Time for Shastang Surya Namaskar

Guess who said this: ‘We should not give in to those who say environment goals should take a back seat till economy improves… that would be short-sighted.’

That was California governor Arnold Schwarzenegger, addressing a solar energy conference. Under his leadership, the state has been leading in green initiatives. The above quote was at a time the US markets were at the peak of their fall.

Such conviction is as much a booster to the renewable energy sector as the recent tax incentive legislation that was made a law. The extension of tax credits in the US has seen maximum advantage to the solar sector with eight years while wind, hydro, etc got between 1-2 years. Tax credits can cover around 30 percent of project costs for solar. Homeowners in the US with solar PVs installed also can avail 30 percent tax credit.

The whole exercise amounts to $18 billion which is to be paid by closing tax loopholes for oil and gas industry.

India has also announced a number of incentives like subsidy, soft loan, 80 percent accelerated depreciation, confessional duty on import of raw materials and certain products, excise duty exemption on certain devices/systems etc. for the production and use of solar energy systems. The Indian Renewable Energy Development Agency provides revolving fund to financing and leasing companies offering affordable credit for purchase of PV systems.

India’s National Action Plan on Climate Change (NAPCC) is likely to become a significant driver of new investment opportunities in the country’s renewable energy portfolio, and in solar generation in particular. Its national Solar Mission to be ready this year end will chart the route for boosting solar PV production by 1000 MW annually by 2017, and another 1000 MW from CSP by the same period.

A generation based incentive has been offered for solar since this year. The generator claims subsidies based on the power it supplies to the grid. A financial assistance of Rs 12 per kilowatt hour in case of solar photovoltaic and Rs 10 per kilowatt hour in case of solar thermal power is being given by the MNRE. Financial incentives for the semiconductor industry is also expected to aid the solar sector.

But doubts still persist.

For the capital intensive sector that it is, linking subsidies to performance could deter investors. But making it capital based would mean that higher the capital, more the subsidy and hence there is no effort to keep costs down. That has been the evidence due to which the new generation based subsidy is being tried out. It had also been seen that high thresholds for capital subsidies meant few players could enter the arena.

Low interest long-term finance is what many seek. Others believe interest subsidies along with generation subsidies will be a sure recipe for wooing many.

It is calculated that India receives 5000 trillion kilowatt-hours of solar energy annually, and that even 1 percent of this harnessed could meet all the energy demands required in 2030! What stops us then?

In an industry that has focused on manufacture and exports instead of adoption, lack of infrastructure has been a big deterrent. Evacuation networks or networks that carry the power generated into the grid need to be put in place. At present hardly 2 MW of solar power is grid-linked.

Perhaps as manufacturing that caters to growing domestic demand picks up (with many companies like Signet Solar, Tata BP Solar, Moser Baer, investing thousands of crores into their plants,) costs will come down. But what many advocate is a feed-in tariff, where an assured and high rate, is fixed for power fed into the grid. That is believed to have been behind the success of solar in Germany where rates three and four times that of market rate was offered. It hardly meant a 2 percent rise in bills for customers.

Any reason why India should not opt for this? Besides the fact that UK still believes it is too 'interventionist' and prefers to go by RPOs. Lol! we still look up there for guidance, right?