Rays Of Hope

In July, India’s northern and eastern power grids collapsed plunging nearly 40 per cent of the country’s population into darkness. While in Delhi metro lines stopped, in Asansol 200 coal mine workers were trapped as the electric pulley shafts stopped. The blackout provided the perfect setting for proponents of decentralised green power to push their case — harness the sun. India gets around 300 days and 2,300-3,200 hours of good sunshine in a year. And unlike wind, biomass or hydro, availability is more dependable. Gujarat, Rajasthan, Tamil Nadu and parts of Ladakh get the highest radiation in the country.

While sceptics say solar power is futuristic, even idealistic, rural India has adopted it in earnest. “Their power cuts are massive. There are no grid connections or they get power only for 4-5 hours a day. Even if solar is costly, two hours of extra power a day is enough,” says Narasimhan Santhanam, director of Energy Alternatives India, a Chennai-based renewable energy consultancy.

 

Acute power shortage in rural areas is also the business case for Mera Gao Power (MGP), a social enterprise. Run by American entrepreneurs Nikhil Jaisinghani and Brian Shaad, who worked on energy projects in Africa before moving to Sitapur, Uttar Pradesh, MGP’s model targets 50-household villages. They put solar panels on a cemented roof, two batteries in a small wooden cabinet in a room, and run 100-metre-long distribution lines around the village. This micro-grid serves up to 35 customers. Says Jaisinghani: “After an hour of engagement, about 20 per cent of the village signs up. By the time we have finished construction, another 20 per cent signs up. Our goal is to get 60 per cent, and we have found ourselves in a great position in almost every village from the start.” 

 

“As far as they know, we could take their money and never come back, but they still pay the fee because they are excited about the service,” he adds. While it can cost up to Rs 100 a week to get poor quality light from kerosene for few hours a day, it costs Rs 25 a week for solar power through this model.

 

MGP’s typical micro-grid can power two LED light bulbs for seven hours and charge a mobile phone — which is what most customers want. MGP invests Rs 50,000-55,000 in each village and recovers the amount in two years. The duo had invested Rs 15 lakh of their own (in 2010 and 2011), and were lucky to get a $300,000-grant from US Agency for International Development soon after. They have spent a third of it so far. MGP is present in 105 villages in UP, where it has about 10,000 users. MGP aims to have 30,000 customers by the end of 2013, 100,000 by 2014, and add a few hundred thousand customers every year after the third year.

 

 

There are others like MGP. Such as Gram Power, a start-up founded by Yashraj Khaitan and Jacob Dickinson from the University of California, Berkeley, which is working on a pay-as-you-go micro-grid system for rural India. Even solar energy service provider SunEdison is reportedly scouting for similar projects.

 

Can rooftop solar energy be a viable option in urban areas as well?

 

The rooftop solar market has two segments: 1-5 KW households units, and 100 KW-plus commercial and industrial units. It is the second kind that has the most potential, but has not caught on as the initial costs are high, financing is not easy to get, and awareness is low.

 

But Santosh Kamath, partner at KPMG India, feels people would adopt solar if they knew the advantages. “A hotel, mall or an office in Gurgaon pays a very high rate (for grid power). Solar rooftop would be cheaper.” For commercial units, the tariff difference between solar and  grid power may become minimal by 2014. Moreover, at Rs 8 a unit, solar power is cheaper than the Rs 14-15 per unit from diesel generators.

 

Kamath adds that net metering would make rooftop solar more viable since the houseowner would pay for net energy consumed — the difference between the solar power he feeds to the grid and what he draws from it. Kolkata’s New Town has introduced a solar-powered 1.76- acre housing complex with net metering.

 

There are other models as well. For instance, utilities can have a direct agreement with developers to buy and sell power. Since solar is high on upfront costs, leasing would make the equipment more affordable for retail customers.

 

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“We approach commercial customers in two ways,” says Shubhra Mohanka, director of Solid Solar. “For people with high bills, we put up a grid-connected system without a battery back-up for captive consumption.” Most of their commercial customers use this system as it suits those who can consume all their solar power. “If you are trying to save on the diesel bill, we employ the back-up solution. Lights, fans, computers and LCD TVs can be put on solar. This has battery back-up and the appliances can run for four hours a day,” she says. Domino’s has approached Solid Solar to manage requirements in off-peak hours with solar power instead of diesel generators, says Mohanka. Solid Solar has rural users as well in U.P., Bihar and Haryana, and some commercial units in Gurgaon and Manesar. It selects places where banks are willing to lend to set up the systems. Last year, it earned Rs 10-13 crore from its rooftop solar business, and expects 45-50 per cent year-on-year growth.

 

The commercial and industrial sector is more lucrative because of higher volumes. “Once domestic financing improves, it will be easier for us to service households,” says Mohanka. It will also require change in regulations, grid parity and net metering, say experts.

 

Azure Power, run by Inderpreet Wadhwa, has a different model. It harnesses 2 MW from rooftops of government buildings and 500 KW from private buildings in Gandhinagar. It bears the project cost but sells all the power to the grid. Of the Rs 11 per unit it earns, Rs 3 a unit goes to the building owners. But customers need to have commercial understanding and be willing to sign long-term agreements, says Wadhwa. “It is a challenge for private companies to pay a lot upfront for something that works over 25-30 years,” he says. “But that is the opportunity — converting capital expenditure into operational expenditure and ensuring performance.” 

 

Lack of financing is a major hurdle. “I have gone to SBI, IREDA (Indian Renewable Energy Development Agency) and so on to get funding for my customers... But banks do not get any revenue from this,” says Rajeev Agarwal, founder of Chennai-based Ardor Green Solar & Wind. Costs can be high. Ardor, for instance, has a Rs-7-lakh system that can also run air conditioners. Despite 30 per cent subsidy, it would still cost Rs 5 lakh. Incidentally, the Reserve Bank of India has included loans to individuals setting up off-grid solar (and non-solar) projects under priority sector lending.

 

Agarwal’s biggest success story is Jayaraj Chandran, who started with a solar water heater. Chandran saved up and bought the Rs-7-lakh system in March this year. His testimonial on Ardor’s website says he has “escaped from the clutches of very poor grid supply”. 

 

States, social enterprises and companies are making forays into rooftop solar. Gujarat has installed solar capacity of 654.8 MW — 66.8 per cent of the national capacity. It is now looking beyond large-scale solar units to smaller decentralised ones, and has allowed residences to sell from rooftop units to the grid.

 

But challenges abound. Rooftop solar power cannot substitute conventional power. Limited space, ownership of panels are just some of the other issues. But KPMG’s Kamath feels that with grid parity nearing, the economically viable rooftop market could grow to 4,000 MW over the next five years. He expects the price of generating solar power to decline 5-7 per cent per annum, provided there is economy of scale in equipment manufacturing, efficient technology and low-cost manufacturing locations.

 

Even though the overall situation is tough, some big companies have entered the sector. Lanco Solar set up its first rooftop project on  Parliament House. It has another in Delhi’s Safdarjung airport, and atop government buildings and cement plants. Their current year’s target is 10 MW. “Government, commercial and industrial units are interesting for us,” says V. Saibaba, CEO of Lanco Solar.

 

Grid-interactive rooftop systems are already an integral portion of the solar market in countries such as Japan, Spain and Germany (80 per cent). In India, the grim power situation is reason enough to push for rooftop solar harnessing. KPMG’ report, The Rising Sun, says power demand will push our energy import dependence from 30 per cent now to 59 per cent by 2032. Coal shortage is expected to increase imports four times in the next five years. By 2030, the share of oil imports could increase 90 per cent.

 

The increase in power demand is what will spur the rooftop solar market, feels Lanco’s Saibaba. “If we have to realise a GDP growth of 7-8 per cent, we have to add at least 100,000 MW in the next five years. You have to decentralise power generation. Fortunately, three-fourths of India has excellent solar radiation of almost 5-6 hours.” 

Bring on the sun!

 

yashodhara(dot)dasgupta(at)abp(dot)in

 

(This story was published in Businessworld Issue Dated 12-11-2012)