It’s one thing for a small percentage of wealthy homes in California and New Jersey to get solar panels. It will be another thing entirely for India, with its 1.19 billion population, to make a substantial commitment to solar power.
Large solar players such as First Solar (s FSLR) and Suntech Power have both recently emphasized increasing sales in India. Part of the reason for the potential growth in India is that the country published a policy called National Solar Mission in January 2010 that calls for adding 20 GW of grid-tied solar energy generation capacity and 2 GW of off-grid projects by 2022. In addition, the Indian state of Gujarat also has its own solar incentive program.
Lack of access to electricity for a large population of the poor in the country – as well as its growing greenhouse gas emissions – has made India an attractive target for solar companies. About 404 million people in India lack access to electricity, according to the International Energy Agency.
Nearly 69 percent of the country’s electricity production came from coal-fired power plants, according to the most recent, 2008 data posted by the IEA website. At 20 gigawatt-hours, solar electricity hardly makes a dent in the overall electricity generation of 830,126 gigawatt-hours. Investor Vinod Khosla has long said that clean tech solutions needs to meet the “Chindia” test, and be able to make a dent in energy markets of India and China.
The country’s renewable energy secretary on Thursday told reporters that the country plans to add 17 GW of renewable power generation capacity between 2012 and 2017, and that will need as much as 1.5 trillion rupees ($33.5 billion USD) to achieve. Most of that investment will have to come from the private sector though.
In addition, India is becoming an attractive market to solar companies because the current engine for solar demand — the European markets including Germany and Italy — have become rather uncertain lately, after these governments have sought to cut large subsidies. With the European markets in flux, solar developers are scrambling to find new markets.
First Solar CEO Rob Gillette struck an enthusiastic note in an otherwise somber first-quarter earnings discussion with analysts this week when he talked about the growing sales of the company’s solar panels in India. First Solar began announcing supply deals, albeit small ones, to Indian customers last December. Asked whether the market opportunity has grown since, Gillette said, “It has changed meaningfully in a positive way. We are putting people on the ground and figuring out ways for First Solar to have a leading position.”
The company shipped 10 MW of solar panels to India in 2010 (none in 2009), and is now looking at doing more than 100 MW of business in 2011, Gillette said. The two supply agreements announced by First Solar so far are 15 MW to ACME Tele Power and 25 MW to Moser Baer Clean Energy.
On the same day that Gillette discussed the market prospect in India, Suntech Power announced a 100 MW solar panel supply deal with SunBorne Energy, which plans to install them in India in the next two years. SunBorne intends to start by installing 10 MW for a project in Gujarat.
Juwi, a large project developer in Germany and a First Solar customer, set up an office in Bangalore late last year and announced its plan to install 100 MW of solar power projects in India in 2011. Earlier this year, Trina Solar and its project developer partner, Lanco Infratech, completed a 5 MW power plant in Gujarat. And BP Solar and Tata Power, which formed a solar cell and panel assembly manufacturing joint venture back in 1989, announced a plan last year to beef up its solar cell production by 62 percent.
India isn’t an easy market to tackle despite the government policies, however. Manufacturers and project developers – domestic and foreign – are going through the typical learning curve found in many other emerging markets. Lining up financing for power projects has been a particular challenge. Tata Power, the largest non government-owned power company, told Bloomberg last November that borrowing costs were too high and that it would skip bidding in the first solar permit auction.
“The high cost of capital and immature financing market are possible constraints to” achieving the National Solar Mission goals, Gillette said.
Photo courtesy of Emmanuel Dyan via Flickr