CEE Jan-Mar 2012

plants and about Rs 11 .50 per unit for PV plants (prayas: India 's Solar Mission: Procurement and Auctions). These were considerably lower than the feed-in tariffs set by the Central Electricity Regulatory Commission, showing that Indian costs were likely to be lower than global costs. It is clear that, at current costs, solar is about four times more expensive than coal-based generation. So, the question is whether our strategy should be to concentrate on how to bring down the costs of solar plants by providing capital for technology generation while we continue to put in some minimum amounts for testing this technology; or whether to bring about a rapid increase in solar energy, hoping that the market wi ll automatically bring down the costs. If we look at what is happening to the manufacturers of solar cell s, it is quite interesting. US manufacturers are shutting shop as they cannot compete with Chinese and Taiwanese. In India, for example, the demand for new power plants has resulted in a huge number of orders being placed with Chinese equipment manufacturers. The Chinese, on the other hand, do not have a large internal market and are relying on the global market to bring down costs. Therefore, creating a large market by itself does not guarantee a market for indigenous manufacture. The problem with looking at a market-driven solution is that in reality, there is no market as yet for solar power. There have been attempts to create an artificial market by fiat - a regulatory market by forcing distribution companies to buy high-cost power. A real market– driven solution would have been to have solar power compete with other forms of power. Such a solution would obviously not work for solar under the current costs. Solar technology would need to be subsidized for the near future before it becomes competitive. The question in policy terms is about who shou ld benefit from this and who should pay for this subsidy. If we look at the current policy, relying on the market means two things. It means that the subsidy is being paid to the party that puts up the solar plants - they are the ones who will receive the money every year for the life of the plants. An alternative scheme would have been to pay the manufacturers of solar equipment the required subsidy. This would have enabled the subsidized solar plants to compete with the coal– based ones and as the cost of coal rises, ST or PV equipment would become cheaper. Giving the subsidy to a Lanco or a Reliance does not, by itself, generate technology for the country or bring down costs. The second issue is about who pays for this subsidy. Relying on RPOs would simply be passing on the burden of the subsidy to the consumer. With coal prices rising and a whole bunch of new private power plants coming into the grid, the price of electricity is bound to rise steeply this year. The issue of who is to pay for solar subsidy will assume much greater importance in the coming years, particularly as the quantum of RPOs increases. In many countries, the economic crisis has seen the RPOs that were promised earlier become impossible to be maintained. Germany is finding that rooftop PV panels cost a substantial amount, leading to discussions on how big a subsidy the consumers can provide. The price of feed-i n tariffs has also been reduced considerably from the starting prices in 2003. In Spain, where the government directly provides the subsidy, this subsidy is being drastically cut, raising questions about existing contracts. Therefore, high-cost electricity form solar is an issue even for countries that are considerably richer. India has a twofold problem in framing energy sector policies -one, providing cheap electricity to the sections that are currently not connected to the grid or that cannot pay for high-cost electricity and the other is to address the long-term issues arising out of climate change. The only way to negotiate the twin challenges is to work out a policy that brings down the cost of solar energy before its large– scale induction into the grid. For th is, the focus of subsidies should be on the production end, investing in the manufacture of solar equipment for lowering its costs, and not on the distribution end. Unfortunately, blinded by market fundamentalism, this is what the current policy-makers are loath to do. Courtesy: Renewable Watch, Oct. 2011, Pp45-46. RENEWABLE ROAD MAP XII Plan Approach Paper proposes integrated role for sector With the Twelfth Plan around the corner, the focus is on the future requirements of the economy and on each sector that contributes to it. The renewable energy sector is expected to play a key role in 51