According to reports, the viability gap funding (VGF) plan for the Jawaharlal Nehru National Solar Mission (JNNSM) addresses only one purpose, lowering the cost of solar power — without, however, addressing the indigenisation aspect. Any attempt to provide financial assistance to the solar sector should take the latter into account, more so in the context of a weakening rupee.
The Ministry of Non-Conventional Energy Sources recently published draft guidelines to offer VGF through bidding. This was aimed at bringing down the cost of solar power. However, the danger of this approach is that project developers cannot be held accountable after availing of 100 per cent VGF. This could lead to lower quality solar infrastructure.
The issue of local sourcing has not been addressed, even with the domestic solar manufacturing industry ironically going into ICU after the Solar Mission was launched in 2010.
With respect to indigenisation, we cannot afford to repeat the blunders made in electronics, telecom gear and equipment and semi-conductors. In 1998, when the (Set-Top Box) STB for DTH and terrestrial transmission for TVs was still being conceived in India, the idea of compulsory use of Indian players for STBs was ridiculed by a top-ranked IAS official at an Information & Broadcasting Ministry conference, who said, “That is foolish, we have missed the bus.” But, much later, after about 10 years, during 2006-08, Dayanidhi Maran, the then Telecom Minister, brought in the local manufacturing clause for telecom gear and equipment. Near-complete local manufacturing is now discussed actively. This, even as babus in the Department of Electronics had declared in the 1990s that we had missed the bus.
The main objectives of JNNSM are:
To bring down solar power cost to grid parity and below at the earliest;
To make it happen with as much domestic content as possible;
Use this opportunity to create a vibrant manufacturing and technological industry and jobs.
Although not directly stated as an objective, we can leverage this opportunity to:
a) Insulate the programme from an ever-weakening rupee
b) Earn forex by exporting our products & technologies – in the long run
To effectively and fully address all these objectives, the Government can buy the solar modules manufactured from domestic industries and supply them free of cost to developers. Developers will have to bid for the lowest tariff with the reference benchmark price of approximately Rs 4/ unit. Thus, the funds being planned for VGF are effectively utilised in the following manner:
To reduce the tariff;
To support the domestic industry and build the manufacturing eco-system;
Laying foundations for the solar technologies;
Saving foreign exchange.
Checks and balances must be put in place for this system to work, such as:
Sourcing of solar modules by tender with appropriate checks and balances for ensuring quality. Project developers should be able to reject low quality products.
Companies that sell their solar modules to GOI should gradually increase their vertical integration in manufacturing. They should go beyond modules to cells, wafers and ingots within a definitive roadmap of, say, three years and continue to supply modules for the government programme.
The government should ensure adequate business for such companies so that they can invest confidently in expansion.
If we go ahead in this respect, we will not miss the solar manufacturing bus.
Any industry needs a sustained market, and this plan provides one.The industry has demonstrated its capability even in 2010, before JNNSM. The technology is not rocket science. China’s solar energy output grew from an annual production capacity of 100 MW in 2005 to 40,000 MW in 2012. India already has capacity to produce about 1,500 MW modules and about 500 to 750 MW cells.
The plan will enhance energy security, employment opportunities, manufacturing and technology development and reduce our dependence on foreign exchange. Products and technologies can be exported to needy countries.
(The author is Managing Director, ConSun Energy, a solar EPC company.)