solar industry

Contents

Introduction

Solar energy has experienced an impressive technological shift. While early solar technologies consisted of small-scale photovoltaic (PV) cells, recent technologies are represented by solar concentrated power (CSP) and also by large-scale PV systems that feed into electricity grids. The costs of solar energy technologies have dropped substantially over the last 30 years. The rapid expansion of the solar energy market can be attributed to a number of supportive policy instruments, the increased volatility of fossil fuel prices and the environmental externalities of fossil fuels, particularly greenhouse gas (GHG) emissions. Like other renewable energy technologies, solar energy benefits from fiscal and regulatory incentives and mandates, including tax credits and exemptions, feed-in-tariff, preferential interest rates, renewable portfolio standards and voluntary green power programs in many countries.
Theoretically, solar energy has resource potential that far exceeds the entire global energy demand. Despite this technical potential and the recent growth of the market, the contribution of solar energy to the global energy supply mix is still negligible. This study analyzes the condition of the solar power industry from the Global as well as Indian point of view. The study also covers various technologies used for solar power generation and various policies and incentives provided by the Indian government for the growth of Solar Power industry. We have also tried to focus on the challenges faced by the industry and the future prospects.
Despite the huge technical potential, development and large-scale, market-driven deployment of solar energy technologies world-wide still has to overcome a number of technical and financial barriers. Unless these barriers are overcome, maintaining and increasing electricity supplies from solar energy will require continuation of potentially costly policy supports.
Technologies used for electricity generation using solar power

Solar energy can be converted to electricity in two ways -PV devices or solar cells and solar power plants. Solar cells convert sunlight directly into electricity, while concentrated solar power plants indirectly generate electricity when the heat from solar thermal collectors is used to heat a fluid, which produces steam that is used to generate power. Light received from the sun can either be converted to electricity (photovoltaic technology) or can be indirectly (concentrated solar power) used to produce electricity and for other heat-based applications.
A. Generation of electricity from solar energy is done in following two ways
1. Solar photovoltaic (SPV) -is the process of converting solar radiation (sunlight) directly into electricity using a device called solar cell. A solar cell is a semi-conducting device, made of silicon or other semi-conductor materials, that generates electricity when exposed to sunlight. Magnitude of electric current generated depends on the intensity of solar radiation, exposed area of solar cell, type of material used in fabricating the solar cell and ambient temperature. Solar cells are connected in series and parallel combinations to form modules that provide the required power. In addition to grid-connected systems, PV systems are also used in remote locations that are not connected to the electric grid. They are also used to power watches, calculators, and lighted road signs.

Working of photovoltaic cell

Following are the 4 types of SPV technology:
1. Crystalline solar cells
2. Thin-film solar cells
3. Photovoltaic modules
4. Balance of System (BoS)

2. Concentrated Solar Power – CSP indirectly generates electricity when the heat from solar thermal collectors is used to heat fluid, producing steam that is used to generate power.Solar power systems usesolar radiation as a high-temperature energy source to produce electricity in a thermodynamic cycle. The need for concentrating solar energy arises because solar radiation reaches the earth's surface with a density (kW/m2) that is adequate for heating systems, but not for an efficient thermodynamic cycle for producing electricity. Thus density of solar radiation is concentrated by using mirrors or lenses. The first commercial plant to use this technique is in operation in California, USA, since the mid-1980s, with 354 MW of solar power installed. Solar radiation can also be used to drive chemical reactions for the production of fuels and chemicals such as detoxification of chemical waste and energy storage.

Schematic of a concentrated solar thermal trough power plant with storage
Following are the 3 types of solar thermal systems:
1. Solar water heating systems
2. Solar cooking systems
3. Solar drying systems
B. Efficiency levels of technologies:
Technology used in solar power generation plants determines the efficiency of the plants. Crystalline PV cells provide higher efficiency as compared to thin films cells; however they are also more expensive as compared to thin film cells. In India, most PV based solar power plants use crystalline PV modules as it is more established. With advancement in technology, the efficiency levels are expected to improve in future.

Global Scenario

Solar energy has experienced phenomenal growth in recent years due to both technological improvements resulting in cost reductions and government policies supportive of renewable energy development and utilization. The installation of solar energy technologies has grown exponentially at the global level over the last decade. For example, as illustrated in Figure 1, global installed capacity PV (both grid and off-grid) increased from 2.2 GW in 2002 to approximately 102 GW in 2012. The global installed solar photovoltaic (PV) capacity increased by 44 per cent y-o-y to reach 102 GW in 2012. The global solar capacity has grown at a CAGR of 46.5 per cent over the last 10 years.
Two-thirds of all solar PV capacity in place worldwide has been installed since January 2011. It took nearly four decades to install 50 GW of PV capacity worldwide. But in the last 2 1/2 years, the industry jumped from 50 GW of PV capacity to just over 100 GW. At the same time, global module prices have fallen 62 percent since January 2011.
Even more amazingly, the solar industry is on track to install another 100 GW worldwide by 2015 -- nearly doubling solar capacity in the next 2 1/2 years.(Figure 2)

Global cumulative installed solar PV power capacity 2002 – 2012

Figure 1

Figure 2
A handful of countries dominate the market for PV. Almost 31 GW of capacity was added in 2012, spearheaded by Germany which added 7,604 MW followed by China which added 5,000 MW. In terms of cumulative installed capacity, Germany is still the market leader with installed base of 32,411 MW. However, its share in the world's installed capacity has decreased to 31 per cent from 35 per cent a year ago. Significant capacity additions were led by China and USA which added 5,000 MW and 3,346 MW respectively. However, a number of countries are experiencing a significant market growth. Notably, Czech Republic had installed nearly 2 GW of solar PV by December, up from almost zero in 2008. India had a cumulative installed PV capacity of 102 MW.

Top ten countries with installed PV power capacity (2012)

Figure 3
Potential policy instruments to increase solar energy development
The impetus behind the recent growth of solar technologies is attributed to sustained policy support in countries such as Germany, Italy United States, Japan and China. Solar energy technologies face a number of technological, financial and institutional barriers that further constrain their large-scale deployment. Policy instruments introduced to address these barriers include feed in tariffs (FIT), tax credits, capital subsidies and grants, renewable energy portfolio standards (RPS) with specified standards for solar energy, public investments and other financial incentives. While FIT played an instrumental role in Germany and Spain, a mix of policy portfolios that includes federal tax credits, subsidies and rebates, RPS, net metering and renewable energy certificates (REC) facilitated solar energy market growth in the United States.
Germany:
The German solar PV market is driven by the Renewable Energy Sources Act (EEG) which offers preferential feed-in-tariffs for renewable electricity. The PV market also receives support from tax credits, loan for private PV investments, community PV investments and community infrastructure investments from banks, etc.
Japan:
The growth in PV installations has been driven by capital subsidies for residential PV systems and feed-in-tariffs.To promote rooftop installations, subsidy in the range of 30,000 JPY/kW to 35,000 JPY/kW were provided to individuals and corporates in 2012 installing residential PV systems. Electric utilities are obliged to buy surplus power produced by PV systems at preferential tariffs.
China:
The growth in the solar PV market is being driven by two national capital subsidy programs introduced in 2009- the 'Building Integrated Photovoltaic (BIPV) program and the 'Golden Sun' program.
United States of America:
Capacity additions have been driven by tax credits, FiTs, renewable purchase obligations (RPOs) and loans and grants by government. Sharp decline in input prices also supported the capacity additions.
Indian Scenario

Abundant Resource :
India is endowed with vast solar energy potential. About 5,000 trillion kWh per year energy is incident over India’s land area with most parts receiving 4-7 kWh per sq. m per day. Hence both technology routes for conversion of solar radiation into heat and electricity, namely, solar thermal and solar photovoltaic, can effectively be harnessed providing huge scalability for solar in India. Solar also provides the ability to generate power on a distributed basis and enables rapid capacity addition with short lead times. Off-grid decentralized and low-temperature applications will be advantageous from a rural electrification perspective and meeting other energy needs for power and heating and cooling in both rural and urban areas. From an energy security perspective, solar is the most secure of all sources, since it is abundantly available in India. Theoretically, a small fraction of the total incident solar energy (if captured effectively) can meet the entire country’s power requirements. It is also clear that given the large proportion of poor and energy un-served population in the country, every effort needs to be made to exploit the relatively abundant sources of energy available to the country.

Action Plan:
The role of energy in India’s economy has become globally relevant in recent years due to rising concerns about the environmental impacts of energy use. Although there has been a gradually increasing dependency on commercial fuels, a sizeable amount of the national energy requirement, especially in the rural household sector, continues to be met by non-commercial energy sources. These include fuel, wood, crop residue and animal waste. Future economic growth will lead to a rapid increase in demand for commercial energy higher levels of urbanization, and adoption of modern lifestyles. The Renewable Energy Plan called for achieving a 10 percent share for renewable energy in incremental power capacity by adding about 10,000 MW of new renewable energy based generation. In addition to the grid connected renewable energy goal, other major renewable energy initiatives include-instalment of 1 million household solar water heating systems; electrification by renewable mini-grids for 24,000 villages without electricity; deployment of 5 million solar lanterns and 2 million solar home lighting systems; and establishment of an additional 3 million small biogas plants. The Electricity Act has provided a major thrust to renewable energy technologies via its mandate which is to promote cogeneration and generation of electricity through renewable sources of energy by providing suitable measures for connectivity with the grid and sale of electricity to any persons, and also specifying, for purchase of electricity from such sources, a percentage of the total consumption of electricity in the area of a distribution licensee. The National Electricity Policy gives each State regulator authority to create a Renewable Energy Portfolio Standard for the transmission and distribution companies serving their jurisdictions. The Ministry of New and Renewable Energy (MNRE) is involved in the development, demonstration and utilization of various renewable energy-based technologies, including Solar Thermal, Solar Photovoltaic’s, Wind power etc. Major MNRE activities include:
(i) Project development and financing of solar energy based grid power
(ii) Urban solar hot water heaters
(iii) Resource mapping.
India has the most developed and diversified solar energy market. The Government of India has set a goal of electrifying 18,000 remote villages. These targets are in addition to those fixed earlier, including establishing 1 million solar PV systems for lighting; 8,000 solar PV pumps for irrigation; 10,000 solar PV generators, stand-alone solar PV power plants, solar water heating systems, solar air heating systems, and solar cookers, including large steam cooking systems, and more solar retail outlets and solar passive buildings.
Schemes that have been introduced in India for Solar Development
Jawahar Lal Nehru National Solar Mission(JNNSM)
India, being a tropical country has huge potential for solar power generation. The total installed capacity of solar energy in the country increased to 1,686 MW as at end of March, 2013 from 941 MW, a year before driven by JNNSM and Gujarat solar policy.
The National Solar Mission is a major initiative of the Government of India and State Governments to promote ecologically sustainable growth while addressing India’s energy security challenge. It will also constitute a major contribution by India to the global effort to meet the challenges of climate change.
JNNSM was launched as part of India's National Action Plan on Climate Change (NAPCC) in 2010. This mission aims at establishing solar power in India. The mission targets include -
20 GW of grid connected solar power generation capacity by 2022
2 GW of off-grid solar applications by 2022
20 million square metres of solar thermal collector area
Creation of favourable conditions for developing solar manufacturing capability in the country
Supporting R&D and capacity building activities to achieve grid parity by 2022
The mission adopts a three phase approach. The program envisages a ramp-up of solar capacity to 1 GW by 2013-14 (Ph-1), 4 GW by 2017-18 (Ph-2) and 20 GW by 2022(Ph-3
Proposed Roadmap:

Roof-top and small grid-connected projects
The Phase II of JNNSM targets deployment of 1,000 MW of rooftop projects both at off-grid and grid connected levels. Rooftop and other Small Solar Power Plants (RPSSGP) launched in Phase1 would be continued in Phase 2 as well. However, only the states which were not covered under phase 1 would be eligible in Phase 2. Some of the salient features of the scheme are as follows:
The project will be connected to 33 kV grid and below.
The size of projects will be in the range of 500 kWp to 2.5 MWp and capacity can increase in multiples of 500 kW only.
Minimum and maximum capacities shall be 1 MW and 5 MW, respectively
Maximum permitted projects for a state shall be up to the capacity to meet requirement of solar RPO at a rate of 0.25 percent
Off-grid applications
In case of off-grid applications of solar power, a 30 per cent capital subsidy and/or 5 per cent annual interest bearing loans has been approved for general category states. Capital subsidy of upto 90 per cent of benchmark project cost is available for the special category states of Sikkim, Jammu & Kashmir, Himachal Pradesh and Uttarakhand.

RPOs to drive demand for solar power; enforcement to remain critical

The Centre has laid down solar-specific renewable purchase obligations (RPOs) within the overall RPO target in order to push demand for the relatively expensive solar power. It has specified that 0.25 per cent of the overall power consumption must be met by solar power in phase 1, to increase to 3 per cent by 2022. Subsequently, few of the states have specified their own solar RPO targets for the next two to three years. However, stricter enforcement of RPOs is a critical factor for the sector's development.

In order to facilitate purchase of solar power by states which have little or no solar power potential, solar renewable energy certificates (RECs) have been introduced. These RECs are eligible for trading on the power exchanges within a price band of Rs9300-13400 per REC.

Various State Policies:
Till 2011-12, only Gujarat and Rajasthan had a state solar policy. In 2012-13, various states such as Andhra Pradesh, Tamil Nadu, Karnataka and Madhya Pradesh have also announced solar policies given the sharp fall in capital costs for solar modules.
Tamil Nadu
The state solar policy came into operation on 26th September 2012 and shall remain applicable till 2017. The state has a set a target to setup 3000 MW solar capacities in next 3 years by 2015.
Some of the salient features of the policy are-
Solar projects shall commission within 8 months from the date of signing PPA
PPA shall remain operational for a period of 20 years
The evacuation line from interconnection point to grid substation shall be laid by the state at the cost of the project developer
Land acquisition will be the responsibility of the developer
Uttar Pradesh
Uttar Pradesh came out with a draft solar policy in September 2012.This policy shall remain in operation up to March 31, 2017. The state targets an installed capacity base of 1000 MW till March 2017.
Some to the salient features of the policies are-
A minimum capacity of 5 MW and a maximum capacity of 50 MW solar power projects will be covered under this policy.
PPA shall remain operational for a period of 10 years
Time frame for commissioning of solar PV projects will be 13 months and solar thermal projects would be 28 months from date of signing PPA.
Land acquisition will be the responsibility of the developer
The responsibility of getting connectivity with the transmission system will lie with the project developer.
Solar power projects will be exempted from transmission /wheeling and open access charges for third party sale and captive units
Challenges for Solar Industry in India

Solar Industry in India is still in nascent stages. While there’s no doubt to the enormous potential that solar power holds in India, there are some big challenges to be surpassed, before the country lays stake to becoming a true global leader in the space. Following are some of the prominent ones:
High Cost
Even after a significant reduction in the cost of per unit of solar electricity produced from Rs. 18 to Rs. 8, the figures are still double as compared to thermal and hydro electricity per unit cost. This high cost is mainly due to dependence on imports for silicon and solar wafers used for the manufacture of solar cells – about 80% of which comes through imports.
Capital Intensive and Lack of effective Financing Infrastructure
Financing the mega-projects might prove to be India’s Achilles Heel. There is a danger that the central government facing a severe fiscal deficit may not follow through on its commitment to fund the mega-projects and cash-strapped state governments may not be in a position to buy power from the central government or private players.
Policy and Land Issues
Over 26 approvals are needed for a company to set up a solar farm which is a very tedious and time consuming process. Also, in India, land is a scarce resource and the amount of land required for utility-scale solar power plants- approx. 1 km 2 for every 20-60 MW generated- could pose a strain on India’s available land resource.
Disparity in solar potential across states and Uncertainty in weather conditions
Although some states like Gujarat and Rajasthan have a huge potential to produce solar energy but, the fluctuation of solar irradiance and temperature are some of the parameters that affect the power quality of photovoltaic systems. The fluctuations can lead to undesirable variations of power and supply quality.

Irradiance Map of India
Education and Awareness
PV systems present a new and less familiar technology; only few people understand it, its value and feasibility. This lack of information further slows the market and technological growth.

Challenges for Captive Solar Projects
For captive solar projects, the architecture most suitable to India would be highly distributed set of individual rooftop power generation systems, all connected via a local grid which would be highly capital intensive.
Also, net metering system is not available and thus surplus power generated through renewable energy cannot be sold to utilities.
Scope for the Solar Power Industry

The Indian Solar energy sector has been growing rapidly in the past few years, majorly due to Government’s initiatives such as tax exemptions and subsidies. Due to technical potential of 5,000 trillion kWh per year and minimum operating cost, Solar Power is considered the best suited energy source for India. Today the installed capacity of Solar power is about 0.1 percent of India’s total installed renewable energy.

Much of the country does not have an electrical grid, so solar power will indeed be a boon for water pumping, to begin replacing India's 4-5 million diesel powered water pumps, each consuming about 3.5 kilowatt of off-grid lighting. Solar energy technology consists of solar thermal technologies, which utilize sun’s energy and solar photovoltaic technology, which convert solar energy directly into electricity.

Over the next 3 years, the expected solar capacity additions in India are in the range of 1.2-1.4 GW. Though, the factors such as economic feasibility of tariffs, financial health of state discoms, RPO target as well as potential delays in project implementation do affect the above expectations.

Solar capacity addition of 1.2-1.4 GW over the next 3 years (2013-14 to 2015-16) Capacity additions of only 800-900 MW under state policies despite tenders of 3 GW bid out.

Sharp drop in capital costs in the last 2 years has prompted several states such as Tamil Nadu, Rajasthan, Andhra Pradesh and Karnataka to invite bids to set up solar projects in 2012-13. Apart from these, states such as Uttar Pradesh, Punjab and Bihar have also floated tenders. However, the weak health of discoms and limited project execution experience is expected to hinder capacity additions in these states.

Solar thermal, being at a nascent stage in India, the projects have faced various issues leading to cancellation and delays. Some of the issues are as follows:
Solar thermal projects were allowed a commissioning period of 28 months from the date of signing the PPA. This is challenging since solar thermal projects require at least one year of pre-project work. Even globally, 36-40 months are provided to commission a solar thermal project.
Solar thermal projects require direct irradiance for healthy PLFs. Only limited sites, mainly in Gujarat and Rajasthan, receive the required irradiance.
Some of the players, such as Lanco have been unable to get procure heat transfer fluid due to higher lead time of suppliers. Moreover, there are limited suppliers for this fluid.
A minimum size of 50 MW is considered for solar thermal projects to be viable. Uneconomical size of 10 MW of migration projects also led to cancellation of these projects.
But, the Government of India projects a massive expansion in installed solar capacity, and aims to reduce the price of electricity generated from solar energy, to match that from fossil fuels like coal and diesel by 2030. India has been ranked 7th worldwide for solar photovoltaic (PV) cell production and secure 9th rank in solar thermal power generation. This capacity is growing rapidly due to the entry of various private players in manufacturing of solar energy equipment. The Indian solar energy sector is estimated to grow at 25% year on year in next few years.

Tenders of 3 GW bid out by 8 states in 2012-13

Industry Insights
Inability to compete with cheaper imports pushing industry into distress
Lack of backward integration and low scale of operations results in high production costs for Indian solar equipment manufacturers. Moreover, foreign manufacturers offer equipment-linked financing at low interest rates to Indian solar power producers, which further encourages imports of photovoltaic (PV) cells and modules. These factors make Indian manufacturers uncompetitive as compared with Chinese and US manufacturers.
Consequently, in 2011-12, imports increased by close to 6 times to Rs 65 billion in 2011-12. Though imports fell by 31 per cent year on year in value terms in 2012-13, it was led by a sharp decline in module prices, which offset the growth in volumes. Concurrently, exports dipped by 24 per cent in 2012-13 after plummeting by about 70 per cent on account of slowing demand from Europe. Cheap imports and a limited export opportunity have significantly deteriorated the financial performance of Indian solar equipment industry as can be seen below:
Sharp drop in revenues and profitability

Plants in a state of forced closure

To gain more insight into the Solar Energy Industry in India, two companies have been considered:
Indosolar Ltd.
Company profile
Indosolar Ltd was incorporated in 2008 and was listed in September 2010.
The company has a crystalline PV cell manufacturing facility with a capacity of 160 MW. The manufacturing equipment is imported from Germany (through Indosolar's tie-up with Schmid Technology Systems.
Indosolar has a weak financial profile marked by poor liquidity levels and a negative interest coverage ratio. The company applied for a corporate debt restructuring programme in September 2011, which got sanctioned in March 2012.
The company had planned to expand its cell manufacturing capacity by 100 MW by 2011. However, the plan has shown slow progress given its weak financial position.

Business evolution
Indosolar Ltd was incorporated in 2008
The company commenced production of crystalline PV cells with an annual capacity of 80 MW in 2009 and got listed in 2010.
The company has a total crystalline cell manufacturing capacity of 160 MW as of March 2012. This constitutes a fifth of the total PV cell capacities operating in India.
Business model
The company is primarily dependent on exports for its revenues.
Indosolar has a tie-up with Germany-based Schmid Technology Systems since 2009 for sourcing plant machinery and other related technology.
Till 2010-11, exports formed more than 95 per cent of company's revenues. However, in 2011-12, this share declined to 64 per cent. Exports were hit due to stiff competition from foreign players and a significant overcapacity in the global market.
Moserbaer Photovoltaics Ltd
Company profile
Moserbaer Photovoltaics (MBPV) was formed in 2005 as a subsidiary of Moserbaer Solar Ltd (MBSL), for manufacturing solar cells and modules.
MBSL's parent company, Moserbaer India Ltd (MBIL), is the second largest manufacturer of optical storage media in the world and the largest in India.
MBPV manufactures photovoltaic cells and modules for Moserbaer's solar business.
Business evolution
Moserbaer India Ltd, one of the world's largest optical storage media companies, was formed in 1983.
Moserbaer India formed its subsidiary Moserbaer Solar Ltd in 2005.
Moserbaer India also formed, Moserbaer Photovoltaics Ltd. for manufacturing of photovoltaic cells and modules
Being a prominent optical media company, they were able to leverage on their technical competence to set up photovoltaic cell and module manufacturing facilities.
Business model
MBPV operates in the cell manufacturing as well as module manufacturing business.
The current capacity is 200 MW for silicon PV cells, 150 MW for crystalline PV modules and 50 MW for thin-film modules.
Strategic alliances with Solfocus(US), Solaria(US), Stion Corporation(US) and Skyline solar (US) provide the company with a good network for marketing and access to technology.
Conclusion
Physically, solar energy constitutes the most abundant renewable energy resource available and, in most regions of the world, its theoretical potential is far in excess of the current total primary energy supply in those regions. Solar energy technologies could help address energy access to rural and remote communities, help improve long-term energy security and help greenhouse gas mitigation.

While the costs of solar energy technologies have exhibited rapid declines in the recent past and the potential for significant declines in the near future, the minimum values of levelized cost of any solar technologies, including tower type CSP, which is currently the least costly solar technology, would be higher than the maximum values of levelized costs of conventional technologies for power generation (e.g., nuclear, coal IGCC, coal supercritical, hydro, gas CC) even if capital costs of solar energy technologies were reduced by 25%. Currently, this is the primary barrier to the large-scale deployment of solar energy technologies. Moreover, the scaling-up of solar energy technologies is also constrained by financial, technical and institutional barriers.