International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 INTERNATIONAL JOURNAL OF MECHANICAL ENGINEERING 6340(Print), ISSN

N 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME

AND TECHNOLOGY (IJMET)

ISSN 0976 6340 (Print) ISSN 0976 6359 (Online) Volume 5, Issue 1, January (2014), pp. 01-09 IAEME: www.iaeme.com/ijmet.asp Journal Impact Factor (2013): 5.7731 (Calculated by GISI) www.jifactor.com

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POTENTIAL STUDY ADDRESSING SHORTAGE OF POWER AND ECONOMIC GROWTH THROUGH FORESEEABLE SOLAR POWER
Eshan Ahuja1, Dr. Navin Kumar Kohli2, Sidharth Ahuja3
1

Mechanical Engineering Dept. Australian National University, Canberra, Australia 2 MP Power Management Co. Ltd., India 3 BE electrical Engineering, India

ABSTRACT India is densely populated and has high solar insolation, an ideal combination for using solar power in India. India is already a leader in wind power generation. India is now one of the top five solar energy developments worldwide as per Ernst & Youngs renewable energy attractiveness index. As per report by WATO-India, 2012, the Indian Renewable Energy business market is experiencing a growth rate of 15 %/yr and the opportunities for private investments are estimated to be of about USD 34 billion. Solar is becoming financially viable for commercial and industrial sectors ,which is leading the power deficient southern states of the country such as Tamil Nadu and Kerala suffering from rising costs of conventional power to gradually shift towards solar energy so as to have long-term solutions for their power needs. Thus, these developments give indication for a good future for solar development. The initiation of Jawaharlal Nehru National Solar Mission (JNNSM) is one of the eight missions of India that makes clear the nations vision for solar technology. This 19 billion USD plan was launched on the 11th January, 2010 by the Prime Minister of India. The future energy mix is expected to have a reduced contribution of indigenous coal as an energy source due to higher costs, logistic constraints, poor quality and dependence on imported coal to run thermal power plants. The country thus faces possibility of severe energy supply constraints and is in need of alternative energy sources. An endeavored is made through this contributing paper whether we could foresee better future energy mix of India. Key words: Renewable Energy, Conventional Power, JNNSM and Future Energy Mix. INTRODUCTION India had a peak power shortage of 9.3% during the five years plan ending in 2012 when over 50,000 MW new generation capacity was commissioned. The capacity addition target during the
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International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 6340(Print), ISSN 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME 12th plan period from 2012-17 is estimated at 88,537 MW. Current Population of India is estimated to be 1.27 billion, growing @ of 1.6%/yr. In the past besides substantial increase in installed electricity capacity, demand outplayed supply. Currently, official peak deficits are above 12 % and may increase further over a long run. More than 25% of the population is living with no access to electricity. Those with access often have to cope with long blackouts. This is likely to be case in the foreseeable future making energy accesses a continuous and growing problem. Table 1: Energy Demand Projection of India Source Unit 1991-92 2009-10 2020-21 Electricity TWh 231 725 1300 Coal Mt. 229 690 1345 Natural Gas b cum 18.6 65 130 Petro-Products Mt. 57 165 335 This Steep growth in demand of energy sources is pervasive requiring serious efforts by Government of India (GOI) to ensure Indias future energy security. The future energy mix of India is expected to have a reduced contribution of indigenous coal as an energy source due to higher costs, logistic constraints, poor quality and dependence on imported coal to run thermal power plants. The country thus faces possibility of severe energy supply constraints and is in a dire need of alternative energy sources. [3] The following discussions would help experts in foreseeing the sustainable future of this totally free energy on long run. ADDRESSING SOLAR POWER ISSUES IN INDIA India is densely populated and has high solar insolation, an ideal combination for using solar power in India. India is already a leader in wind power generation. As per Ernst & Youngs report, India is among top 5 destinations worldwide for solar energy development renewable energy attractiveness index. Indian Renewable Energy business market is experiencing a growth rate of 15 %/yr & opportunities for private investments are estimated of about USD 34 bill. India has a solar power reception of around 5 Trillion Kwh/yr. [4] [5] Various incentives and individual solar policies rolled out by states which include capital/ interest subsidy, accelerated depreciation, nil/concessional excise and customs duties, and Generation Based Incentives or feed-in-tariff. Apart from this, Indian Renewable Energy Development Agency (IREDA) and other public sector agencies are also actively funding renewable energy projects. Solar is becoming financially viable for commercial and industrial sectors ,which is leading the power deficient southern states of the country such as Tamil Nadu and Kerala suffering from rising costs of conventional power to gradually shift towards solar energy so as to have long-term solutions for their power needs. Thus, to confront these above mentioned issues leading to future Energy threats in the nation and to efficiently and economically utilize the enormous untapped potential solar energy availability in India, National Action Plan on Climate Change (NAPCC) introduced JNNSM. JNNSM is one of the eight missions of Indias NAPCC that elucidates the nations vision for solar technology. The Mission document for phase II issued in December, 2012. [6] The target of mission is: i. Policy framework for deployment of 20,000 MW of grid connected solar power by 2022 ii. 1000MW by 2017 and 2000 MW by 2022 off grid solar power iii. Achievement of 15 mill m2 solar thermal collector area by 2017 & 20 mill m2 by 2022. iv. Deployment of 20 million solar lighting systems for rural areas by 2022.
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International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 6340(Print), ISSN 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME v. Creating favorable conditions for solar manufacturing capability for indigenous production & market leadership by 4-5GW of installed capacity by 2017. Through JNNSM, India is aimed at reducing the cost of solar power generation in the long run. Large scale deployment goals, aggressive R&D and domestic production of critical raw materials, components and products would help to achieve grid tariff parity by 2022. Table 2: Phase-wise Distribution of Targets in JNNSM Till Phase 1 Cumulative Target Cumulative Target 2009 Phase 2, (2013-17) (2012-13) Phase 3, (2017-22) 6 2.4 3.1 1.3 1100 200 7 5 10000 1000 15 10 20000 2000 20 20

Source Grid-connected (MW) Off-Grid (MW)

Thermal Collectors (Million m2) Solar Lighting Systems (million)

The Mission proposed a mechanism of bundling relatively expensive solar power with power coal based stations (cheaper in comparison) for the facilitation of the grid connected solar power generation. For each MW of installed capacity of solar power for which an agreement (PPA) is signed. The Power Ministry allocated an equivalent amount of MW capacity from the unallocated quota of coal based stations and then NVVN supplies this bundled power to the Distribution Utilities. This Scheme is referred to as the 'Bundling Scheme'. Second phase targets majorly consists of 1000MW Off-grid and 10000 MW Grid connected solar power installment which is to be implemented in a 5 yrs. span from 2013-2017. There is no more power available to bundle as in phase 1 so instead projects will be selected under the RfS and shall be given VGF (Viability Gap Funding) made available through Indias NCEF (national clean energy fund). Under the VGF mechanism bidders estimate the cost of their projects and the government funds the difference between that and the projected returns, in this instance the fixed rate in the power purchase agreement, distribution is as follows: 50 % on successful commissioning of the full capacity Balance 50 % progressively over next 5 years subject to plant meeting generation requirements (CUF within specified range).

The projects as per RfS are to be installed across nine cities in India and out of 10 GW target to be achieved 4GW is under Central scheme & 6 GW under various State specific schemes. SECI shall enter into Power Purchase Agreement (PPA) with the Bidders selected for purchase of solar power on a 25 yrs. agreement as per the terms, conditions and provisions of the RfS. The bidding process under this scheme is divided in Part-A (DCR)-375 MW or Part-B (Open)-375MW. Bidders can apply for Projects either under A, B or both. The difference between the parts is that A has the conditions of Domestic Content Requirement i.e. the solar power plant would have to use solar cells and modules manufactured in India and thus has a funding support directly by the Central GOI and cheaper International loans available with imported components. [7]

International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 6340(Print), ISSN 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME POLICY REGULATORY FRAMEWORK AND ANALYSIS Currently, there are a variety of incentives that reduce the cost of solar electricity. A 30% investment tax credit and accelerated depreciation which significantly reduce the LCOE of Solar PV and Thermal. In many states in India, rebates/concessions and other incentives are added to the incentives. The custom duties and excise duties concessions/exemptions also made available on specific capital equipment, critical materials, components and project imports. [7] The tremendous interest from developers for NSM led to the competitive bidding for projects and a subsequent fall in tariffs was seen at the time of Bidding done by different states. Table 3: Fall in the tariffs as per competitive bidding done by several States in India (INR/Kwh)
Tariff Rate TN UP Phase1 Feb 2010 10.95 12.76 12.12 NSM2 Feb 2011 7.49 9.44 8.77 KN Aug 2011 7.94 8.5 8.34 RJ Nov 2012 6.45 8.45 7.59 TN Dec 2012 5.97 17.95 8.28 AP Dec 2012 6.49 10.98 6.49 KN Sep 2013 5.51 Not given 5.51 VGF

Min. tariff Max. tariff Weighted average

4.84 9.85 5.57

4.48 7.1 5.53

5.45

* 1 Crore (Cr) INR =168,595 AUD @ 1 AUD=59.31INR COST IMPACT OF SOLAR POWER The capital cost of solar power project in India decreased from around Rs 25 Cr/MW in the year 2009 to the present cost of Rs 8.0 Cr/MW. [2] The manufacturing cost of solar power during past 5 to 6 years has seen dramatic changed in India. It was mainly because the capacity installed in the year 2006-07 was only 2.11 MW to 35.5 MW in 2009-10 and now it is more than 3000 MW. In these periods, demand for solar equipments, panels was met from import from other countries. After declaration of Solar Mission, the manufacturing of panels, films have started production in India. From the various regulations issued by CERC, the cost of manufacturing of solar plant as envisages are collected and plotted as below:

Figure 1: Decline in Solar manufacturing cost (past six years) * 1 Crore (Cr) INR =168,595 AUD @ 1 AUD=59.31INR

International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 6340(Print), ISSN 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME Here, the cost of solar thermal was stagnant from 2010 to 2012 then started decreasing because in India the progress on solar thermal was not up to the level as envisaged in those years but after the implementation of 1st phase of the JNNSM the nation was progressively becoming the manufacturing hub for solar equipment, the solar plants were being manufactured based on indigenous items and there was involvement of some of the large Solar Cell producers of India such as Moser Baer, Indo -Solar, Solar, BHEL, CEL, an and d Solar Semiconductor thus, the manufacturing targets were achieved thereby significantly reducing the capital cost of manufacturing. COST IMPLICATION AND PROJECTIONS The Central Electricity Regulatory Commission (CERC) released the new benchmark capital cost for Solar PV plants i.e. Rs 8 Cr/MW for the financial year (FY) 2013-14. [2] In the years to come, it would further drop gradually. The drop in the cost is ranging from 15 15-25% per annum whereas in the case of Solar Thermal it is about 10-15%. 10 In this study, , to be safer, the drop in the cost of solar Thermal & PV are assumed to be 8% and 10 % respectively instead of actual 10 10-15% due to possible barriers especially of VGF Mechanism, hindering unforeseen situations. The thermal capital cost of coal is assumed ssumed according to the present cost in the NTPC Daripalli Plant of 1600 MW i.e. INR 5.5 Cr/MW with further increasing cost rate of around 8 % every year up to 2020 However, the solar cost has been assumed to be stagnated after few years. The fig here shows the trend of declining solar costs over the past years. The feasibility of implementation of JNNSM and its positive implications can be seen when compared with the trend of thermal capital cost.

Figure 2: Comparing Projected Capital Cost of Solar Thermal & PV with Thermal Project (Rs Crore / MW). * 1 Crore (Cr) INR =168,595 AUD @ 1 AUD=59.31INR According to the projections Solar PV will become competitive with Conventional at the completion of the yr 2016 6 at a cost approx. Rs 6.50 Cr. /MW and will start decreasing further up to 5.20 or nearby and will become stagnant, whereas in the case of Solar Thermal the competitive yr will be 2018 at a cost of Rs 7.25 Cr. /MW. Overall, this rapid decrease in the cos cost of solar PV & Thermal will majorly come from economies of scale in the solar plant size, manufacturing industry,
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International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 6340(Print), ISSN 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME learning experience. Other factors like advances in R&D, indigenous equipments manufacturing and improvements in the performance of the solar field. By 2020, capital cost reductions of more than 30% could be possible. In the year 2010-11 11 when JNNSM was launched the solar power capacity of India was only 35.15 MW. In comparison to the 1000MW Target of Phase 1 the achieved capacity rose up by 65 % i.e. 1645MW and thereafter if the further capacity addition is projected at the rate of 40 to 50% up to 2017. The he Phase II, at the 2017 level projected capacity will be around 8327 MW and by 2022 capacity addition would be around 35000 MW. FORESEEABLE SOLAR SCENARIO OF INDIA It is seen that the RPO requirement from 2011 to 2013 was 0.25% the target of 1536 MW was met in the year 2013 with around increase of 6% as 1643 MW. To o support the RPO mechanism other additional solar power capacity additions by various states, REC mechanism as well as the recent announced 4000 MW solar UMPP are used and thus, the actual further growth rate is expected to be above 7 % but for analyzing the target for future years under the base line scenario growth rate of 6 % is assumed.

Figure 3: : Projections of Solar RPO compliance From the projections, it can be seen that the mission target of capacity addition of 20,000 MW (20GW) for 2022 will be achieved well before during 2019-20. 2019 20. India is going ahead to achieve this target well before or say during the 2021 2021-2022, 2022, the solar capacity would be around 36,000 MW and shall meet the RPO in time. The electricity prices are increasing around 5-10% 10% every year by the CERC/SERC. Procuring solar power could save money in the long run even if the current cost of solar electricity is higher than grid prices. In India, the power tariffs vary by state and also the type of consumer. Hence, there is no single frame fra of reference for grid parity.

International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 6340(Print), ISSN 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME

Figure 4: Solar LCOE through competitive bidding done by several States in India From the above illustration, the average LCOE received through competitive bidding is around Rs 5.5 /kWh in spite of Govt. has fixed the LCOE L rate around Rs 8/kWh. Furthermore, the average LCOE tariff for electricity in India was Rs 3.8 per kWh in 2011-12, 2011 12, as against an average cost of Rs 4.87 per kWh. The gap between the average tariff and average cost per unit was Rs 1.08 per kWh, or 22 per cent of the cost per unit. unit. The gap between average tariff and average cost per unit of electricity has ranged from between 20 per cent and 30 per cent. Continuing the same projections for unit cost by filling gap with 10% average increase per kWh for further five years, it would be like in fig shown. For Comparing Average cost of Electricity in India with the Solar PV LCOE it is assumed that the Solar PV LCOE will be stagnant after the year 2014-15. 2014

Figure 5: : Grid Parity Solar Vs. electricity Price * 1 Crore (Cr) INR =168,595 AUD A @ 1 AUD=59.31INR Thus, the result can be achieved in year 2014 or in the worst case 2015 when solar rate would be cheaper and with grid parity, it will continue to provide electricity with no fuel cost and with minimal maintenance for 25 years or more. Grid prices typically increase, however, making the value of solar greater over time. Over 25 years, the savings from solar grow significantly and will be free forever and forever.
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International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 6340(Print), ISSN 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME SUMMARY OF RESULTS AND FINDINGS The Solar PV will become competitive with Conventional at the completion of the yr 2016 at a cost of about Rs 6.50 Cr. /MW and Solar Thermal in 2018 at a cost of Rs 7.25 Cr. /MW, moreover in the Mission completion year 2022 the costs of Solar PV & Solar Thermal would be around 5.23 & 6.59 respectively.

The average LCOE received through competitive bidding was around Rs 5.5 /kWh in spite of Govt. fixed the LCOE rate around Rs 8/kWh. Missions solar capacity target of 20,000MW will be achieved around 20018-2019 and till 2022 the projected capacity would be around 35,000MW. RPO Target of 3% from an initial 0.25 % and a capacity of about 34000 MW will be achieved in the year 2021-2022.

India had a peak power shortage of 9.3% during the five years ending in 2012 when over 50,000 MW new generation capacity was commissioned. The capacity addition target during the 12th plan period (2012-17) is estimated at 88,537 MW comprising of 26,182 MW that is backed by the central government, 15,530 MW that is backed by the various state governments and 46,825 MW that is expected from the private sector. However, no previous plan period in India has seen a capacity addition equal to or greater than what was planned. Most experts therefore expect less to be actually achieved. The easiest way for SEBs to improve their financial health is to raise tariffs to a level that truly reflects their generation, transmission and distribution costs. States like Tamil Nadu, Odisha, Jharkhand, Kerala and Delhi have already raised tariffs by as much as 15-30% in the past year. With costs rising and the financial health of distribution companies deteriorating, further increases of tariffs across the country are expected. The aim can be achieved in year 2014 or in the worst case 2015 when solar rate would be cheaper and with grid parity, it will continue to provide electricity with no fuel cost and with minimal maintenance for 25 years or more. Grid prices typically increase, however, making the value of solar greater over time. The chart illustrates the Grid electricity is cheaper after few years. Over 25 years, the savings from solar grow significantly and will be free forever and forever. Solar power can be considered to be a safe investment and is recognized as such in most mature markets such as Germany where the lenders are willing to provide 100% non-recourse debt. Solar power is already cheaper than grid power for commercial consumers in Maharashtra, Delhi and Kerala even without any subsidy. Unsubsidized solar power is already feasible in some parts of the country. As prices for grid power are expected to increase and cost for solar power is expected to fall, more and more states and customer segments will find investing in solar a lucrative option. REFERENCES [1] [2] [3] [4] Bettina Weiss, P. S. I., 2013. JNNSM pathway, September, 9 2013. deo, s. j. s. v., 2013. Central Electricity Regulatory Commission Indian Government. [Online] Available at: http://www.cercind.gov.in/2013/orders/SO243.pdf. EIA, 2013. US. energy information admministration India Overview. [Online] Available at: http://www.eia.gov/countries/cab.cfm?fips=IN. WATO-India, 2012. Renewable Energy in India, Mumbai: Government of western australia. woods, l., 2013. PVTECH. [Online] Available at: http://www.pv-tech.org/news/china_introduces_tariff_zones_6478. Ramachandra, T. V. J. R. &. K. G., 2011. Hotspots of solar potential in India.. Renewable and Sustainable Energy Reviews, 15(6), pp. 3178-3186.
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International Journal of Mechanical Engineering and Technology (IJMET), ISSN 0976 6340(Print), ISSN 0976 6359(Online) Volume 5, Issue 1, January (2014), IAEME [6] MNRE, 2010. Guidelines for Selection of New Grid connected Solar Power Projects. [Online] Available at: http://www.mnre.gov.in/file-manager/UserFiles/jnnsm_gridconnected_25072010.pdf. [7] MNRE, 2013. Further Revised Draft of Guidelines for setting up of 750 MW Grid Solar PV power projects with Viability Gap Funding (VGF) under JNNSM Phase II, Batch I. Available at: http://mnre.gov.in/file-manager/UserFiles/further-revised-VGF_750MW_Guidelines_forgrid-solar-power-projects.pdf . [8] Eshan et al, Indias Reliance on Energy Sources: An Overview Study towards Sustainability by 2022, International Journal of Engineering Innovation & Research, Nov-Dec 2013, Volume 2, Issue 6, ISSN: 2277 5668. [9] K. Balachander and Dr. P. Vijayakumar, Economic Analysis, Modeling and Simulation of Photovoltaic Fuel Cell Hybrid Renewable Electric System for Smart Grid Distributed Generation System, International Journal of Mechanical Engineering & Technology (IJMET), Volume 3, Issue 1, 2012, pp. 179 - 186, ISSN Print: 0976 6340, ISSN Online: 0976 6359. [10] Eshan Ahuja and Dr. Navin Kumar Kohli, Emission Reductions using Application of Conservation & Energy Efficiency Strategies in Energy Inefficient Australians Households, International Journal of Advanced Research in Engineering & Technology (IJARET), Volume 4, Issue 6, 2013, pp. 110 - 117, ISSN Print: 0976-6480, ISSN Online: 0976-6499. [11] Navin Kumar Kohli and Eshan Ahuja, Performance Prediction in Hawt Wind Power Turbine, International Journal of Mechanical Engineering & Technology (IJMET), Volume 2, Issue 2, 2011, pp. 14 - 24, ISSN Print: 0976 6340, ISSN Online: 0976 6359.