Thursday, November 19, 2009

Solar PV and Utility 2.0: Making the grid smarter!

The plenary session at the recently held Solarcon India 2009 was presented by Jigar Shah, Founder, SunEdison.

According to him, emerging markets are important for growth of solar energy as these markets are likely to grow at CAGR of 72 percent from 2008-13.

In contrast, North America would grow at 61 percent, other OECD countries at 21 percent and Europe at 16 percent. So, what would be the total addressable market? In 2010, $100 billion (approximately 5 percent) of the global retail electricity demand could be competitively addressed with solar power.

He added that system prices had fallen 40 percent in 2009 vs. 2008, with more to come in 2010. It is expected to stabilize to long-term trend of ~5 percent per annum. The system cost is expected to drop to $2.85/W, supported by the increase in the system efficiency.

Shah mentioned that India has the best solar resource in Asia. All technologies work in India including the technologies that generate electricity only from direct normal insolation (DNI).

Thin-film and multijunction solar cells can easily be manufactured in India and have half the performance degradation due to temperature.

He highlighted the case of wireless telecom in India, which has helped India leapfrog in communications (over the fixed line services) and though it is more expensive, yet communication has been the largest source of productivity growth in the entire decade.

Shah put solar in the similar situation which could be exploited as the largest energy resource for India in the long term. According to him, energy has the capability to be the next largest source of GDP growth potential in India. However, it also presents the biggest challenge to growth. Here, there are four aspects:
* Price is not as important as the existence of electricity.
* India continues to be unable to institute land and water policies necessary to grow electricity simply through new coal.
* Nuclear is proving to be just as difficult and costly as coal.
* What is the trade off between electricity pricing and GDP growth? Data shows that household electrification in villages results in a 64 percent increase in family income.

Besides, airports, shopping centers, deserts, and industrial sites can cover 20,000 MW of solar without using agricultural land. He opined that solar is a better energy product due to the following factors:
* Solar is scalable and growing.
* Solar is competitive.
* Solar is predictable.
* Space for solar installations is available.

Plan for Grid connected solar program
The main challenge is that the state electricity boards (SEBs) do not know how to integrate 21st century technologies or “Utility 2.0.” This involves energy efficiency, self generation, independent power producers, etc. So how does solar fit into Utility 2.0? It is not only about solar, but also about storage.

Shah also advocated a plan for a grid connected solar program. The new goal should be: 20,000 MW program by 2020, starting with 100 MW in 2010!

For this, the industry would be required to grow at 50 percent annually to meet ~2 percent of India’s needs by 2020. Government should also allow for 80 percent depreciation on all systems.

It should encourage SEBs to provide full tariff without seeking Central funding support. Integrated solar manufacturing should be encouraged. This can result in creation of 1 million direct job years of employment.

How to achieve all of this?
How would one go about in achieving this? First, start with a generous 25-year feed-in Tariff (FIT). For instance, Rs 15 per kWh would show seriousness and attract players. Also, it would be prudent to reduce FIT based on MW targets – not based on calendar year.

Next, there should be hassle free interconnection to the grid and purchase of electricity in priority to conventional electricity. There should also be a training program for contractors to learn how to install solar PV – grant funding.

Further, in the areas of utility rates and revenue policies, Shah recommended charging customers real cost of electricity –- peak and off-peak. He suggested keeping subsidized rates for the poor, and a tiered rate structure (higher rate as the consumption increases) for middle class and wealthier customerss.

“It all comes down to Utility 2.0! It needs some effort to make the grid smarter,” Shah concluded.

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