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To summarise, solar energy has potential to meet the energy requirements of India. If the potential as described earlier is achieved, solar energy has the following significantly positive implications for our energy security and climate goals:

 Solar energy can contribute to about 7 percent of our total power needs and displace ~16,900 MW[10] of marginal conventional power by 2022 implying a saving of 61 MTPA of coal / annum. Additionally, 72 million m2 of solar collector area can save about 11 MTPA of coal / annum. Since this reduction would spare the marginal requirement which is likely to be imported coal, this would mean a saving of 71 MTPA of imported coal which is a reduction of more than 30 percent of our coal imports.

 Furthermore, solar power can save 95 Million Tonnes of CO2 per annum by 2022. This is ~2.6 percent of India’s total emissions in that year and will be a very useful contribution to our voluntary target of 25 percent reduction in the carbon intensity of GDP.

Governmental guidance However, for all this to be achieved, the Government has an important role to play in the coming five years. These include the following:

 Keep the market stimulus going

The first phase under the JNNSM is the right beginning. The Government has to keep the market going so that the supply chain and ecosystem continue to evolve for the rapid scale up. A graduated scale-up is desirable rather than a fits-and- starts approach. The scale-up should be calibrated based on trade-off analysis between current affordability and long term benefits.

 Get the funding in place and channeling it to the utilities The Indian power utilities are highly cash strapped and reeling under the burden of rising fuel costs and greenfield investments. They need to be given the full support to absorb the cost of this program. A more direct support from the Centre to the state power utilities is the need of the hour. In the absence of this, the program has a serious risk of derailing. We understand that steps are being taken to utilise the fund created by the cess on coal (National Clean Energy Fund) to assist states in building the evacuation infrastructure. While this is welcome, we suggest a more broad based utilisation of this fund that will support states in meeting their RPO (Renewable Purchase Obligation) targets for solar power.

 An active role in giving the requisite support to the lending community

In the first phase of the program, the lending community is likely to have concerns related to technology risk and power off-take and payment security. The Central Government has indeed evolved innovative steps under the National Solar Mission such as the bundling program wherein the solar power is pooled with conventional power and the bundle is sold to state utilities at an average rate. This softens the impact of the higher price of solar power and gives comfort to lenders that payment default is less likely to occur. However,

we believe the following steps can be taken to further strengthen the environment for financing: 1)Classify renewable energy and cleantech areas as a separate sector for measuring sectoral exposure limits for banks; currently they are considered part of power sector for measuring exposure limits leading to sectoral limits emerging as a constraint. 2) Grant priority sector lending status to solar sector and 3)Allow banks to issue tax free solar bonds which will enable access to a long tenure stable interest rate source of finance. Further, for the first phase of the National Solar Mission projects, it would be prudent to provide a calibrated back-stop arrangement (at least for a certain time frame) in the event of payment default by states utilities. We understand that such a mechanism is being worked out and that will indeed be a very supportive measure. It is important that the first phase of NSM receives the necessary financing to be successful. This has serious implications for the long term.

 Support domestic R&D through public-private collaboration While vendors may be able to indigenize certain low value components of both grid and off-grid applications by themselves, high value technology intensive components may require R&D support from Government agencies / institutions for indigenization. Some examples of such components are absorber tubes for parabolic trough plants and collector dishes for high temperature / pressure industrial processes. Institutes such as the Indian Institutes of Technology could collaborate with the industry under a Government driven R&D funding framework to engineer products in the country. There are successful examples from the US where the National Renewable Energy Laboratory (NREL) collaborates with the private sector for collaborative research.

 Look at innovative possibilities for large scale solar powering of agriculture pumpsets

The total connected load of agriculture pumpsets is expected to be in excess of 100GW by 2020. We believe that this could be a very large market for solar-powered pumpsets and could commence earlier than expected if the Government adopts

Issue VIII 2011 I 49

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