In June 2014, Ashok Agarwal thought he was home and dry. Agarwal, the CEO of Essel Infraprojects, was on the verge of delivering the $5 billion Essel Group’s first solar power project—a 20 MW plant in Osmanabad, Maharashtra—within deadline. All that was left was putting up the last 10 km of transmission lines that would connect the Rs 200 crore-plant to the state electric grid.
And that was when Agarwal got a reality check: Farmers who owned the land on which the transmission towers were to be built refused to allow their construction. Essel had the necessary government clearances, and a lot was riding on on-time completion of the project. “We had to get the farmers together, literally touch their feet and beg,” remembers Agarwal, “Of course, we had to pay more money.”
It took three months to put up the last five towers over just half-a-kilometre, and Agarwal missed his deadline by six days, losing Rs 50 crore in bank guarantees. The next time around, he vows, he will set up the transmission lines first.
But this would not be the end of his struggle with farmers who own land. In Punjab, when he started buying land for a 30 MW solar power plant in Mansa, in 2014, he first got the land for the transmission towers. But then, he got stuck while acquiring land for the plant itself: Farmers who owned the land started holding out for higher prices. Agarwal had begun acquiring 150 acres at Rs 8-9 lakh per acre, but by the time he finished, he paid Rs 25 lakh per acre, making the project costs go haywire.
Land acquisition, a hurdle for all infrastructure projects, is turning out to be the biggest pain point—although hardly the only one—for the development of solar plants in India (generating 1 MW of solar power requires 5 acres of land over which the photovoltaic cells, or PVCs, are spread). And price is not the only issue. Land holdings are often small, and divided among several family members, with disputes arising among competing branches of the same family. For instance, Agarwal recalls 20 members of one family landing up for signing the deal for a single 5-acre parcel, with each member wanting a share of the money.
The stories that you hear from solar power producers are a far cry from the euphoria that seems to surround the recent statements and commitments made by some of the largest corporate houses in India towards the country’s solar power industry.
At present, India has just 3 GW of installed solar capacity, having added less than 1 GW in 2014. This accounts for just over 1 percent of India’s total installed capacity of 260 GW (as of January 2015), according to the Central Electrical Authority (ministry of power). To put India’s solar target in perspective: Germany, the world’s second-largest solar market (recently ousted from its first place by China), has just under 40 GW of installed capacity; China has just over 40 GW; the total global solar capacity is 360 GW.
Sixty percent of India’s installed capacity for electricity generation is coal-based, by far the biggest source of power. According to Amit Bhandari, a fellow at think tank Gateway House, “Even if India meets its 100 GW solar target by 2022, it would account for only 10 percent of the country’s energy needs.”
After the ministry of new and renewable energy (MNRE) revised India’s solar energy target in 2014—from having an installed capacity of 20 GW by 2022 to 100 GW by 2022—a host of corporate houses are signing Memorandums of Understanding (MoUs) with state governments. For instance, Essel Group, which has put up 100 MW of solar power capacity, has said it will install 7.5 GW by 2022, a 75-fold increase. At RE-Invest (a renewable energy conference held in New Delhi this February), corporate houses, foreign solar companies and public sector corporations committed to install more than 200 GW by 2022.
However, nearly all the solar power producers, electrical contractors, project consultants and experts Forbes India spoke to find the figure to be far-fetched. Indeed, reaching even the government’s target of 100 GW will take a huge shift in policy and execution. “There is a big mismatch between the goal and the roadmap; there’s no clear strategy,” says Tobias Engelmeier, founder and managing director of Bridge to India, a consultancy. “Hundred GW is too ambitious. We should see about 30 to 40 GW in India, which would be really good. That’s what Germany has done in 10 years.”
The government’s plan, however, is noble: India is a huge importer of energy (mostly fossil fuels like coal, oil and gas) and a shift to alternative sources is desirable. The country is blessed with an abundance of natural sunlight and solar power can be produced even in remote areas, through small off-grid solar plants that can power clusters of rural homes.
But can solar power go beyond localised production and usage, and compete, in any meaningful way, with conventional power?
Action on the ground is constrained by several factors such as land acquisition, poor evacuation facilities to transport the power to the state grid, low availability of PVC modules for solar panels and unwillingness of state power distributors (discoms) to buy solar power, which remains more expensive than coal power.
Where land is concerned, meeting the 100 GW target would require 5 lakh acres, or half the land of Goa.
“Land is the biggest problem for solar power,” says Anil Sardana, CEO, Tata Power, India’s largest integrated power producer, with a stated aim of producing 25 percent of its total output from non-coal and non-polluting resources by 2020. Yet, the company has gone slow on solar power. Its portfolio of renewable energy—it forms 14 percent of its current total output—mainly comprises hydro and wind energy. Sardana says that although Tata Power was one of the early movers in the solar energy sector in India—its oldest solar project, a 118 KW plant at Lonavla recently completed 18 years—it is unwilling to make the huge investments that rival companies seem to be making. “Making big bets on solar without land under your belt doesn’t seem right,” he says.
Developers also say that even if land is available, regulatory bottlenecks can prevent companies from buying large tracts and scale up rapidly. “Acquisition of farm land is an issue,” says Khurshed Daruvala, managing director of Sterling and Wilson, the electrical contracting arm of Shapoorji Pallonji Group, which provides engineering, procurement and construction (EPC) services for solar plant developers. “For example, the maximum farmland holding is 27 acres per farmer in Maharashtra. If you want to acquire 500 acres, the procedures for the company are long because you have to acquire each parcel individually.”
To work around the problem of finding large, contiguous land areas, wind energy company Suzlon is trying a hybrid model, of putting up solar panels in the spaces between its wind turbines, and leveraging on the common transmission and maintenance infrastructure. Chairman and Managing Director Tulsi Tanti, a wind power evangelist for more than a decade, says, “Though wind is a cheaper and proven technology, today, solar has the momentum.” Suzlon is finalising plans to put up 200 MW of solar projects in Rajasthan, Madhya Pradesh, Andhra Pradesh and Gujarat in FY16. Its plans have been boosted in no small measure by Dilip Shanghvi, founder and managing director of Sun Pharmaceuticals, and one of India’s richest persons who bought a 23 percent stake in the company for Rs 1,800 crore this February.
Essel’s Agarwal agrees with this hybrid model: “Solar gives you output in the day time while with wind, your output is generally higher in the evening.”
Another way around the land acquisition problem is the development of solar parks. In this “plug-and-play” model, state governments or EPC developers acquire the land, put up transmission lines, get the required government permissions and approvals, and offer the facility to companies who can put up their solar projects on the land and offer the operators a fee.
At present, Charanka Solar Park in Gujarat, with a capacity of 590 MW (of which 224 MW has been commissioned by 20 developers) is the only operational large-scale solar park. Bhadla Solar Park in Rajasthan is expected to be operational soon.
The renewable energy ministry has plans to set up 25 such solar parks (each with a capacity between 500 and 1,000 MW, or up to 20 GW in total) over five years. Consequently, several states are flagging off solar parks to attract investors. Among the biggest such projects is the Adani Group’s MoU with the Rajasthan government to set up a 10 GW solar park.
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(This story appears in the 01 May, 2015 issue of Forbes India. To visit our Archives, click here.)