Welcome to the weekend edition of Lights On, a newsletter that brings you the key stories and exclusive intel on energy and climate change in South Asia.
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The new UN report on the state of the global climate has this week shone fresh light on the urgency of climate action around the world. Like many other developing countries, India faces a host of environmental vulnerabilities compounded by socio-economic factors such as poverty and carbon-heavy infrastructure.
But India is also striving to offer solutions. Its energy transition efforts are closely watched internationally, and though they have failed to fully deliver on overly ambitious targets, they offer solid hope for transformation. This week I spoke with Dr Ajay Mathur, director general of the International Solar Alliance (ISA), a collaboration of 86 members countries launched by India ahead of the 2015 UN climate conference in Paris. In this candid interview, Dr Mathur explores India’s successes and shortcomings in achieving its solar goals and becoming a global clean energy leader.
Lights On: Clean energy is a key part of most countries' climate agenda, and India in particular committed to fast-tracking its energy transition at home and abroad. What are the challenges ahead for this to happen?
Ajay Mathur: There are three kinds of challenges to the acceleration of solar. The first is an up-to-date understanding of the cost, performance and the linkages with my applications. Say that I want a solar pump, or a home system, or I want a solar generator for my health clinic, what is the kind of price point, what is the kind of performance that I'm looking for? That's the first issue. Then, where will I buy it? How much will it cost? Who will sell it? And who will maintain it? That's the second question. The third is that all solar applications tend to be very cost intensive. So while the operating costs are very near zero, that means that I need access to capital, and low interest rates. In short, information, capacity, and the availability of low-cost money are the three main challenges.
Speaking of solar acceleration, we know that India’s nearest target is 100GW of installed solar by next year. And it looks like we are very behind on that, so far just over 40GW have been installed. What went wrong? And how do we make things right?
The call for 100GW covered both solar parks and solar rooftops, and [while] solar parks have picked up, solar rooftops have not. So solar parks are very near the target, just a few GW away, but solar rooftops are very behind.
One of the key issues is that we have not yet been able to find a business model which would be of interest to both the household, the person who's putting solar on their rooftop, and the distribution company.
We [were the] first, the world over, to move towards what we call net metering, but with net metering the electricity company buys the excess electricity from solar at the same price at which they sell electricity to the user. Now, they buy grid electricity at far lower prices, and so they lose money with every kWh of solar electricity that they buy. Also, they get this excess solar electricity at times when there is limited demand for electricity, and so they have a challenge in selling it at the same rate at which they buy it. So they don't like it.
On the other hand, distribution companies would like solar power from the rooftop solar facilities to be procured at the same price at which they buy grid electricity, which is essentially the average of the generation cost of fossil fuel electricity. Now that's too low for householders; it's not remunerative for them.
So we need a price for rooftop solar electricity which is remunerative for both the householder and the electricity company.
The second problem is that investor confidence in solar parks requires a clear off-taker, somebody knows they are buying solar electricity at a particular price. And there is an off-taker power purchase agreement in place. We see that developers are able to attract investment capital, and provide solar electricity at competitive prices once an off-taker is in place.
The third problem is there hasn't been as much of a development of on-round-the-clock renewable electricity supply, or even solar supply in the evening hours, and so electricity distribution companies revert to using coal electricity in the evening and night hours. And because they have to enter into a contract with coal electricity producers, they have to pay them for their capacity even if they're not buying actual electricity during daylight hours. So at this point it makes sense for utilities to buy the entire amount from coal electricity producers because coal power is available round the clock.
Consequently, restructuring the contract becomes important. We don't want the contracts not to be honoured, but they need to be written in a manner that helps the off-take of solar power during the day, when it is the cheapest form of electricity, and allows the buyers to back down when they are not using solar electricity. The right systems are in place, we need to improve the business models.
What is the role of storage in this context? Do you think storage will take off soon or is it still at too early a stage to be counted on?
I think that storage prices will fall within the next one to four years. Round the clock electricity from solar plus batteries will be competitive with the price of electricity from fossil fuels. It's a short time frame after which financial institutions will start seeing this as a choice.
[Earlier this week], Reliance announced that they are investing in a new company employing technology from MIT which is making liquid metal batteries. Now, the problem with liquid metal batteries is, number one, they're heavy so they can only be used for stationary purposes, not for mobile purposes. They're put in stainless steel containers which are heavy. But while the upfront cost is high, their operating costs are low because they are very efficient and they can switch on and off very fast, in nanoseconds. The price has come down and if a company like Reliance which has got extremely good records in providing services, and bundling in the cost in the services, that would be a good way of pushing round the clock electricity from solar.
How would that work in practice?
You say, I'm going to send you electricity at a certain amount of rupees per kWh. The operating costs? You don't need to worry about that. You pay me a certain amount of money, and I will take care of the rest. So anybody with slightly deeper pockets, that can shoulder the capital costs and then the lower costs in operations is who yields the profits and therefore the return on capital.
Let’s talk about India’s plans for the world. One Sun, One World, One Grid (OSOWOG) is India’s flagship project to connect Asia, the Middle East and Africa through solar energy. ISA is spearheading the effort, which has been hailed as visionary by international observers. But critics argue that India is not yet up to the task, citing potential transmission issues, policy hurdles and diverging electricity prices among partner countries. So how is this project going to address these problems?
OSOWOG wants to connect different regions of the world. Now within individual regions, electricity trade already happens. Yes it is constrained, but yet people acknowledge that there are benefits from the regional grid. For example, electricity trade between Germany and Norway enables Germany to have days when only renewable electricity is needed. Together, the two countries have a far greener grid than they would if they were on their own.
Now the idea is that under OSOWOG, regional groups connect to each other. So for example, imagine that the South Asian groups connect with the Gulf Cooperation Council grid (GCC). When it is evening in India, it is still afternoon in the Gulf, so the electricity that is generated during the afternoon there ensures that the sun's electricity reaches India after dark. This is the big picture.
Now, your question is valid, because if the electricity is put in on one side, and taken out on the other side, prices will have to be established. So what we will need is international regulators. The regulator will need to ensure that on the one side, the person who has set up the grid and who's invested in the cable gets a return, but on the other side, that if anybody wants to put in electricity, it can flow.
So we asked EDF, Électricité de France, to explore this in three phases. In the first phase, they will be looking at techno-economics – what the structure will look like, whether you go through a desert, whether you go over the mountains, whether you go on the seabed. The second phase will look at the geographies and the markets to establish where this connection makes sense. And then the third phase will explore the regulatory institutions, and the issues that need to be addressed as we go ahead. The first phase results will be available towards the end of this month, the second phase by October, and the third part and the entire study will be completed by May next year.
In the context of a global solar grid, what is the role of decentralised solar?
The two ideas coexist, OSOWOG will not replace decentralised solar. It targets places that are connected to the grid where there is a large demand, because the cables enable them to use solar electricity at times when the sun is not available. Decentralised solar will continue to be a major source of clean energy. And as far as the International Solar Alliance is concerned, one of our major programmes is on solar mini grids. We are looking at what I would call a solar generator, a panel plus batteries which will essentially replace the diesel generator. These tools continue to be used, but if at any point you get connected to a grid, then you can take advantage of the OSOWOG connectivity. And if not, you are still fully autonomous.
When China declared its net zero target last year, many wondered what the impact on the solar energy market would be. For example, a boost to R&D would mean that the prices of Chinese products would go down even further. And some people said this will be great, because technology will become so cheap that it will enable more countries to take advantage of these innovations, but others worry that this would eventually create a Chinese monopoly in the solar space. What do you think would be a constructive approach to the spread of new solar tech around the world?
Without focusing on specific countries, let's look at the experiences that we have had. The first thing is that the places where new technologies are developed, and places where they are manufactured may not be the same. So a lot of the R&D occurs, for example, in the US and Australia, in Europe, and a lot of the manufacturing occurs, as you said, in China – but also in Thailand, in Taiwan, and so on. Secondly, we found that [manufacturing] plants' R&D is important. Because even today we are finding that solar manufacturing plants that were set up in the late 1990s or in the early 2000s are no longer competitive because the solar panels that they produce are not efficient enough. Today's [plants], using today's R&D are much more efficient and cheaper on a per kilowatt hour basis.
The third point I would suggest is that the largest markets that are emerging today are in the developing countries where new capacity is being created, as a substitution of fossil fuels. And if you look at this new solar capacity, then the challenges really are around the distribution of the solar panels and batteries. And in my opinion solar panels and batteries will be far more distributed in tomorrow's world than they were in yesterday's world.
One of tomorrow’s challenges will be how to handle a growing amount of solar waste, as old panels reach the end of their life. Studies point at a solar waste crisis in the making if the problem is not addressed urgently. Has the ISA thought about this?
This is one of the ISA's main programmes, because for solar waste and battery waste we need to set up systems now. Every country in the world needs to do that, and we need to be able to recycle material. Now this means that I should be able to separate out the various materials, the gold, the platinum and the chromium that go into the panels. Therefore I need to design them in such a way that they are separable. So, design specifications, the collection of used panels and batteries, recycling, all of these become important. And what the ISA is doing is to put together best practices from around the world, and by next year we will put out the first guidelines for waste management.
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