,” he said, adding that “subsidies are no solution to attracting investment.”
Bankers, he said, needed to reorganize their lending norms in such manner that auto and home loans could be clubbed along with the installation of rooftop solar panels. He advocated the use of escalating tariff for solar power to achieve grid parity over a five-year term. “A more realistic interest rate with staggered repayment, could perhaps be the answer to solar energy expansion,” he said, adding that solar panels and other related equipment could be installed in arid and non-agricultural land on a 20-25 year lease and the land owner could be paid compensation with the funds generated by the investor. Such a model would do away with the need to acquire land, he emphasized.
Goyal informed that two new power schemes have been launched by his ministry — the Deen Dayal Upadhyaya Gram Jyoti Yojana for providing 24x7 power to every farm and home in the rural areas and the Integrated Power Development Scheme for urban areas. The government also proposes metering transmission of power from generation up to the consumer point so as to monitor and segregate pockets with T&D losses and theft. Once this is done, the discoms would be able to cut down their losses without having to raise tariffs, he pointed out.
The amendment of Electricity Act 2003 put renewables in focus and place larger targets to buy RE and strictly imposing RE generation. He mentioned that like Renewable Power Obligation (RPO), the government will bring Renewable Generation Obligation (RGO) for every power generator to also generate renewable energy in their mix, besides strict enforcement of RPO and RGO being with stiff penalties.
Goyal said the Global Investors Meet on Renewable Energy would be held in New Delhi on February 15-17, 2015 and renewed his call for making India the Renewable Energy Hub. The minister launched the UNEP India Inquiry for designing a sustainable financial system for India with an executive briefing that was released at a conference. FICCI is steering the UNEP India Inquiry and the India Advisory Council of the UNEP India Inquiry and it will be chaired by Naina Lal Kidwai.
Ashok Lavasa, Secretary Ministry of Environment, Forests and Climate Change, stated that huge amount of funds were required for combating climate change for which eight nation missions have been launched. As many as 22 states in the country have prepared action plans for which about $30-35 billion is required.
These efforts will be scaled up by identifying new missions for Phase II of the programme, he said, adding that financing was required for development, equity and climate change and mitigation. In this effort, contribution would have to come from the promoters, domestic resources would have to be tapped and the Internal Rate of Return (IRR) would have to be looked at. Simultaneously, international funding would have to be factored in for success in achieving the objectives of the national missions. In this context, Secretary Lavasa urged FICCI for devising a scheme to do large scale afforestation and trade credits for development purposes.
Nick Robins, Co-Director, Inquiry into the Design of a Sustainable Financial System, UNEP, said the Inquiry which has a two-year mandate for reporting late 2015, aims to seek answers for three basic questions, viz-a-viz, why should rules governing the financial system be used in pursuit of green & inclusive outcomes ? What rules governing the financial system have been, and might be deployed as effective instruments? And how rules can be deployed given the complexities and competitiveness concerns of financial actors and nations? It seeks to unravel how environmental risk assessment can be implemented across banking, insurance and investment sectors to anticipate future shock; what are the key policy options to mainstream sustainability in the world’s largest asset class; how can securities, investment & accounting rules strengthen voluntary leadership to drive both disclosure and use of sustainability information.
The focus, he said, should be on realising the strategic role of the central bank in sustainable development, aligning policies for financial regulation, infrastructure and sustainable development, deepening sustainability risk management – environmental stress tests, capital re-balancing via a strategic policy framework for equity and debt capital markets and extending responsibility for financial institutions.
Naina Lal Kidwai, Chairperson, India Advisory Council of the Inquiry, Immediate Past President, FICCI and Country Head, HSBC India, stated that reforming the financial system will be an essential aspect of the transition to a green and inclusive economy. Policy and institutional changes will need to address the financing gap for meeting the key priorities on clean energy, environment, and low carbon growth path. Now, bankers and investors are also recognizing the need for reforming the financial system to complement traditional environmental and sustainability policies.
She said that clean energy, for example, has financing challenges from both lenders’ and borrowers’ perspectives. Renewable energy projects today require large upfront investment due to higher prevailing costs and they have reasonably long payback periods. Despite favourable policies and support being provided by the central government and state governments, lenders are reluctant to provide financing for renewable energy projects. Lenders are wary about off-taker risk with regard to a number of states, given their financial health. Additionally, banks in India face structural challenges due to their sectoral exposure limits.
Financing of renewable energy projects fall within the power sector exposure limits, which also includes large thermal, coal or gas-based power plants. The large amount of credit extended to the fossil fuel based power sector has caused banks to reach their respective exposure limits, thus limiting their appetite for renewable energy projects. Given these challenges, the sector needs additional policy and structural reforms and assistance from the government to empower the lending community to finance clean energy projects.