WHILE India is facing an acute power crisis, there is one segment in the electricity sector where the sun is literally shining brightly. Solar energy is emerging as one of the brightest spots in the power sector and India is having a dream-run in this renewable energy sphere.

Solar energy is taking off in a big way thanks to a series of events that have happily coincided in making it an affordable and viable alternative. The acute shortage of coal, one of the major sources for power generation in the country, has forced power producers to import expensive coal. Many of the new coal-powered plants generate power at tariffs that are very high.

On the other hand, both the central and state governments are unveiling a slew of incentives for the solar energy sector, encouraging the use of this renewable form of energy. The price of photo voltaic (PV) panels has also dropped sharply in recent months, boosting the prospects for the sector.

According to a recent report by Boston-based GTM Research, a renewable power consultancy, there is a glut in supplies resulting in a crash in the price of panels. Globally, the production capacity of PV solar panels is at 59 gigawatts, nearly double the demand of 30 GW. The glut in production has forced many leading PV panel manufacturers in the US, Europe and Asia to shut down operations and even file for bankruptcy.

The price of PV panels dropped by more than 50 per cent last year, taking many of the manufacturers – who had invested huge amounts in building up capacities – by surprise. GTM Research predicts that the price of panels will continue to dip further; at present, they are being sold for between 70 and 85 cents, but are expected to fall to 45 cents by 2015.

Indian solar power producers have been the biggest beneficiaries of this sharp fall in the price of PV panels. While India produced a mere 20 MW of solar power in 2010-11, it generated 940 MW in 2011-12, as producers took advantage of the fall in panel prices.

Importantly, solar energy has achieved grid parity, meaning the cost of generating one unit of solar power is equivalent to the prevailing cost of conventional electricity sold through the grid. In fact, electricity from many of the new coal-fired plants that are being planned will be dearer than solar power.

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THE Indian government has also unveiled an ambitious programme to boost solar power production and also energy from other renewable sources including wind and biomass. The Jawaharlal Nehru National Solar Mission (JNNSM) has set a target of adding 20,000 MW solar energy capacity by 2020.

Under the mission, being rolled out in three phases between 2012 and 2022, there is a process of reverse auction, where bidders have to quote the price of solar power that they would generate and sell to the grid. In the first phase, the prices were around Rs10 a kWh, or even more. However, in bidding for the second round, the prices fell further. Solardirect was the lowest bidder, quoting Rs7.49 a unit for a 5MW solar energy plant.

The average tariff bid for the 350 MW under the mission was Rs8.8 a unit. Compare this with the price of Rs18 a unit, which was the cost of generating one unit of solar energy about three years ago. According to a report by CRISIL, a leading ratings and research agency, capital costs for setting up solar energy plants fell by 30 per cent within a year; it now costs just about Rs100 million (about $1.8 million) to set up a one MW solar power plant. PV modules account for half the cost of setting up a solar project

The sharp fall in the price of solar panels has also attracted a lot of foreign funding into the sector. According to US-based Pew Charitable Trust, there was a seven-fold jump in solar energy investments into India, which added up to $4.2 billion in 2011.

Overall, the clean energy sector in India received $10.2 billion in investments, resulting in the country emerging as one of the top performing clean energy economies.

“On a number of measures, India has been one of the top performing clean energy economies in the 21st century, registering the fifth highest five-year rate of investment growth and eighth highest in installed renewable energy capacity,” says Phyllis Cuttino, director of Pew’s Clean Energy Program. “The country holds great potential in the Asia/Oceana region and will continue to be a top destination for private investment this year.”

According to Farooq Abdullah, minister of new and renewable energy, the government is setting up an investment promotion cell to boost investments in renewable energy, by providing a single-point contact for potential investors. Abdullah estimates that about $50 billion will be invested in renewable energy in India over the next five years; solar would account for half of it, followed by wind ($19 billion) and hydro and biomass ($3 billion each).

The minister notes that India ranks fifth in terms of renewable energy capacity, after the US, China, Germany and Spain. It has an installed base of 25,000 MW in renewable energy, which is about 12.5 per cent of the total power generation capacity of 200,000 MW. “We have decided to increase the share of renewable energy in our power production during the 12th Plan period (2012-17) by increasing the installed capacity by about 30,000 MW,” he adds.

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THE ministry of new and renewable energy (MNRE) is now planning to set up a separate entity to encourage biomass-based power generation, on the lines of the Solar Energy Corporation of India. The latter is planning to set up pilot power plants to develop technologies and products relevant to India.

About half a dozen states including Gujarat, Rajasthan, Chhattisgarh, Maharashtra, Karnataka and Tamil Nadu, have been at the forefront of encouraging renewable energy. In May, Gujarat established Asia’s largest solar power park, with a capacity of 600 MW.

Spread across 3,000 acres of wasteland near the Rann of Kutch, the park will generate two-thirds of India’s 900 MW of solar power production.

Ernst & Young, a consultancy, in its ‘Country Attractiveness Indices’ for renewable energy, ranked India and Germany second in its solar photovoltaic rankings, after the US. It says India enjoys 250 to 300 days of sunshine every year, and is one of the most promising locations for solar energy.

The government is also offering subsidies for setting up rooftop solar projects, which would also ensure supplies to remote towns and villages that are off-grid. “Rooftop solar projects have to take off in such a manner that people can generate power for their own use from their rooftops and sell the surplus power directly into the grid, without storing in batteries,” says Tarun Kapoor, joint secretary, MNRE. “For this, we are coming out with a separate subsidy scheme to give a push to rooftops.”

The cost of generating a unit of power from solar rooftops would be around Rs8 to Rs9, but with subsidies this could be brought down to Rs5.

The ministry is also urging state governments to encourage use of biomass to produce power. India has an estimated 500 million tonnes of biomass available annually, which could add up to a significant chunk of its total non-renewable energy capacities.