Too many chinks in the solar power plan?

As part of India’s 100 GW renewable power plan, a capacity for 20 GW has been earmarked for a scheme in which unemployed youth and farmers are provided a grant of ₹50 lakh/MW from the Centre to set up solar projects of 0.5 MW to 5 MW. Besides this, a dedicated Feed-in tariff (FiT) from State governments could make the plants viable.

Can the policy fly? There are serious concerns. Firstly, the beneficiaries are required to hold a majority stake in the projects. How will an unemployed youth or farmer find money to invest (equity requirement is around ₹2 crore a MW)? Additionally, commercial banks will be wary of providing finance to applicants with little or no solar experience on a non-recourse basis.

Introducing changes What needs to change? The primary objective of the policy is to provide entrepreneurship and employment opportunities, along with ramping up renewable energy capacity and promoting solar energy. The objectives are important; what’s debatable is whether the current policy is the right way to go.

It would be great from a grid balancing and cost of delivery of power perspective if thousands of megawatt-sized projects organically sprout up across the country. There are plans to build large solar parks in remote locations and a significant number of rooftop projects. These small MW-sized projects would complete the picture. However, there are several other and perhaps better ways to provide employment and entrepreneurship opportunities both in the solar sector and outside.

These projects can ideally be located near smaller towns and village clusters. This will help provide more reliable power supply to such areas, minimising transmission losses and also in the medium- to long-term, minimising the need for new investments in transmission infrastructure for anticipated growth in power consumption. Instead of building green corridors where the new infrastructure will only be partially utilised due to the intermittent nature of renewables, the new investments can instead be channelled to strengthen local grids that can be more optimally utilised for both generation and consumption.

Any unutilised or not-so-fertile parcel of land in the area can be taken up for such projects. Small land owners of unutilised or not-so-fertile land can even lease such land parcels for secured long-term incomes, a model that has worked successfully in Punjab. Such projects, if taken up in significant numbers, can be competitive in terms of cost of delivered power.

Promoting projects The question is: How can the government help promote such projects? There is a need to identify areas where local power generation capacity is limited, land costs are reasonable and new 11kVA and 33kVA transmission lines are being planned to meet growing requirements. This requirement should cover large parts of India.

Based on this requirement, define the future cost of delivery of conventional power, add a rupee or two for the renewable component (as this power will help meet the discoms’ RPO targets) and add that as a FiT that the State discoms should be willing to pay. This should come to around ₹6/kWh. Renewables loans amounts up to about ₹15 crore are eligible for priority sector cost of debt (approximately 10.5 per cent per annum). All this, including the Centre’s grant, should be enough to make such projects viable.

The government should not harp on giving this capacity to unemployed youth and farmers. Even if the policy was to be fully implemented, a maximum of 19,000 people will get these projects (9,500 MW of capacity with each project at 0.5 MW). The target has the potential to create hundreds of thousands of jobs. The focus should be on skilling the youth by creating specialised training centres. More opportunities may be created if the policy is open-ended and the equivalent capacity actually comes up.

If the government really wants youth and farmers to be entrepreneurially involved, it needs to develop a model where their share in ownership is limited to the cost of land plus the grant money. This will provide them with a fixed annual income and an opportunity to work. Expecting them to arrange for both equity and debt only allows for nontransparent allocations and financial manipulation.

The writer is with Bridge To India, a strategic consultancy in the solar energy space

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