Cloud Over India's Solar Power Plans

By SUNIL RAGHU
NEW DELHI -- India is betting big on abundant sunshine to feed its growing power needs, but funding costs and feeble solar panel manufacturing capacity are clouding its ambitions to harness the non-fossil fuel.
In July 2009, India unveiled a $19 billion plan to produce 20 GW of solar power by 2020, with this increasing to 100 GW by 2030 and 200 GW by 2050.
It's a hugely ambitious project--solar now accounts for only a tiny proportion of India's energy mix. The need for more capacity is clear--apart from environmental imperatives, India's inability to meet power demand now has for long crimped its economic growth.
Rules governing the sale of solar power to India's national and state grid companies are vague, solar equipment makers don't yet produce enough to benefit from economies of scale and bring down prices, and financing costs make it difficult to expand output rapidly.
Of India's installed generating capacity of 152.36 gigawatts, there are just two megawatts of solar capacity connected to the grid. There is no data available for off-grid generation.
However, things are moving. On Saturday the government is to unveil a roadmap on how India can achieve its target, which includes provision for surplus solar power made in the domestic sector to be fed into the grid for a fee.
It will also include the role of the federal and provincial governments, funding issues and what sort of financial supports will be made available.
Grid companies aren't obliged to buy solar power but the "Solar Mission" announcement may change this.
Solar power in India costs 15 rupees ($0.32) per kilowatt hour, compared to 3.5 rupees per kilowatt hour power drawn from the national grid, government officials say.
Other parts of the roadmap may call for government buildings to be fitted with solar panels by 2012, and for the promotion of microfinancing to encourage nearly 20 million households to start using solar power by 2020.
"The solar push will not come easy. After all, we are talking about the world's second most populous nation transitioning from fossil-fuel energy, which accounts for nearly 60 per cent of our electricity generation, to solar power becoming a substantial part of the country's energy mix," Rajiv Arya, chief executive officer of Moser-Baer (India) Ltd.'s photovoltaic business.
Photovoltaic cells, are usually made of silicon, collect solar energy and convert it to electricity.
Moser-Baer will invest $5 billion over 10 years to build new photovoltaic cell manufacturing capacity, in plants in Hyderabad, Chennai and Delhi, Chairman Deepak Puri said Tuesday.
Only two other local companies--Tata BP Solar and Webel-SL Energy Systems Ltd. -- make solar panels.
The government recently invited bids from companies to set up photovoltaic cell making plants, and offered a range of supports for this.
"The investment required to set up a 3000 megawatt manufacturing capacity will be around 180 billion rupees," said Rajiv Jain, associate director at India Semiconductor Association. "It is not the money but the cost of finance that will be critical." Industry players such as K. Subramanya, chief executive at Tata BP Solar, expect the targets can be met and funding won't be a hurdle.
"This is entirely possible and we have in front of us examples of telecom and internet revolutions that have happened in less than a decade," Mr. Subramanya said.
India had about 340,000 mobile phones in 1997 but today has over 500 million cellular subscribers.
Write to Sunil Raghu at Sunil.Raghu@dowjones.com