Energy in India and the Promise of Solar
India is a country of close to 1.3 billion people with the population continuing to grow. The economy as well has been growing at a rapid pace. The current president Narendra Modi wants this economic boon to continue. He wants to replicate China’s ascension and targets GDP growth at 8% per year. This will mean energy requirements will also increase dramatically. Currently, India has a mix of energy sources including coal, oil, bioenergy, natural gas, hydroelectric, nuclear and renewables. The largest contributor to the power grid is coal power plants followed by oil two of the dirtier forms of energy (Fig. 1). However, despite its size and population its carbon dioxide emissions are still relatively small compared to many other countries. Currently each Indian produces 1.6 tons of carbon each year. For comparison, CO2 emissions per person per year in China are four times what they are in India. With the expected growth, CO2 emission are predicted to be 3.6 tons per person per year or about 5.3 billion tons in total which would make it one of the biggest contributors to greenhouse gases.
For all the growth and excitement in India it remains a country of extreme poverty. India has about 75 million of the world’s 300 million people that live off the energy grid entirely while hundreds of millions only receive electricity a few hours a day. Nearly 230 million Indians live on less than $1.90 a day. Mr Modi has promised to bring universal electricity to the India by 2022 with the major source being hundreds of new coal power plants. A study done by the International Energy Agency predicts that coal will continue to be the most used energy source by 2040 at 49%. It will also have a 6m barrel a day increase in oil consumption over that time period, something largely attributed to the growing number of cars on the roads. However, Mr. Modi has also pledged to build 100 gigawatts of solar-based power by 2022 as well.
Several things favor increasing solar power in India over the coming years. Over the past several months the price of solar power has decreased dramatically to the point where it is only slightly more expensive than coal. KPMG, a consultancy group, predicts that solar power will actually be 10% cheaper than domestic coal in 5 years. Also to that end, Mr. Modi and Francois Hollande of France created an International Solar Alliance during the climate talks that took place in Paris last year. They set a goal of $1 trillion in global funding for solar energy by 2030. In the meantime, however, private companies are doing their part to bring energy to impoverished Indians. Harish Hande the co-founder of Solar Electric Light Company, or Selco views smaller solar panel projects as the future. He doesn’t believe large solar farms adding to the grid are necessary. His company sells a small panel connected to a battery that will power house lights and phone chargers for $192. This price is well out of the reach for most of the poor. Selco manages to sell its units by promising financing from a bank. The customer would pay the bank small monthly installments which approximate the price they would spend on kerosene.In a few years the system would be owned completely by the customer who would have free energy going forward. Larger commercial opportunities are arising as well such as the world’s first solar airport. Cochin airport built a 45 acre solar plant on unused land near the airport and have begun producing about 50,000 killowatts/ day of power which is slightly more than the airport consumes. The excess capacity is sold back to the grid. The project cost about $9.3 million and the managers at Cochin believe it will recoup this in approximately 5-6 years.
As India grows its energy requirements will keep pace. Mr. Modi has an admirable plan to deliver universal energy to all Indians by the year 2022. As it is the quickest and cheapest means to an end his plan to expand mostly coal is understandable but also lamentable. India is already massively polluted with 13 of the world’s 20 most polluted cities. Currently small time producers of carbon dioxide this economic and population growth is expected to make them one of the worst. Should India be focused on long term local and global environmental issues or bringing the hundreds of millions out of poverty the quickest and cheapest way it can? Rich countries and other developing ones have benefited from cheap, dirty energy for its growth making it tough to point fingers. However, India has the capability and should do more. As solar energy prices fall to that of coal it could possibly make better economic sense to invest more in solar energy. At 1% of energy production there surely is room for growth. Solar energy will not be a panacea to the energy and environmental needs of a growing country, but it should be a large part of the solution.
MBA Candidate 2016