‘Democratise the solar energy model for better results’

Damian Miller is an expert on solar energy in emerging markets. He holds a PhD from the University of Cambridge (Trinity College), and his dissertation addressed the role of entrepreneurs in the diffusion of solar photovoltaic technology in Asia. After finishing his PhD in 1998 he put his research findings into practice. He joined Shell, becoming Shell Solar’s director of rural operations and establishing solar subsidiaries in India, Sri Lanka, the Philippines and Indonesia. He also implemented a large-scale solar project in China and managed joint ventures in Morocco and South Africa. During this time he worked closely with multilateral and bilateral development agencies and emerging market governments to help grow local solar markets, overseeing the connection of more than 125,000 solar homes. At the end of 2006 he set up Orb Energy in India and is currently its CEO. In four years, Orb has become one of India’s leading providers of solar energy solutions. Orb sells, installs and services solar systems across multiple states in India, with plans for further expansion. He currently resides in Bangalore, India. He spoke with DNA on a host of issues relating to the future of solar power and policies governing this sector in India.

You recently wrote in an article in the New York Times that wholesale photovoltaic panel prices spiked from $2.5 per watt in 2002 to more than $4 by 2007. With the financial crisis, solar modules plunged to as low as $1.5 per watt, but the industry is now primed for another round of growth.
Yes, we see solar power prices have dropped dramatically over the last few years. The biggest contribution for this came from Germany, which allowed each house to set up solar panels on their rooftops, and then feed the same power into Germany’s national grid. Today, 2% comes from solar. This way, the household earns a return on the solar power they generate and feed into the grid, the suppliers benefit because they are the ones who help the households set up the solar panels on their roof tops, the country benefits because it uses a natural resource and saves money on fossil fuels, and the world benefits because of using a climate friendly energy source.
In fact, in calendar year 2010 Germany will add roughly 7 gigawatts (7,000 mw) of additional solar power generation capacity in just one year.

Did the feed-in tariff model that Germany introduced influence solar power generation across the world?
Yes it did. Fundamentally it has driven down the costs of solar power. By creating surging demand it has encouraged supply. When this supply outruns demand, prices drop — as happened in 2008 — and is likely to happen again in 2011, when Germany cuts its feed in tariff. Also, Germany’s feed-in tariff created lots of green jobs. With rapid growth of solar installations in Germany, thousands of smaller solar companies sprang up. Each focused on specialised parts of the solar value chain. And it has also meant that solar has emerged as a mainstream solution for large-scale power generation. Under feed-in-tariff regimes solar power plants that started at just 1-5 mw grew to more than 50 mw.

Now you have plants of 250 and 550 mw planned in California and over 2,000 mw in China. Countries like Spain, Italy, France, Czech Republic, Korea and the UK have begun opting for the German model.

How do you view India’s solar policies? It has not adopted the Germany style feed-in tariff model.
India has opted to generate 20 gigawatt of solar power by 2022. To encourage solar power entrepreneurs and suppliers, it has welcomed anyone who can generate more than 1 mw of solar power to feed into the national power grid. It plans to pay just over `17 per unit to investors in a solar power plant for every kWh of power they feed into the grid. This is a good model, because it has finally encouraged large-scale solar power generation in the country.

Can the government meet its target of 20 gigawatt?
It could be difficult. The India model is different to the German model. In Germany any home, business, building or factory can set up a solar PV installation and start feeding into the grid. I can install a 1kW solar system at home and start being paid for the solar power I generate. In India this is relegated mainly to power plants of 1 mw and above, with some pilot projects at the 100kwh level. The trick is to democratise the process so that everyone can become a solar producer. Only this way can you achieve the numbers that India is talking about.

Moreover, when the government selects the solar power producer, it brings into play the power of dispensation, and the charges of favouritism, isn’t it?
The German model avoided all that. But an India-based German company (SunTechnics) has already been working on rooftop models in West Bengal with some degree of success and it generates power at around `10 per kWh.
Karnataka also wanted to do this kind of thing with 5000 solar rooftops in Bangalore.  It was a great idea, but remained just an idea.  But it needs to be executed.  It needs to be implemented.

That is why we cater to the rural market, where there are few government conditions for entry into the market.  It is tough, because we have to compete against subsidised power for farmers, and subsidised kerosene and diesel.  But we offer good uninterrupted power in areas that don’t get it.  And we are succeeding.  And today, we are already doing business worth `30 crore a year and growing rapidly.

With solar photovoltaic module costs falling to less than $1 per watt, why is it that solar power project costs are so expensive in India?
The world’s biggest photovoltaic producer, First Solar, makes them at 80 cents per watt, but the wholesale price of such modules is more like $1.5. In a rural system, which we cater to, our largest cost - 35% — is that of the battery, which stores the solar power for use in the night. Indian battery producers are protected by a high 40% import duty which makes battery prices in India artificially high for the end consumer. Then come the wires, the electronics, lights, transportation, installation at the site, sales, commissions and the margins for the vendor and for the after sales service.

The key to the market is financing and the distribution channel that reaches the markets. This is because consumers spend 75% of the life-time cost of power generation on day one. If you can finance this cost, then the costs can be quite low — and the customer will have payback in 4-5 year. 

Even then, we manage to supply this at Rs400-500/watt, which is around $10 per watt installed.  In an on-grid system, where there are no batteries, no lights, economies of scale, lesser margins for vendors the costs could be Rs160-200/watt.

Isn’t that very high for on-grid supply?
The costs of the initial systems installed under a new policy will invariably be higher.  They need to be, to incentivise entrepreneurs to take the risk of investment. Then as more entrepreneurs come in, and as costs fall, governments should have a mechanism in place, which allows them to wrench down purchase prices year after year. This is what Germany is doing next year, and it is likely to lead to a further reduction in costs.

India does not appear to have this?
It should.

Considering that solar power has practically zero operations and maintenance costs, shouldn’t governments promote solar power for villages saving on grid costs?
Solar power is ideal for villages that are inaccessible, remote and expensive to reach through grid lines. The goverment has long had a program in place for rural distribution of solar home systems and solar lanterns.

But the programme was largely government implemented, and tender driven, with little focus on incentivising the private sector to directly enter this market and directly serve the customers needs. This is a policy that is now changing under the National Solar Mission, and I see brighter days ahead.