Climate Change Policy in India, and the National Solar Mission

The National Plan

The National Action Plan on Climate Change (NAPCC) was released by the Prime Minister’s Advisory Council on Climate Change in June 2008, with an intention to serve as the first country-wide framework on climate change. The following eight missions in the NAPCC were meant to map out long-term and integrated strategies to achieve key national goals from the climate change perspective:

  • National Solar Mission
  • National Mission for Enhanced Energy Efficiency
  • National Mission on Sustainable Habitat
  • National Water Mission
  • National Mission for Sustaining the Himalayan Ecosystem
  • National Mission for a Green India
  • National Mission for Sustainable Agriculture
  • National Mission on Strategic Knowledge for Climate Change

The respective ministries and agencies involved then developed the individual mission documents.

The NAPCC mission design received mixed response from various stakeholders, especially regarding the rather broad domains of some of the stated goals, and on whether the missions were intended to establish principles and philosophical guidelines, or clear-cut strategies. The missions may also be considered another examples of siloed thinking that asks too much of our ministries, departments and other discrete divisions with our bureaucracy in terms of coordination. Much of this criticism holds valid given that implementation has not really proceeded at the expected pace, and there has been too little done to be analysed about for most of the missions listed.

The National Solar Mission, later dubbed as the Jawaharlal Nehru National Solar Mission (JNNSM), is a remarkable exception. With its ambitious goals, immense scale, and our abundant potential, JNNSM can serve as a crucial element of India’s response to the challenges of energy security and climate change.

The mission’s first phase experienced successes and failures, and signalled the maturing of the solar industry in India.

The Jawaharlal Nehru National Solar Mission

The JNNSM, launched in January 2010, set an ambitious target of deploying 20 GW of grid connected solar power by 2022. It aimed at reducing the cost of solar power generation in the country, ultimately achieving grid parity by 2022, through long term policy thinking, large scale deployment goals, aggressive research and development, and domestic production of critical raw materials, components and products.The mission thus endeavoured to create an enabling policy framework to achieve this objective and make India a global leader in solar energy.

The 20,000 MW grid solar power target included both solar thermal power generating systems and solar photovoltaic technologies, and 2,000 MW of off-grid capacity, including 20 million solar lighting systems and 20 million square meter solar thermal collector area,are also aimed to be achieved by 2022.

While a part of the NAPCC, solar power represents much more than climate action. It can potentially address issues of energy security as well as energy poverty for a nation with hundreds of millions living with no access to electricity. In this process, it can also reduce our dependence on fossil fuels and imported reserves, impacting our account deficit as well.

Shantavva, an octagenerian freedom fighter, appreciates Selco lights at her modest home in Dharwad. Does the National Solar Mission help or harm such social enterprises?

On a global level, India can prove itself a world leader in cost-competitive solar power and it may very well become the first economy in the world to achieve grid parity, setting an example of sustainable growth. This would also be at par with our commitment at the 2009 UN Climate Change Conference (the Copenhagen Summit) to reduce its emissions per unit of GDP 20 to 25 percent below 2005 levels by 2020. India is currently the world’s 7th largest emitter of global warming pollution and 5th largest for emissions from fossil fuel combustion.

Last but certainly not the least, solar power also represents a commercial opportunity whose time has come, and is attracting greater investments than ever from the private sector. While this promises economic growth and jobs, and signals a maturing market, it is also important for the state to ensure that this growth is equitable and that crony capitalism does not eat into society’s interests.

The mission is scheduled to be implemented in three phases. The first phase was of three years, lasting until March 2013, the second till March 2017 and the third phase is to continue till March, 2022. The target of Phase-I was to set up 1,100 MW grid connected solar plants including 100 MW of roof top and small solar plants; and 200 MW capacity equivalent off-grid solar applications and 7 million square meter solar thermal collector area.

Policy design

As many experts have pointed out, the JNNSM seems to be pointed solely at large scale commercial opportunities and does not necessarily cater to the “poor and vulnerable sections of the society” (a stated guiding principle for the NAPCC) or even to the small entrepreneur. This is also noticeable because of the greater stress on grid power supply (20 GW) than decentralised, off-grid solutions (2 GW), the latter having much greater potential for penetration in rural areas as well as for new entrepreneurs.

On the other hand, it can be argued that focusing on commercial opportunities could accelerate the maturity of this market in India and build infrastructure while reducing costs rapidly enough to benefit all sections of society in due course.

Another concern is that of land availability for large plants. This is also tied to R&D issues regarding solar energy in India. Given our space constraints, India needs to build research capacity to maximise land use efficiency. Similarly, there needs to be greater research for resolving questions regarding appropriateness of different solar technologies in India, and for developing cheaper photovoltaics and diverse applications of solar power. Even though JNNSM does have an R&D component, more needs to be done.

Concerns regarding usage and availability of water for large scale plants have also not been addressed, and could constrain the already tight water-energy nexus in the nation.

India’s First Canal Top Solar Power Plant near Kadi, Gujarat (via Wikimedia Commons)

Phase 1: Salient Features & Results

In a span of three years, India has taken a significant step forward by increasing its installed capacity of solar power from around 30 MW to more than 2,000 MW. JNNSM made impressive strides in adding capacity, and successfully reduced the costs of solar energy to around $0.12 per kWh for solar photo voltaic (PV) and $0.21 per kWh for Concentrated Solar Power (CSP), making India amongst the lowest cost destinations for grid-connected solar power in the world.

The grid-connected segment saw enthusiastic participation from Indian and international investors, thanks in part to two unique features which helped reduce tariffs and improve market appeal:

  • Bundling: Since power from solar projects has a higher cost to begin with, it is being bundled with coal-based power from the National Thermal Power Corporation’s unallocated quota, through the NTPC Vidyut Vyapar Nigam (NVVN),reducing the overall tariff impact on distribution utilities.
  • Reverse auctioning: Projects were allotted to qualified bidders through attracting reverse bids, fully realising the benefits of declining prices in the global market, and bringing the purchase price of both PV and Concentrating Solar Power (CSP) to a competitive level, far lower than the Central Electricity Regulatory Commission’s benchmark tariffs.

Implementation of a Renewable Purchase Obligation (RPO) for solar power and institution of a Payment Security Scheme (PSS), were other features which underlined the success of JNNSM’s Phase 1.

The mission’s Phase 2 design continues this trend of using innovative policy mechanisms such as buying-down the cost of solar generation by financing incremental cost through instruments such as capital subsidy, Generation-Based Incentive(GBI) and Viability Gap Funding (VGF).

Letdowns and learning

Phase-1 has also been marked by a number of challenges and unintended consequences:

  • Unsuccessful approach for thermal: Every single solar thermal plant awarded under JNNSM Phase 1 was delayed, and targets were not met. This may be due to lack of availability of solar resource data, complexities in land acquisition, provision of water supply, low feed-in-tariffs, and lack of loan guarantees, all of which could have been anticipated.
  • Local manufacturing (Quality concerns and domestic content requirements): The most controversial aspect of JNNSM has been the guidelines mandating components to be manufactured in India, accounting to over 60% of total system costs for solar PV projects, and 30% for solar thermal. In fact, some of the critical components for concentrated solar power projects are practically unavailable in India. This also led to the US trade representative filing a complaint against India with the WTO. Without a local industry capable of producing good quality inputs at reliable schedules and competitive pricing, local project developers suffered. For continued growth of solar power, domestic manufacturing competency needs to be developed. A silver lining of the whole mess is that the component manufacturing industry is seeing growth due to the great market response so far.
  • Commercial funding: While agencies such as multilateral institutions and NBFCs financed many phase 1 projects, commercial banks (who usually fund infrastructure) stayed away. As the JNNSM program scales up, it is necessary to get these players into the fold to reach satisfactory levels of investment. This lack of funding is also experienced by local component manufacturers
  • Challenges of centralisation: So far, JNNSM has focused on centralised power generation, which, while lowering costs through economies of scale, leads to losses when sharing transmission and distribution facilities with electricity sourced from other modes. Thus, new transmission infrastructure in the form of green corridors should to be set up.And why should centralisation even be necessary? By encouraging decentralisation, JNNSM could have, and perhaps still can, serve the poor and the underprivileged, empowered social entrepreneurs, and saved on transmission losses, all at the same go.

While JNNSM has seen some challenges and failures, and needs to rectify its guidelines and buckle up for its remaining run, it is important to keep in mind that an industry which practically did not exist until a few years ago is now a hotbed of growth and innovation and is already providing a small but significant fraction of the energy mix in the country. JNNSM is undoubtedly a venerable, forward-looking policy, and it just needs to continue sticking to the principles with good execution to eventually make India the world leader in solar energy.

(This post was written for the Policy in India series on NewsYaps at JNNSM: The Sunshine of India’s National Action Plan on Climate Change)