30120140501001

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

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 & Young’s 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 nation’s 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
1

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 India’s 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 & Young’s 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 India’s NAPCC that elucidates the nation’s 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.
2

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.

Source

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)

Grid-connected
(MW)

6

1100

10000

20000

Off-Grid (MW)

2.4

200

1000

2000

Thermal Collectors
(Million m2)

3.1

7

15

20

Solar Lighting
Systems (million)

1.3

5

10

20

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 India’s 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]

3

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

4.48
7.1

Phase1
Feb
2010
10.95
12.76

NSM2
Feb
2011
7.49
9.44

KN
Aug
2011
7.94
8.5

RJ
Nov
2012
6.45
8.45

TN
Dec
2012
5.97
17.95

AP
Dec
2012
6.49
10.98

Min. tariff
Max. tariff

4.84
9.85

Weighted
average

5.57

5.53

12.12

8.77

8.34

7.59

8.28

6.49

KN
Sep
2013
5.51
Not
given
5.51

VGF

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)

4

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, BHEL, CEL, and Solar Semiconductor thus, the manufacturing targets
Solar,
and
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%. In this study, to be safer, the drop in the
10
,
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 according to the present cost in the NTPC Daripalli Plant of 1600
ssumed
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 at a cost approx. Rs 6.50 Cr. /MW and will start decreasing further up to
6
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 of solar PV &
cost
Thermal will majorly come from economies of scale in the solar plant size, manufacturing industry,
5

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 when JNNSM was launched the solar power capacity of India was only
11
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 Phase II, at the 2017 level projected capacity will be around 8327 MW and by 2022
he
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 support the RPO mechanism
o
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. India is going ahead to achieve
2019 20.
this target well before or say during the 2021 2022, the solar capacity would be around 36,000 MW
2021-2022,
and shall meet the RPO in time. The electricity prices are increasing around 5-10% every year by the
10%
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 of reference for grid parity.
fra

6


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 rate around Rs 8/kWh. Furthermore, the
L
average LCOE tariff for electricity in India was Rs 3.8 per kWh in 2011-12, as against an average
2011 12,
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. The gap between average tariff and average cost per unit
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
:
A
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.
7

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.
Mission’s 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]

[5]

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.
8

[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, “India’s 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 Australian’s 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.

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