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Solar Sector

Solar was the most talked about sector in 2010 and there was a rush from different entities to enter this sector and profit from its growth. This was very evident when the NTPC Vidyut Vyapar Nigam (NVVN) issued request-for-selection (RfS) document for a total capacity of 620 MW grid connected solar power projects under JNNSM. Against the capacity of 620 MW, NVVN received applications for 5126 MW capacity, including 3311 MW capacity for solar thermal and 1815 MW capacity for solar photovoltaic power plants(Source: MNRE).

In addition to this, MNRE also allotted projects of total capacity of about 100 MW registered for the Generation Based Incentive (GBI) under the guidelines for “Rooftop PV and Small Solar Power Generation Programme (RPSSGP).

At the state level, Gujarat has been very aggressive in promoting solar energy. The state allotted 716 MW (Solar PV and Solar Thermal combined) of solar projects to 34 developers in the first round. Later on, the state allotted another 565 MW of projects bringing the total allotment to 1281 MW.

On the installation front, the year saw the commissioning of two major projects. The first one was by the Solar division of Reliance Industries Limited. Reliance started operations of its 5 MW solar PV power plant in Khimsar, Rajasthan. The other major project to start operations was the 5 MW project in Sivaganga, Tamil Nadu by Moser Baer. The year also saw additions of several smaller grid connected projects come on line (North Delhi Power Limited in Delhi, Moser Baer in Chandrapur, Maharashtra, etc)

On the financing side, Indosolar, a manufacturer of Solar Cells used in Solar PV power plants, went for an Initial Public Offering(IPO) in September 2010. The other company to go for IPO was Orient Green Power, an Independent Power Producer(IPP) focused on renewable energy power production.

A notable development was the investment by Private Equity firm Blackstone in Moser Baer. The PE firm has plans to invest about $300 million in Moser Baer Projects Private Ltd (MBPPL).

As far as manufacturing components for Solar energy is concerned, the JNNSM mandates the use of Indian made modules (from 2010) and cells(from 2011) for all projects coming under the mission. In addition to this, many incentives are available for setting up manufacturing plants in India. These initiatives are expected to benefit Indian companies like Tata BP Solar, Moser Baer and Indosolar among others. In fact, Lanco Solar announced its plans to set up an integrated solar manufacturing facility(capacity equivalent of 250 MW/year) in Chattisgarh. Lanco is only one of the many players that have plans to enter the Solar PV manufacturing business. With more and more components manufactured in India, it is expected that the price of Solar PV modules will drop significantly, thereby enabling more and more Solar power installations all over the country.

REC trading

The trading of Renewable Energy Certificates (REC), one of the key growth driversfor the Renewable energy industry, successfully started in India in March 2011. The RECs were traded in 2 of the major power exchanges – Indian Energy Exchange (IEX) and Power Exchange India Limited(PXIL). Under the REC mechanism, distribution companies are mandated to purchase a percentage of their power requirement from renewable energy sources. If they are unable to do that, they can compensate for it by purchasing the Renewable Energy Certificates (RECs). These RECs are sold by renewable energy power producers at the exchanges. In addition, they can also sell the commodity electricity to other buyers. There are two types of RECs – Solar RECs and non-Solar RECs. The price range in which the RECs will be traded is set by the Government agencies.

If the REC trading becomes successful, the renewable energy sector will slowly reduce its dependence on subsidies for sustainable growth and will be driven by market forces.

Outlook for 2011 and beyond

The year 2011 is expected to be the year of Solar in India. During this year, several solar projects are expected to come online, especially solar projects that were allotted by NVVN – about 150 MW(Solar PV) under JNNSM – and about 500 MW(Solar PV) allotted in Gujarat. Since Solar Thermal projects take longer time for completion, those projects are expected only in 2012. The Solar policies for other states, especially Rajasthan, are eagerly awaited. All these factors should result in a big jump in the contribution of solar energy to the overall power requirement. With the continuous reduction of costs in Solar, it is expected that there will be an increase in the rate of installations/year.

Wind installations are also expected to increase at a steady pace in 2011 and beyond. With most high potential sites (high wind speeds) already utilized, project developers will install wind turbines in lower wind speed locations with turbines that are taller and are designed for such locations. As seen earlier, since almost every wind turbine company is setting up manufacturing plants in India, the costs of installing Wind power generators should go down. The debate about setting up off-shore wind turbines along the Indian coastline will intensify in 2011.

The growth of other renewable sources like Biomass power, small Hydro and Waste to energy should also continue at a steady pace. More and more biomass project developers are expected to get into energy crop farming.

REC trading is expected to improve the returns for renewable energy projects.

Conclusion

The year 2010 was a historic year for the Indian renewable energy industry, mainly due to the big push given to the Solar sector by the government. With the nuclear disaster in Japan and the increase in crude oil prices due to the turmoil in Arab countries, more and more countries across the globe are turning towards Renewable energy. This augurs well for India and the world and at this point, things can only go up for the Indian renewable energy sector.