INDIA IS BUILDING SOLAR

Pointing out the threats costly energy and energy shortages represent to Indian business (“India Inc”), G. Chandrashekar offered his India readers a view into the advanced state of the solar energy industry in Europe and made the case for the feasibility of developing an Indian solar energy industry.

The very impressive numbers in this post, showing huge growth in the world's solar industry, are Chandrashekar’s. He attributes them to a Prometheus Institute/Worldwatch Institute study, probably Vital Signs.

Chandrashekar and many other solar energy industry watchers make much of Germany’s solar industry leadership but there is a serious backlash now emerging. The enormous output of Germany’s solar sector was the result of a government incentive many solar energy experts in the rest of the world believe is now having a detrimental effect.

In the 1990s, the mantra about solar was “scale.” If only the governments would institute incentives to stimulate business, the industry could bring the cost of solar systems down through economies of scale. So Germany, under the influence of the very committed and convincing Hermann Scheer, took the bit and ran. It created a feed-in tariff.

Unlike most U.S. solar energy subsidies, which allow solar system owners to earn back only an amount equal to their own consumption, the feed-in tariff rewards solar system installers for all the electricity they feed into the grid. The German feed-in tariff did exactly what it was designed to do: It stimulated solar manufacturing, produced a huge leap forward in scale for first the German and then the world’s solar industry and brought solar energy to within a decade or less of grid parity.

The problem is that the industry has grown so fast it is overreaching itself. There is far more capacity than there is market unless the market is stimulated with the same kinds of incentives that brought Germany to its current level of activity.

Why not just keep feeding the beast? Because even in Germany the cost of subsidizing solar power production, essentially by non-solar power producing rate payers, is becoming burdensome and producing a popular backlash. The same thing is happening in Spain, where a feed-in tariff was instituted but quickly met opposition.

Many industry insiders are wondering if solar energy is in for trouble, or at least a slowdown, as many governments – including the U.S. – refuse to institute the kind of incentives Germany took on to get the industry off the launch pad.

Some slowing in the market may relieve world silicon shortages and ease price pressures there but too much of a slowdown will hurt. The German solar industry employs 40,000 people.

Perhaps redemption lies in Asia. It is entirely possible, some would say likely, that emerging economies like India and China, desperate for energy of any and every kind, will step in and sustain production at scale for just a little longer. The rumor is that China’s manufacturing capacity, growing steadily for the last 3 years, is about to take over world markets, drive prices down and create greater expansion.

China has only barely begun to install solar domestically and tap that mind-bogglingly massive market. India’s government recently announced a global climate change plan that strongly emphasized solar energy development, a plan that will surely expand markets. (See INDIA GETS SERIOUS ABOUT SOLAR)

With global climate change about to drive the price of greenhouse gas emissions significantly up and the price of oil on the rise, solar energy is in the home stretch of its 3-decades-long run to grid price parity.

Will it get across the finish line? Markets never offer certainty but like Mr. Chandrashekar implies, solar is a good bet.

A glance at world insolation makes it obvious that anything Germany has done, India could do better. (click to enlarge)

Solar energy sizzles worldwide
G. Chadrashekar, July 16, 2008 (Business Line via The Hindu)

WHO
India Inc; Prometheus Institute; Worldwatch Institute; India Ministry of New and Renewable Energy (especially the "Solar Energy Centre" at their website)

WHAT
Aggregated planned world corporate investment in the solar energy industry is Rs. 50,000 crore ($11.6 billion). Is it feasible for India? Will the solar development of India and China save the world solar industry?

Solar is behind the others but when it reaches price parity, there will be no limit to its growth. (click to enlarge)

WHEN
- 2007: World production of photovoltaic (PV) cells rose 51% to 3,733 megawatts.
- 2007: 2,935 solar modules were installed worldwide.
- 1996 to 2007: 9,740 megawatts of PV installation worldwide.
- 2007-08: Rs 77 crore ($17.9 million), India’s budgeted funds for solar energy development
- 2006-07: Rs 74 crore ($17.2 million), India’s budgeted funds for solar energy development
- 2005-06: Rs 58 crore ($13.5 million), India’s budgeted funds for solar energy development

WHERE
- Europe is the world leader in PV cell manufacture, led by Germany.
- China rose to 3rd in the world in PV manufacture in 2006 and to 2nd in the world in 2007.
- China exports most of its PV cell manufacture to Europe.
- Maharashtra, Rajasthan, Meghalaya and Uttarakhand: Areas where India will spend biggest for solar energy development.

WHY
- Europe passed Japan to become the world leader solar cell manufacturing last year.
- Germany, with more than half the world’s solar PV installations, led the world last year. Spain, with the 2nd best feed-in tariff, was also 2nd in installations.
- Germany’s solar energy industry employs 40,000 people.
- China’s PV production rose 6 times over to 820 megawatts in 2007.
- India’s government recently announced a global climate change plan that strongly emphasized solar energy development and upped its budget to Rs 77 crore ($17.9 million) for solar, Rs. 3 crore (~$699,000) over the year before and Rs. 19 crore ($4.4 million) over 2 years before.

All this and the Asian giants have yet to be factors in the market. (click to enlarge)

QUOTES
- Chandrashekar: Analysts expect more price drops — perhaps as much as 50 per cent in the next two years — as polysilicon becomes easily available, production and installation are further scaled up, manufacturing efficiencies increase and more advanced technologies are introduced.
- Vital Signs, from Prometheus Institute and Worldwatch Institute: “Solar electricity could soon be a competitive alternative to conventional retail power in many regions…”
- Chandrashekar: Renewable energy is expected to play an important role in future. Corporate India has a job cut out. It is business and corporate social responsibility as well.