From Darkness to Light: The 7 White Horses Drawing the Chariot of India's Solar Mission
The suddenness in the acceleration of the Solar initiatives being launched by the Government of India has not only taken our country by surprise, but also caught industry participants off guard. It would thus be natural in a sense, to assume the difficulty of the global community to fathom the pace of developments that the Solar Industry in India is presently witnessing. Especially in the backdrop of India's historical Hindu rate of growth.
What may warrant attention nevertheless — although slightly departed from an economic or business perspective — is that while the growth of the Indian economy has always metaphorically compared with the movement of an elephant, in Hindu mythology, the chariot of the sun is drawn by seven white horses.
If the Chariot were to symbolize our Nation's resolve to make electricity available to all citizens and make India a global destination for Manufacturing — and the sun was to represent the potential that Solar Energy today has, to facilitate the achievement of this desired objective, then each of the following seven ideals that we are witnessing as India pursues its Solar ambition — may fittingly portray one of the seven horses that is drawing the chariot of India's Solar Mission forward.
- A Nation's Belief in the scale of the stated mission to achieve the targeted 100 GW capacity addition.
- The Determination of our country's leadership, that such a seemingly impossible task is also achievable when backed by an unshakeable resolve.
- An Alignment of government policy and framework to facilitate the achievement of the stated ambition.
- The extension of Co-operation by Nations to facilitate the transfer of information to replicate globally successful models in the Indian context.
- Creation of a favourable economic and business environment to attract foreign capital to invest into the undeniable potential of India's power sector as a Global centre for long term growth.
- Encouragement to enterprise and innovation to develop and implement unique business models to make Solar power an economically viable energy alternative.
- Ground level Action which has been visible over the past 4 months – and thereby dispelled the oft harboured doubt that riddles government initiatives of vision not being translated into action.
India's power sector is one which is saddled with the history of a chequered past. Accumulated debts and cumulative losses limit the ability of State Electricity Boards to offtake relatively more expensive Solar power from power plants that the government is pushing the construction of through various schemes and benefits. Hence there is a logical constraint on the long term viability of such proposed initiatives to make India energy sufficient by emphasizing on Renewable Energy generation in lieu of Conventional Energy sources.
As a result, the flow and scale of investment required to enable India to achieve the envisioned addition of Renewable Energy capacity has so far been limited by the fear of delinquency of a financially overstretched counterparty who was the purported offtaker of the generated power. This undeniable fact, along with the inherent currency risk that is associated with inflationary economic growth, have cast a veil over the future potential that India's power sector holds as an investment destination for Global Capital.
However, in between this chequered past and uncertain future, is the determination of the present, which provides a firm belief that India's repeated assertion of its intent to scale the installed Solar Power capacity from 3 GW to 100 GW by 2022, is not merely an aspiration, but infact a pursuit driven by definitive action.
Over the past few months in the follow up to Re-Invest 2015, India's Solar Industry has been the subject of unparalleled global attention. The government has in turn pro-actively engaged with global investors, taken concrete steps towards the implementation of its earlier announcements and sought the flow oftechnical knowledge and financial assistance across International boundaries from the World's leaders in Renewable Energy.
In the backdrop of this intent, and in a display of adaptability of policy to align with the demands of global capital markets, the recent announcements made by NTPC (National Thermal Power Corporation), which is India's largest energy conglomerate and 431stin the '2015, Forbes Global 2000' ranking of the World's largest companies, assume increased significance.
- NTPC, which is a Government Public Sector Undertaking and one of only four Companies to have been awarded 'Maharatna' status, would buy 15,000 MW of solar power on behalf of the Ministry of New & Renewable Energy (MNRE) by buying power on their own balance sheet.
Guidelines for the allocation of 3,000 MW out of this 15,000 MW, being that the First tranche of this allotment have been finalised, and the tender for 500 MW of this said capacity was released last week.
NTPC provides a far more secure counterparty to invest with, as compared to the financially stretched State Electricity Boards, who had till date been the sole offtakers of power, which had led to scepticism in the flow of investment to India in the desired scale.
- The 15,000 MW solar power being bought by NTPC in lieu of State electricity boards, will be in addition to NTPC's own plans to set up 10,000 MW of Solar power capacity in a Power Developer mode, for which it would be awarding EPC contracts to companies having requisite experience in the execution of large scale EPC projects – with a technical understanding of the Solar industry.
3,300 MW is the capacity addition that has been rolled out as the First Tranche of this initiative of NTPC, for which 250 MW was recently awarded for the state of Andhra Pradesh, with an additional 500 MW due to be tendered in May '15 and 250 MW in June '15.
- For the allocation of these capacities to interested companies, NTPC would run a reverse bidding process for the procurement of solar powered electricity and — under the aegis of the Ministry of New & Renewable Energy - are also in the process of finalising the guidelines for procuring such produced power in dollar denominated tariff to reduce currency risks for international investors sourcing off shore capital investments.
- NTPC would sell the power it buys to the states, initially by bundling the procured Solar power with unallocated conventional power to bring tariffs down, and with the scale of deployment being envisaged being largely unparalled, it is expected that economies of scale would further drive the cost of solar power to grid-parity.
The scientific interpretation of course of the Seven Horses that draw the Sun God's chariot is that they each represent one band of the visible spectrum of light, which we see in the form of a rainbow, when a ray of light breaks through clouds of darkness.
But just as the beauty of a rainbow lies in it's unannounced arrival, the rarity of its occurrence, and ephemerality of its presence, so too is the charm of India's Solar revolution in the unprecedentedness of its scale, the confidence in its achievement and the strength of the nation's resolve to make it happen in the face of all doubt and uncertainty.
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