Financial Constraints Could Derail India’s Ambitious Solar Energy Plans

Lack of foreign investments owing to the global financial crisis and its own negotiating stance at climate talks could throw back India’s schedule to implement plans of setting up large scale solar energy projects.

India is looking to invest billions of dollars in setting to large scale solar and wind energy projects. These projects are essential for meeting the growing power demands and also for countering any demands from the developed countries to reduce carbon emissions.

India currently generates only 3 percent or 12,000 MW of its electricity from renewable sources, mostly comprising of wind energy while solar energy contributes only 2 MW. The government recently announced ambitious plan to boost electricity generation from solar energy to 20,000 MW by 2030.

Tapping solar energy is essential for India as it’s power plants are in short supplies of coal. Thus for various reasons ranging from energy security and international pressures to reduce its carbon emissions to environmental problems related to conventional energy sources, India has announced these massive plans to expand its solar energy infrastructure.Financial constraints is one of the major problems India is facing to achieve the set solar energy goals. The domestic solar energy companies do not get any substantial incentives plus there is low demand for solar energy systems which is why a huge number of these equipments are exported to other countries.

NDPL, a JV between the government and a private company, has proposed a feed-in tariff scheme for the national capital region. However, large sums of subsidies will be required to attract home owners to buy solar panels. In addition, the electric grid will have to be engineered in order to accept the electricity thousands of homes will send back. Pilot projects have been installed to address these technical issues but without adequate financial resources the implementation of this plan seems impossible even if the technical problems relating to transmission are solved.

Indian government officials are eying international financial help either through bilateral carbon offsetting agreements or those run by the United Nations in order to implement their ambitious plans. Any such financing agreement will solely depend on India’s stance at the Copenhagen climate talks.

History shows us that India has always struggled achieving power generation targets. During the previous three five-year plans India managed to achieve 66.5 percent of the set target a best. After installing 54.3 percent of the targeted power generation capacity in the 1992-97 plan, the success rate declined to 47.8 percent during 1997-02 before reaching 66.5 percent during 2002-07.

The government recently in increased its target for the 2007-12 plan from 78,500 MW to 90,000 MW. It will not be surprising if the success rate dips again given the severe shortage of coal and lack of funds to pursue the bold solar energy plans. India will push for international assistance to developing countries including itself thus hinging all the success or failure of its plans to the terms of the next international climate treaty.

India needs to utilize the resources at hand and not wait for international assistance especially when there is an urgency to boost generation capacity. India has the financial reserves to bear the huge costs of these solar energy projects but only time will tell if the government is willing to take that extra step to secure it future and initiate investments in solar energy.

Photo: afloresm (Creative Commons)

The views presented in the above article are author’s personal views and do not represent those of TERI/TERI University where the author is currently pursuing a Master’s degree.