INTERVIEW
INTERVIEW
EQ: Comment on the ratification of the Paris Agreement on Climate Change?
AH: In terms of scope and impact, the Paris Agreement is probably the most far-reaching international agreement ever. In India, as in the rest of the world, we can expect the commitment to lead to changes in the way we live our lives. India has committed to generate at least 40 % of its power capacity from non-fossil fuel sources by 2030. India plans to install as much as 100 GW of electricity generation capacity through solar energy by 2022, of which 40 GW would be through rooftop systems. In order to achieve these targets, India will have to set its energy policy in tune with these commitments. We believe that the back end projections done to reach this number will now have to be integrated into the new energy policy that NitiAyog is championing for the Indian government. The agreement has definitely enhanced the focus on renewable energy sector and has highlighted the importance of clean energy in ensuring a sustainable future for humanity. There are definitely challenges involved such as availability of low cost finance, health of the key off-taker of power i. e. State Electricity Boards, grid availability etc. We hope these challenges will be eventually overcome and that the Indian renewable energy sector will flourish in the days to come.
EQ: What is the impact of recent decline in solar module prices in the Indian PV market and what is going to be likely trend of solar module pricing and technology?
MC: We have seen solar module prices dropping from levels of around $ 1.20per Wpin 2012 to around $ 0.35 per Wpin 2016. This has been primarily on account of two factors – technological innovation and oversupply. The decline in solar module prices have resulted in much lower project costs, which in turn have resulted in decreasing tariffs and consequently, lower overall blended cost of power. We do not see significant capacity additions happening in the solar module manufacturing business and hence believe that the demand-supply mismatch will reduce going forward. This in turn should decelerate the fall in solar module pricing. However, other innovations like reduction in the cost of energy storage and improvement in efficiency of power production in next 3 to 5 years could lead to a further cost reduction as we have seen over the last 3 decades in the solar sector.
EQ: What is your view on the WTO ruling against the Indian Government’ s local content requirement on solar power developers?
MC: The WTO ruling in the US v / s India conflict in February 2016 as well as in September 2016( rejection of India’ s appeal) found that India has violated global trade rules by imposing mandatory local content requirements on solar power developers. We believe that India’ s arguments regarding solar cells and modules being indistinguishable from solar power generation and solar cells and modules being characterized as inputs of generation of solar power do have merit. Having said that, India is a strong supporter of the multilateral, rule-based trading system andhence, we believe the Indian Government would look to explore alternative mechanisms by which to promote local development of the solar module manufacturing sector. In the short-term, India could look to incentivize production of solar modules and cells in a manner which is WTO compliant like direct subsidies to domestic manufacturers, tax breaks etc. In the long run, India must deeply engage with international partners and get the best available technology at internationally competitive rates. It will also have to take steps to promote research and development in renewable energy sector. This will in turn reduce the cost of energy and increaseenergy efficiency.
The government’ s recent launch of the‘ International Solar Alliance’ is definitely a positive move in this direction.
The views expressed are the personal views of the author and do not reflect the views of / are not necessarily endorsed by Tata Capital.
www. EQMagPro. com EQ December 2016 71