Energy

Solar energy is everybody's business

Solar mission is too important to let doubtful dealings hijack it

 
By Chandra Bhushan
Last Updated: Wednesday 08 July 2015

solar mission

In public perception the renewable energy sector is a do-good sector that promises environment-friendly and affordable energy. It is for this reason that this sector gets overwhelming support from all sections of society. Civil society organisations, including the Centre for Science and Environment (CSE), have worked hard over the years to increase awareness about renewable energy and have pushed the government policy towards ambitious programmes.

Renewable energy is important for India not only because of its environmental credentials, but also because it is going to play a major role in achieving energy security for the country in the future. And within renewable energy, solar energy has the most potential. It was in this context that when the prime minister announced Jawaharlal Nehru National Solar Mission (JNNSM) as part of the National action plan on climate change in 2008, civil society in general welcomed it despite it being the world’s most expensive solar energy programme funded by the public. The 20,000 MW grid-connected solar power that JNSSM plans to install till 2022 will cost the public more than Rs 2 lakh crore from 2012 till 2047. With so much of public support and subsidy, it is in everybody’s interest that the programme succeeds. However, like some other renewable energy programmes, we are finding JNNSM is also getting entangled in bad market practices.

Information on solar mission not in public interest
 
In March 2011, Centre for Science and Environment (CSE) approached the Ministry of New and Renewable Energy (MNRE) and NTPC Vidyut Vyapar Nigam (NVVN) to get information about the companies that had won the bids and about the technology they were using. It was a research enquiry but CSE was rebuffed by both the organisations. CSE then filed an RTI application in September 2011 with MNRE, Ministry of Power, CERC and NTPC Ltd (NVVN is a subsidiary of NTPC) to get information about companies that had won the bids.
 
CERC and the power ministry replied that the request pertains to MNRE and, therefore, they are forwarding the application to the ministry. MNRE said the application should be directed to NVVN because it was the nodal agency for executing the first phase of JNNSM.
 
NTPC Ltd., in its reply, put up the “confidential” barrier, saying the “information sought for relates to Commercial Confidence of the third party and the disclosure of which may affect the competitive position of the third party and has no public interest or activity, hence the same is exempted under section 8(1)(d)&(j) of RTI Act 2005”.
 
CSE then appealed to the Appellate Authority of the NTPC Ltd on October 28, 2011, challenging the denial of information but has not yet received a response from the authority. CSE has again written to the authority, hoping they will disclose information as a large sum of public money is being spent on JNNSM
 
 

Criticising the renewable energy sector quickly gets one branded anti-environment and pro-fossil fuel. This is the reason people avoid critically examining this important sector. But we at CSE believe strongly that though we want the sector to grow and flourish, we cannot allow it to be undermined by impermissible practices and indifferent bureaucracy. We don’t want the renewable energy sector to get such a bad name that it loses public support and goodwill. That is why we have tried to bring to the fore the lapses and have pushed for reforms.

In 2008, we published our research on wind energy showing the monopolistic nature of the business and how the wind sector was growing but not producing enough electricity. This was happening because of the upfront tax break the wind industry got, prompting even Bollywood stars to own wind farms. We were then roundly criticised and accused of killing a nascent sector. Today, the Ministry of New and Renewable Energy (MNRE) itself has recognises the problem and is contemplating removal of accelerated depreciation benefits for the wind sector. Similarly, we have highlighted the issue of biomass-based power plants that burn coal illegally but take preferential tariff. In JNNSM, we again find doubtful dealings.

When the winners of the reverse bidding for the first batch were announced in November 2010, there were whispers in the market that the winning companies had quoted low prices and that they had done this to grab projects on prime solar land and would later sell them to serious players at a premium. Most wining companies were unknown entities. Very few of them were from the energy sector, leave alone the solar energy sector, and fewer still had websites. The surprising part was that most of the established players in the energy sector, from AP Power Generation Corporation Limited to Moser Baer Power to Essar Power, were not able to win the bids. This should have rung alarm bells.

We now know that one company, LANCO Infratech, put up front companies and managed to get about 40 per cent projects of the first batch of the first phase of the solar mission by using unfair means. They were able to win the bids by clubbing projects and using the economy of scale to reduce prices. In doing so they throttled competition and stopped genuine players from entering the market.

  Non-transparency and questionable processes of MNRE are responsible for the lapses in renewable energy programmes  
 
 

What does this 40 per cent market mean in monetary terms? The tariff the state utilities (indirectly the consumers) will pay for 620 MW auctioned under the first batch of the first phase till 2037 (the projects will get preferential tariff for 25 years) itself will be close to Rs 35,000 crore. LANCO, therefore, will have assured revenue of about Rs 13,000 crore from these projects.

Both MNRE and power purchaser NTPC Vidyut Vyapar Nigam failed to check this scam even when there were signs of illegality. It is difficult to say whether it reflects complicity of MNRE and the power purchaser or sheer incompetence. What is clear is that such lapses in the renewable energy programmes have happened largely because of the non-transparency and questionable processes MNRE has adopted in implementing these programmes. For instance, in JNNSM it refused to disclose any information about the winning companies, apart from their names and project location (see ‘Information on solar mission …’).

India will be spending lakhs of crores of rupees in promoting renewable energy, especially solar energy, but all this will go down the drain if it does not put transparent and fair laws in place that promote competitiveness, innovation and attract serious businesses. With bad market practices and non-transparency that prevail today, energy security and sustainable energy will remain a dream. It is important that MNRE investigates further and learns from what happened during the first phase of JNNSM, punish the guilty and reform the renewable energy sector.

 

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  • Dear Mr. Chandra Bhushan; Yes

    Dear Mr. Chandra Bhushan;

    Yes of course you are right that solar energy is everybodyÔÇÖs business as long as public money is being used in solar energy projects. Your article brings out appalling facts about the way JNNSM is being handled and kudos to you and your team for consistently pursuing the details of the way solar projects had been auctioned. You wrote that most of the winning companies were unknown. Then next question is how these companies were short-listed and what the qualifying criteria for bidding were. I am not sure how these companies were assessed against bidding requirements. Another question is what the minimum size of a single project awarded was. In other words how many projects do make 620 MW auctioned so far? This is very important. I am against small scale projects as they will never be successful business wise and they will never be sustainable ecology wise in the long run culminating into wastage of public money ultimately. However the good thing I notice is that a large chunk almost 250 MW (40 %) is owned by a single entity LANCO Infratech. Again I am not sure how many projects will make this 40 %. Is it 10, 20, 50 or more? The higher the number, the lower the efficiency and also higher cost of production. My only point is that we need large scale grid connected projects to make renewable energy commercially viable and environmentally sustainable. I hope LANCO Infratech understands this important aspect and uses its 40 % portion by setting up only a few large scale projects.

    We do not want so many players in renewable energy business with as many small scale projects especially 1) when public finance is being used to support and flourish this business, and 2) until competitive and self-sufficient renewable energy market has developed. Once the market is fully developed, private sector will know what the appropriate size of such project is which can work. As long as the government is providing preferential tariff and subsidies, we must heed to the economy of scale of each project and not just the prices offered by bidding companies. I am sure the bid evaluation committee has the expertise to assess what the bidding companies offered is actually not only workable on the ground but also sustainable in terms of economic, environmental, and social aspects. If not we are going to witness many failures indicating misuse of public money.Solar energy sector will be doomed!!!

    In case the JNNSM project proponents had fixed adequately lower number of total projects to be awarded or sufficient higher minimum size of a single project to be awarded while auctioning in the first phase, established energy players would have grabbed the projects instead of unknown players. The principle cause we should seek to promote is renewable energy and not creation of so many enterprises/entities when this sector is still in its infancy stage and cannot survive without the government support. It is good that the government is investing in and supporting development of this sector and precisely that is their duty but creation of hundreds of enterprises running tens of hundreds of small scale renewable energy projects, even before market is established and understood, is the sure way to a disaster.

    For the next phase, the entire country needs to be divided in a few solar zones depending upon solar energy potential and invite technical and commercial proposals from companies describing how they will be responsible to harvest solar energy in each zone and providing business case for that zone. Evaluate them and then award one company for one zone. So the system is not based on projects but based on zones. Certainly MNRE needs to do some groundwork to do it. I am not sure how the bids were invited in the first batch. Meanwhile Mr. Bhushan, please continue your endeavor to unearth the practices followed. Good luck to you!

    Yours sincerely

    K D Bhardwaj

    Posted by: Anonymous | 7 years ago | Reply
  • Mr. Bhardwaj's comment are

    Mr. Bhardwaj's comment are absurd. One of the reasons that India lacks innovation and scientific breakthroughs is this mentality of ours that only Big companies are cappable of delivering the goods. Almost every innovation in the US comes from small startup companies who are willing to risk. Further almost all of the huge fraud committed has a large company behind it. As long as small companies meet the requirement we need to encourage them as their lower overheads will mean lower prices as well. Of course whether big or small their deliveries need to be checked and validated.

    Coming to Mr. Bhardwaj's absurd idea that large solar farms will be more economical he needs to understand Solar PV a bit better. There may be some market advantages of purchasing large amounts of material but as a plant, a PV solar plant of 1 KW is of the same efficiency as a 1 MW or for that matter a 100 MW one. This is not like a 100 KW thermal turbine and a 240 MW turbine with the latter being 99.9% efficient whereas a 100 KW machine may be 95%. There are no economies of scale in PV. That is, small plants are as efficient as big ones. In fact locating these in far corners of the country is a problem because we pay so much for solar and then because of our leaky T&D system we will lose 30% of it in transit.

    Posted by: Anonymous | 7 years ago | Reply
  • good article

    good article

    Posted by: Anonymous | 7 years ago | Reply
  • It's good that someone takes

    It's good that someone takes a critical approach to renewable energy. It is true that criticizing renewable energy can give the wrong perception that one has anti-environmental views. However, only with constructive criticism can we aim to better improve. As this is still a relatively new sector, India has to plan the build-up of the renewable energy industry right. This includes hiring the right partners that have a strong believe in saving the environment. The core of saving the environment should not be concentrated on only the renewable energy output. It should run through the entire process of energy creation, including the type of heavy equipment used, to the workforce.

    Posted by: Anonymous | 7 years ago | Reply
  • Hi Chandra. Appreciate the

    Hi Chandra. Appreciate the investigation report and positive comments. The solar business is amongst the few successful opportunities for power generation in a safe, environmental, and free resource to prevail in times to come. In the worse case scenario, barring few electrical equipment s required, solar and wind would be the only source of available power capable of off-grid and independent supply. And with innovations, we will witness much higher productivity panels, incl possibly AC generation at source, instead the present DC generation reducing transmission losses at production point.
    What is surprising, is that Lanco has gotten away without anyone blinking an eyelid. When stalwarts as Raja, Kalamadi, Chautala, Chavan, etc have been brought to book for serious and fraud offences - why and how did this one cat get away?
    And now the continuing games by State regulators....look at the TN fiasco. Is is exactly the fallout from the Lanco scam.
    Just like everyone thinks....India rich country....can afford all the scams from Telecom to Asian Games...etc..etc. But that is reflecting in the sorry state of affairs today and continues. What a shameful bunch of Indians....and we keep getting fooled!

    Posted by: Anonymous | 6 years ago | Reply