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India should accelerate, not slow down, solar adoption

According to reports, Swaminathan Aiyar recently argued in a column that an accelerated adoption of solar energy by India could bring down some thermal power stations and hurt their financiers, further burden inefficient power distribution companies, and ultimately bankrupt some of the expensive solar plants too.

His prescription: slow down the solar mission, let polluting thermal plants and their financiers gain while other countries sweat, through their faster adoption and innovation, to make solar energy cheaper and more efficient so that countries like India are able to cheaply switch to solar energy in future.

Put simply, let others do the day’s work and join them for the evening party!

Every laptop owner in the world today is somewhat aware of the party Swami is referring to. Today, one gets a computer four times more efficient and at half the price than the one he purchased a decade ago. So if we had decided to wait a decade, we could have paid much less and got a lot more than we did then (Sure, we could have missed out on the advantages of owning a laptop for a decade!). But had everyone been equally smart and waited out the decade, nobody could have benefitted.

Why laptops are substantially cheaper and more efficient today than in the past is because you bought one a decade ago and another in between. And many others did the same.

The expanding demand provided the economies of scale, increased competition, and boosted innovation in technology and operations, helping manufacturers cut prices and add more features to your computers. As more and more people started using the computers, the network effect kicked in, making computer more valuable for every user.It is the same combination of increasing innovation, scale and competition that is slashing costs of solar energy. Every time the solar industry capacity doubles, cost drops 22 er cent.

Over the years, solar prices have sharply fallen with the winner in the latest domestic auction offering to supply power at Rs 2.44/unit. Prices have not fallen because of super smart moves by some Indians. It’s because many companies and governments across the globe have purchased solar panels, and continue to do so, bringing down the cost for everyone in the world. The conviction to shift to renewable energy shown by US, Japan, Germany, Australia, China and other countries in the past has benefited India, and now India’s ambitious solar plans would help the globe.

By opting to stay out, India runs the risk of decelerating the global solar revolution, and make our wait for the magically lower solar prices longer than what can be achieved at the current pace. And if every country starts thinking on the same lines, the revolution gets stalled.

Another reason Swami cites for India to go slow on solar is the high interest rates. He argues that interest rates, which accounts for almost all operational solar costs, tend to fall as economies advance and therefore India must wait to be a developed economy before going full throttle on solar. This is like delaying solar plans by decades, not years. Yet, if being an advanced economy is the aim, the access to clean, affordable, renewable energy can actually help achieve that much faster.

Swami is correct in predicting rapid solar expansion could end up idling some thermal capacity which could also result in some bankruptcies. But, with some good planning, India can handle it. Even today, Indian generators have a capacity utilization of just about 60%. Some of the gas-fired generators have been idling for years. This, of course, has burdened lenders but the overall economic growth has been just fine at about 7 per cent.

The fear of power distribution companies losing out on revenue due to proliferation of solar rooftops is overblown. Solar rooftops give citizens the never-seen-before freedom from the tyranny of inefficient discoms who have for too long starved households and businesses of reliable energy supply. Discoms, which often need taxpayers’ cash injections to stay alive, buy less power from generators to keep their losses low, without worrying about boosting supply to customers. Their problem is inefficiency, not solar rooftops.

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