Waiting for the solar boom
Pratap Raju, Joint Managing Director, PR Clean Energy, talks about India’s renewable energy, and how it’s going to shape the power industry
Twelve years back, two brothers named Pramod Raju and Pratap Raju came to India from the Unites States. After forays into corporate finance and advisory (and even briefly in Bollywood), they found a niche in India’s booming renewable energy, sometime around 2009. It was a young space, made for new entrepreneurs.
First steps in solarIn 2009, solar was still nascent and prohibitively expensive. In fact, they were not even sure that there was huge potential in solar. They first began in wind energy and helped commission 59 MW of wind farms for two clients in Tamil Nadu and Maharashtra.
In 2011, surprised by quick drop in prices, they partnered with Fonroche Energie, the largest private developer of solar PV in France, and waited for the next tender. It came one month later—the RfS for the big NVVN tender, batch II opened. They bid. They won their first project of 20 MW.
About 12 months later, though it was their first solar project in India, they were the first to commission a solar project in the entire batch on December 23, 2012. With Fonroche’s technical team and expertise and a strong construction partner in Mahindra EPC, the construction took only 5 months.
When will the solar boom happen?The solar PV industry is changing fast, maybe faster. The government tenders, over the next 3 years, are in the thousands of MWs, but some state governments are still struggling to make them work. With rising diesel prices, solar does seem like the panacea to the power problem.
Solar PV is expensive (about Rs. 7-9 per kWh) though becoming less and less every year. So when will it transform India? Many people say grid parity, i.e. when solar PV costs a client the same as drawing power from the grid. It seems logical, even intuitive. How could a client refuse solar power when it does not cost him more than the grid? This moment of grid parity could happen anytime between 2016 and 2022.
The entrepreneur brothers believe that the real boom will be sooner if one looks at the right benchmark—opportunity cost, i.e. what people give up or gain while choosing solar.
Solar PV, of course, replaces the power drawn from the grid. But when the grid is down, a solar PV plant can be technically integrated with diesel generator (DG) set and save diesel. In case, anyone thinks that an industrialist would not use this logic and buy more expensive solar PV than grid power, it has already been answered. As clients have already installed costlier DG sets to improve energy security, the decision for solar PV too will be based on economics, not ideology.
In India, today solar PV is already lower than the “true cost” of power used by industrial clients. Is that the full story? Not quite. When solar PV is more expensive than ‘true cost’, the chances of profits are still there. Looking at DG set scans clarify the same.How can industrialists make additional profits by buying expensive additional power from DG sets? The answer is fixed costs. The industrialists will add solar PV as long as additional profits are higher than the cost of power. With idle factories due to power shortages, many industrial clients use solar PV even today to maximise profits.
Although, the solar PV is more expensive than grid, and the true cost of power faced by industries, it saves costs for clients.
What’s next?PR Fonroche is looking at targeting private solutions in India. With global partners like Fonroche, it can leverage a tremendous amount of experience globally, with over 200 MW commissioned and 300 MW in development.
With this first 20-MW plant giving clients confidence in its ability to build high-quality PV plants efficiently, PR Fonroche will be able to build more complex, innovative solutions in India.
With over 65 MW of industrial solar PV solutions commissioned, the firm is looking to bring its experience to a plethora of industries—whether it’s to build solutions for pharmaceutical companies, warehouses or solutions for airports (Fonroche has a 1.3 MW solution in Nice Airport, France.) Besides ground mounted solutions, Fonroche is exploring rooftop solutions, solutions over canals (in prototype), and carports. It may release PV-powered greenhouse solution this year. Fonroche has built 35-MW greenhouse in Europe, and these greenhouses have a structure on top in which the PV panels are arrayed. Some portion of the power is used to support the greenhouse, while the majority of the power is exported to local communities through the grid.
This is an exciting concept for India as it doesn’t use land. In fact, it enhances the value of the land. And being very modular, it can be set up anywhere where there is a power shortage.
How can the government help?The government has done an excellent job in solar so far; however, the industry may complain that tariffs are too low, financing is challenging, and land acquisition is fraught with risks. The government needs to deploy and rigidly enforce existing policies, in particular RPO and wheeling policies. With these two, the private solutions business can take off without any burden on public money.
The government also needs to clarify industrial policy. Although it is appreciated that the government aims to promote solar manufacturing in India, there have been tremendous changes in solar manufacturing, globally. So the government needs to balance the need to promote solar manufacturing locally with the need to generate more power, which means more manufacturing downstream and likely more jobs in solar manufacturing. Fonroche follows a partially supported local manufacturing policy, especially in module manufacturing which allows a base to grow slowly while importing sufficient quantities to allow more power plants to be built. Once the disruptions in the global cell manufacturing industry subside in a few years, the government can introduce policies to increase local contents when India has more leverage.
Maybe then, the need of the hour will be a modified industrial policy which focuses only on module manufacturing.
Waiting for the solar boom