OPINION: Solar energy to cut energy costs for the manufacturing sector
The centre should grant more financial aid to the solar energy sector and decentralised model of solar energy development that does not endanger grasslands and desert ecosystems.
The Covid-19 pandemic has brought the world to a standstill and has impacted almost every sector. Now, with unlock 4.0 when the things are settling down, every industry can cope up with the damage caused by the lockdown as per its capabilities and requirements. The solar energy sector has been highly affected in these unprecedented times. There is a lot of uncertainty in the industry currently and the sector should bounce back after this crisis ends. That will decide how quickly we achieve our renewable energy target of 100 GW by 2022. The solar rooftop sector has been badly affected because of two reasons — high labor cost and dependence on commercial and industrial sectors. Power demand in India has come down by 25-30 per cent today. This decline in demand with reduced collection and slow recovery will adversely impact already stressed distribution companies by creating a cash gap of around Rs 40,000 crore. Industries invite very high fixed costs with reference to their monthly power bills. Solar power can come to their rescue by reducing their bills by Up to 80 per cent. The reduction is dependent on factors like load and consumption profile; state policy; technology used and design.
With Levelised Cost of Electricity at less than Rs 2 per Kilowatt Hour, corporates are rising up to the challenge of investing in solar in-site and off-site solutions. A company can reduce its power bill by upto 90 per cdent by setting up a solar power plant on-site on their roof top or ground area. This is the highest preferred mode of installation since the asset is synchronised with the loads on a live basis and the plant is insulated from policy variability. The financial modes of execution are either the capex (self investment) or opex (third party investment) route. Banks and lending institutions have taken note of the reliability of solar power and the high returns of the project. They have, thus, started aggressively funding solar projects for captive use. Under the opex model, a third party sells power at a pre agreed tariff bound by a Power Purchase Agreement usually with a 12-15 year term. There is also an off-site mode of setting up a solar power plant in a remote location and transmitting the power to the industry’s location. Whichever the Technical or financial model selected by an industry, investing in solar plants is a no-brainier. In most cases, investing in a solar project gives an industry greater returns than existing business.
Impact due to Covid-19
Due to covid-19 and nationwide lockdown, ongoing solar projects have been halted, power companies are facing disruption and developers are concerned about the delays their projects are facing because of the production slowdown in China. Even today, the solar industry relies on China for around 80 per cent of its requirement of solar supply. Solar power equipment imports in January 2020 had declined by about 70 per cent as compared to January 2019. Industry players have been facing delays in procurement of modules, solar cells and other components because of covid-19. Also, about 85 per cent of the labour in the solar energy sector includes migrants and many of them have returned to their villages and are likely to be away for some time until the lockdown is completely lifted.
Challenges post lockdown
Once the lockdown is over, a major area of impact in the performance of solar energy plants will be availability of spares and manpower for maintenance. As the high wind season is approaching in the coming months, planned maintenance will also become a challenge. Execution work at new projects have come to a standstill. Even though force majeure conditions will enable extension for completion period; migrant labour will take quite some time to reach project sites. Solar energy projects, unlike other infrastructure projects, hardly take 6-9 months to complete once land and evacuation facilities are available and this is only possible by deploying a large number of workforce for a shorter duration.
Role of solar energy sector in economic recovery post Covid
The solar capacity addition in India in Q1 2020 was the lowest since Q4 2016. However, according to a recent report by the International Energy Agency (IEA), while renewables are not immune to the COVID-19 crisis, they are more resilient than other fuels. The agency noted that in 2021, the solar energy sector is expected to spring back up as currently delayed projects start to come back online. In 2021, it expects to reach the same level of renewable capacity additions globally as in 2019. Renewable energy, especially the solar energy sector, is at the cusp of this opportunity as it delivers cheaper, cleaner electricity – with the right regulatory and policy framework, it could be the way forward when compared to conventional electricity.
Moreover, the number of direct and indirect jobs that will be created as a result of the construction and maintenance of renewable assets will be an added advantage post the lockdown is lifted to revive the economy when increasing unemployment is a concern. Renewable energy, especially from solar, has long edged past the point of grid parity and is now cheaper than conventional energy. This economic rationale would itself mean a fillip for renewable energy in the post-COVID-19 phase.
The power sector is a lead indicator of economic growth. After lockdown, we expect a lot of incremental power capacity addition to be from renewables. Thus, investment in renewable energy is a precursor to the health of the economy. This will add value to revive the economy. This pandemic is also a lesson for companies to not rely solely on one country for their technical equipment and move towards being more diversified. The construction phase of solar, however, is very employment-intensive and, to some extent, operation and maintenance of solar generate significant employment in our communities.
Thus, job security and job creation will probably be the most important factors in determining how India manages to combat the economic slowdown post-COVID-19. Operations and maintenance of solar assets results in part-time employment opportunities to several thousand people from remote and rural areas.
Government’s role to revive the economy post Covid
The Government of India has also taken many proactive fiscal measures like Repo rate cut to 4.4 per cent, three months moratorium on principal and interest repayment for term loan and working capital facilities to revive the solar energy sector. The solar industry is seeking some respite from the government so that they can stay afloat during this economic crisis and work towards meeting the long-term renewable energy targets of the country. A strong and strategic revival plan is very
important post covid for the industry to help achieve its targets on time.
More targeted policy introduction is to be done to support decentralized projects such as rooftop solar and provide incentive to domestic production of solar cells, modules, and other equipment. This crisis provides an opportunity to the government to lead by example and create a stimulus plan which is green, efficient and progressive. Recently, the International Renewable Energy Agency’s (IRENA) Coalition for Action wrote to governments putting forth recommendations on how governments can ensure a rapid and sustained economic recovery of the renewable energy sector that aligns with climate and sustainability objectives. They emphasized the role renewable energy could play in these strategies by providing reliable, easy-to-mobilize and cost-effective electricity for essential services.
Post Covid, more financial aid is required to boost local manufacturing, given India relies on China for about 80 per cent of its solar inputs. The centre should grant more financial aid to the solar energy sector and decentralised model of solar energy development that does not endanger grasslands and desert ecosystems. Government-supported financial institutions need to step forward and take the lead in scaling up long-term investment into India’s solar energy sector.
Source : economictimes
