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A COMPARATIVE STUDY OF SOLAR ENERGY PROGRAMS AND POLICIES BETWEEN INDIA AND CHINA

Under the aegis of Rd. Atul Sharma Assistant Professor Department of Mechanical Engineering RGIPT, Rae Bareli

Submitted by SHIKHA YADAV (ROLL NO: M-10-28) NIJHUM BERA (ROLL NO: M-10-17)

EXECUTIVE SUMMARY
In the world energy scenario, both India and china are going through an energy transition. If China has expanded its 2020 target from 1.8 GW to 20 GW-that's more than triple the amount of PV solar power installed in the entire world during 2008 then India is also not far behind, India has also started "the most ambitious solar plan that any country has laid out so far," the National Solar Mission matches China by setting a new target of 20 GW solar capacity by 2020. What's more, India estimates that the plan could bring the nowprohibitive cost of solar down to US $.08-.10 per kWh by 2017-2020, making it costcompetitive with fossil fuels. India's solar plan will meet this cost by levying taxes on gasoline and diesel, as well as implementing other measures like a feed-in tariff, solar power purchase obligations, tax breaks for manufacturers, exemptions on tariffs for imported equipment, and a national renewable energy standard that mandates a certain percentage of India's power be generated from solar. And there is the provision that the Indian government will provide $100 billion in subsidies over 20 years to utilities for buying solar-generated power. Though these two countries are on close fight but still the two countries differ sharply in several respects. Residential energy consumption in China is twice that in India, in aggregate terms. In addition, Chinese households have almost universal access to electricity, while in India almost half of rural households and 10% of urban households still lack access. On aggregate, urban households in China also derive a larger share of their total energy from liquid fuels and grids (77%) as compared to urban Indian households (65%). Yet, at every income level, Indians derive a slightly larger fraction of their total household energy needs from liquid and grid sources of energy than Chinese with comparable incomes. Despite these differences, trends in energy use and the factors influencing a transition to modern energy in both nations are similar. In addition to urbanization, key drivers of the transition in both nations include income, energy prices, energy access and local fuel availability. Indias thirst for natural resources is not comparable to China and its impressive 7 percent average economic growth is not as high as Chinas thundering 9 percent. Low energy capacity forced India to rely on imports in the period of increasing demand while is becoming the Dragon King in the Solar market. Indias main problem is not lack of knowledge but the lack of successful transition from research-based knowledge to sustainable commerciality.

ACKNOWLEDGEMENT
A project usually falls short of its expectation unless aided and guided by right person at right time. We humbly state that this project is not a fruit of our individual efforts but of a number of persons, who directly or indirectly helped us in the project. We would like to express our sincere gratitude to our project guide, Dr. Atul Sharma, for providing us the opportunity to work with him on this project work. His suggestions in visualizing the project and sustained interest to attain the objective envisaged in the project are gratefully acknowledged. His invaluable guidance had been indispensable to bring about successful completion of the project undertaken. In the last, but not the least, we would also like to express our sincere thanks to all our friends and colleagues who have helped us throughout the project with their cooperation, moral assistance and creative criticism, which was an on-going challenge, always tempting us to perform better.

SHIKHA YADAV (Roll No:-M-10-28) NIJHUM BERA (Roll No:-M-10-17)

TABLE OF CONTENTS
CHAPTER NO
1 2

TITLE Introduction Indian solar program Background The JNNSM Current situation Looking forward Chinese solar program The solar programs Current scenario Comparison of the Indian and Chinese solar programs Energy hungry tigers and dragons Recommendation for the Indian program Conclusion References

PAGE NO. 6 14 15 18 25 28 31 32 40 42 44 47 52 55

5 6 7

ABBREVIATIONS
ADB BHEL BOS BP CERC DGESL FIT GOI IEA IIT IREDA JNNSM MFI MMCD MNRE MoP MTOE NCE NDRC NTPC NVVN PPA PPA PV REC RPO SERC SWH UNDP UNFCCC Asian Development Bank Bharat Heavy Electricals Ltd. Balance Of Systems British Petroleum Central Electricity Regulatory Commission Department of Geosciences Environmental Studies Laboratory Feed in Tariff Government of India International Energy Agency Indian Institute of Technology Indian Renewable Energy Development Agency Jawaharlal Nehru National Solar Mission Multilateral Financial Institutions Million Metre Cube Per Day of Natural Gas Ministry of New and Renewable Energy Ministry of Power Million tons of Oil Equivalent National Centre of Excellence National Development and Reform Commission National Thermal Power Corporation NTPC Vidyut Vyapar Nigam Ltd Power Purchase Agreement Power Purchase Agreement Photo Voltaic Renewable Energy Credits Renewable Purchase Obligation State Electricity Regulatory Commission Solar Water Heating United Nation Development Program United Nations Framework Convention on Climate Change WEIGHTS AND MEASURES Unit of energy, equal to 1x109 Unit of energy, equal to 1 unit Unit of power, equal to 1x106 Unit of power, equal to 1 billion (109) watts Unit of weight, equal to 1,000 kg or 2,204.6 pounds Unit of power that a PV module is able to supply when it receives 1000 watts per square meter of solar irradiance i.e at noontime. Conversion: Rs1 million Equal to Rs1x106 Rs1 billion Equal to Rs1x109 Rs1 trillion Equal to Rs1x1012 Rs1 lakh Equal to Rs1x105 Rs1 crore Equal to Rs1x107

BU (billion unit) kWh (kilowatt hour) MW (megawatt) GW (gigawatt) MT (metric ton) Wp(Peak Watt)

CHAPTER 1 INTRODUCTION

The Earth has provided us with a wealth of energy resources over the millennia, from basic fuels such as wood and charcoal to modern scientific resources such as nuclear energy. Some of these energy resources are in unlimited supply, but others are being depleted and will eventually run out. Nature provides us with a number of energy resources, which have been utilized by primitive civilizations and continue to be useful today. Wood burning is certainly an ancient way of heating and cooking and is still very much in use today both in developing and developed nations. In fact, wood burning, or biomass energy, is being encouraged in developed countries as one of our renewable energy resources. The different energy sources can be classified as into several types based on the following criteria: a. Primary and Secondary energy b. Commercial and Non-commercial energy c. Renewable and Non-Renewable energy

Primary and Secondary Energy:


Primary energy sources are those that are either found or stored in nature. Common primary energy sources are coal, oil, natural gas, and biomass (such as wood). Other primary energy sources available include nuclear energy from radioactive substances, thermal energy stored in earths interior, and potential energy due to earths gravity. The major primary and secondary energy sources are shown in below figure. Primary energy sources are mostly converted in industrial utilities into secondary energy sources; for example coal, oil or gas converted into steam and electricity.

Figure No. 1: Classification of Energy in Primary & Secondary. Source: Authors compilation from literature review. (Boyle, 2004)

Primary energy can also be used directly. Some energy sources have non-energy uses, for example coal or natural gas can be used as a feedstock in fertiliser plants.1

Commercial Energy and Non Commercial Energy: Commercial Energy The energy sources that are available in the market for a definite price are known as commercial energy. By far the most important forms of commercial energy are electricity,coal and refined petroleum products. Commercial energy forms the basis of industrial, agricultural, transport and commercial development in the modern world. In the industrialized countries, commercialized fuels are predominant source not only for economic production, but also for many household tasks of general population. Examples: Electricity, lignite, coal, oil, natural gas etc. Non-Commercial Energy The energy sources that are not available in the commercial market for a price are classified as non-commercial energy. Non-commercial energy sources include fuels such as firewood, cattle dung and agricultural wastes, which are traditionally gathered, and not bought at a price used especially in rural households. These are also called traditional fuels. Non-commercial energy is often ignored in energy accounting. Example: Firewood, agro waste in rural areas; solar energy for water heating, electricity generation, for drying grain, fish and fruits; animal power for transport, threshing, lifting water for irrigation, crushing sugarcane; wind energy for lifting water and electricity generation. Renewable and Non-Renewable Energy Renewable energy is energy obtained from sources that are essentially inexhaustible. Examples of renewable resources include: Wind power, solar power, geothermal energy, tidal power and hydroelectric power. The most important feature of renewable energy is that it can be harnessed without the release of harmful pollutants. Non-renewable energy is the conventional fossil fuels such as coal, oil and gas, which are likely to deplete with time. With the consistently rising prices of fossil fuels, renewable energy sources are gaining international attention including World Oil & Gas majors which have specific departments dedicated to harnessing renewable sources. The trend of rising share of renewable energy to the total energy used by world is a live example of its rising value to the energy sector.

Figure 2: Classification of energy as renewable & non-renewable energy. Source: Authors compilation from literature review. (Boyle, 2004)

Global Primary Energy Reserves2 Coal The proven global coal reserve was estimated to be 860,938 MT by end of 2010. The USA had the largest share of the global reserve (27.6%) followed by Russian Federation (18.23%), China (13.23%). India was 4th in the list with 7%. Oil The global proven oil reserve was estimated to be 1383.20 billion barrels by the end of 2010. Saudi Arabia had the largest share of the reserve with almost 19.1% followed by Venezuela with 15.3 %.( One barrel of oil is 159 litres) Gas The global proven gas reserve was estimated to be 187.14 trillion cubic metres by the end of 2010. The Russian Federation had the largest share of the reserve with almost 23.9%. Global Primary Energy Consumption3 The global primary energy consumption at the end of 2010 was equivalent to 12002.35 million tonnes of oil equivalent (Mtoe). The primary energy consumption for few of the developed and developing countries is shown in Table. It may be seen that Indias absolute primary energy consumption is only 4.3% of the world, 22.9% of USA, 1.04 time of Japan but 1.65, 2.07, 2.5 times that of Canada, France and U.K respectively.

Primary Energy Consumption by Fuel , 2010 (In Million tonnes oil equivalent) Country USA Canada France Russian Federation United Kingdom China India Japan Malaysia Pakistan Singapore Total Oil 850.0 102.3 83.4 147.6 73.7 428.6 155.5 201.6 25.3 20.5 62.2 4028.1 Natural Gas 621.0 84.5 42.2 372.7 84.5 98.1 55.7 85.1 32.2 35.5 7.6 2858.1 Coal 524.6 23.4 12.1 93.8 31.2 1713.5 277.6 123.7 3.4 4.6 3555.8 Nuclear Energy 192.2 20.3 96.9 38.5 14.1 16.7 5.2 66.2 0.6 626.2 Hydro electric 58.8 82.9 14.3 38.1 0.8 163.1 25.2 19.3 2.1 6.4 775.6 Renewable Total 39.1 3.3 3.4 0.1 4.9 12.1 5.0 5.1 ^ 158.6 2285.7 316.7 252.4 690.9 209.1 2432.2 524.2 500.9 62.9 67.6 69.8 12002.4

Table No. 1(Source: BP Statistical Review of World Energy, June 2010)

Global Reserve to Production Ratio4: The R/P ratio will remain a critical aspect to analyse the severity of fossil fuel reaching Peak conditions. The below given figure gives a glimpse of R/P ratio of the major world entities. Coal remains the most abundant fuel by global R/P ratios, though oil & natural gas proved reserves have generally risen over time. Non OECD countries account for 93.4% of the worlds proved oil reserves; 90.9% of natural gas reserves,

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Indian Energy Scenario Coal dominates the energy mix in India, contributing to 52.9% of the total primary energy consumption. Over the years, there has been a marked increase in the share of natural gas in primary energy production from 10% in 1994 to 13% in 1999. There has been a decline in the share of oil in primary energy production from 20% to 17% during the same period. Energy Supply Coal Supply India has huge coal reserves, at least 60600million tonnes of proven recoverable reserves (at the end of 2010). This amounts to almost 7% of the world reserves and it may last for about 106 years at the current Reserve to Production (R/P) ratio. In contrast, the worlds proven coal reserves are expected to last only for 118 years at the current R/P ratio. Reserves/Production (R/P) ratio- If the reserves remaining at the end of the year are divided by the production in that year, the result is the length of time that the remaining reserves would last if production were to continue at that level. India is the fourth largest producer of coal and lignite in the world. Coal production is concentrated in these states (Andhra Pradesh, Uttar Pradesh, Bihar, Madhya Pradesh, Maharashtra, Orissa, Jharkhand, and West Bengal). Oil Supply Oil accounts for about 30 % of India's total energy consumption. India today is one of the top ten oil-guzzling nations in the world and has overtook Korea as the third largest consumer of oil in Asia after China and Japan.In the current scenario, Indias oil consumption by end of 2010 is expected to reach 155.5 million tonne(MT), of which domestic production will be only 34 MT. In 2003-04, against total export of $64 billion, oil imports accounted for $21 billion. India imports 70% of its crude needs mainly from gulf nations. The majority of India's roughly 5.4 billion barrels in oil reserves are located in the Bombay High, upper Assam, Cambay, Krishna-Godavari. In terms of sector wise petroleum product consumption, transport accounts for 42% followed by domestic and industry with 24% and 24% respectively. India spent more than Rs.1,10,000 crore on oil imports at the end of 2010.5 Natural Gas Supply Natural gas accounts for about 10.62 per cent of energy consumption in the country. The current consumption for natural gas is about 55.7 MTOE as against production of 45 MTOE. By 2030, the demand is expected to be around 200 MCMD. Natural gas reserves are estimated at 1.5 Trillion cubic meters. 6 Electrical Energy Supply The all India installed capacity of electric power generating stations under utilities was 1,12,581 MW as on 31st May 2004, consisting of 28,860 MW- hydro, 77,931 MW - thermal

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and 2,720 MW- nuclear and 1,869 MW- wind (MoP). The gross generation of power in the year 2002-2003 stood at 531 billion units (kWh) 7. While fossil fuels have played an important role in getting society to the point it is at today, there are four big problems that fossil fuels create:

Air pollution - When cars burn gasoline, they would ideally burn it perfectly and create
nothing but carbon dioxide and water in their exhaust. Unfortunately, the internal combustion engine is not perfect. In the process of burning the gasoline, it also produces: Carbon monoxide, a poisonous gas Nitrogen oxides, the main source of urban smog Unburned hydrocarbons, the main source of urban ozone Catalytic converters eliminate much of this pollution, but they aren't perfect. Air pollution from cars and power plants is a real problem in big cities.

It is bad enough now that, in the summer, many cities have dangerous levels of ozone in the air.

Environmental pollution - The process of transporting and storing oil has a big impact
on the environment whenever something goes wrong. An oil spill, pipeline explosion or well fire can create a huge mess. The Exxon Valdez spill is the best known example of the problem, but minor spills happen constantly.

Super tankers being loaded with oil in Saudi Arabia

Global warming - The carbon dioxide coming out of every car's tailpipe is a greenhouse
gas that is slowly raising the temperature of the planet. The ultimate effects are unknown, but it is a strong possibility that, eventually, there will be dramatic climate changes that affect everyone on the planet. For example, if the ice caps melt, sea level will rise significantly, flooding and destroying all coastal cities in existence today.

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Dependence - The United States, and most other countries, cannot produce enough oil to
meet demand, so they import it from oil-rich countries. That creates an economic dependence. When Middle East oil producers decide to raise the price of oil, the rest of the world has little choice but to pay the higher price. Every day, the world produces carbon dioxide that is released to the earths atmosphere and which will still be there in one hundred years time. This increased content of Carbon Dioxide increases the warmth of our planet and is the main cause of the so called Global Warming Effect. One answer to global warming is to replace and retrofit current technologies with alternatives that have comparable or better performance, but do not emit carbon dioxide. This is called Alternate energy. By 2050, one-third of the world's energy will need to come from solar, wind, and other renewable resources8.Climate change, population growth, and fossil fuel depletion mean that renewables will need to play a bigger role in the future than they do today. Fossil fuels are also natural energy resources, but, due to the fact that they take millions of years to form, are not in unlimited supply and have been severely depleted in recent centuries. They also cause environmental issues due to mining and the greenhouse gas emissions created by their burning. These are a major contributor to climate change Renewable energy resources involve, one way or another, harnessing a form of natural power, whether it is from the wind, sun or water. These have been used successfully over the centuries and are on the rise again in many developed countries as clean, everlasting energy resources. Alternative energy refers to energy sources that have no undesired consequences such for example fossil fuels or nuclear energy. Alternative energy sources are renewable and are thought to be "free" energy sources. They all have lower carbon emissions, compared to conventional energy sources. These include Biomass Energy, Wind Energy, Solar Energy, Geothermal Energy, Hydroelectric Energy sources. Combined with the use of recycling, the use of clean alternative energies such as the home use of solar power systems will help ensure man's survival into the 21st century and beyond. Home security and home independency are the catch cries of the new era in sustainable development and self-sufficiency.

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CHAPTER 2 JAWAHARLALNEHRU NATIONAL SOLAR MISSION-TOWARDS BUILDING SOLAR ENERGY

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Background
Biggest Energy Opportunity of the 21st Century
The GOI launched its ambitious JNNSM promises to catapult India into becoming the Largest Market for Solar Energy in the World. In fact, Indias Solar Energy sector has the potential to be the biggest Energy Opportunity of the 21st century. Solar Energy in India is poised to take off in an exponential manner because of a unique confluence of favorable Supply and Demand factors .India currently has less than 500 MW of Solar Energy capacity which accounts for less than 0.1% of Indias total electricity capacity. This picture is going to radically change over the next decade because of the following factors. India has very high insolation which makes solar energy much cheaper to produce solar power in India compared to countries like Germany, Denmark etc. Germany despite receiving only 50% of Indias Solar radiation has more than 9 GW of solar energy capacity already installed and is going to probably hit 18 GW by 20119 .The most suitable areas for solar radiation are Rajasthan, Gujarat, Madhya Pradesh, Maharashtra. Followed by Andhra Pradesh, Karnataka, Punjab, Haryana, Uttar Pradesh, Uttarakhand, Jharkhand, Tamil Nadu, Orissa and West Bengal.

106 5349

39823

4426

1072 304

87

2300 289

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Figure No.3: The Solar Map of India with the segregation of the suitable areas with their capacities Source: solar@ecoreserve.in

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has a huge electricity demand supply gap Large parts of India regularly face blackouts for lack of electricity supply leading to huge monetary losses .It has been estimated that India suffers from more than 15-20% supply shortage in times of peak power. Major cities like Gurgaon regularly face 10-14 hours of power cuts in summer months.10Compared to the fact that 400 million people in over 1 lakh villages live without a power connection, the actual installed base off off-grid solar is truly miniscule compared to the energy needs of the population. The potential for generation runs into the large multiples of GW hours allowing tremendous scope for implementation at the grass root level. Solar PV has significant potential in replacing diesel in cellphone towers, powering irrigation pumps as well as street / home lighting, while current thermal usage is skewed toward residential and hospitality based water heating. The MNRE is also promoting the concept of solar cities to reduce dependency on conventional grid power.

.India

Figure No.4:Un-electrified Village, India as on 30 June, 2008


Source: Progress Report Published by CEA: http://powermin.gov.in

SI No
1 2 3 4 5 6 7 8

States/U.T.
Andhra Pradesh Arunanchal Pradesh Assam Bihar Delhi Jharkhand Goa Gujarat

Un-electrified Village
0 1668 5383 18395 0 20235 0 73

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35

Haryana Himachal Pradesh Jammu and Kashmir Karnataka Kerala Madhya Pradesh Chhattisgarh Maharashtra Manipur Meghalaya Mizoram Nagaland Orissa Punjab Rajasthan Sikkim Tamil Nadu Tripura Uttar Pradesh Uttaranchal West Bengal A & N Island Chandigarh D & N Haveli Daman & Diu Lakshadweep Pondicherry Total All India : 105379

0 312 113 355 0 1904 867 5018 361 2354 137 455 20994 0 12595 25 0 367 11492 548 1553 175 0 0 0 0 0

Table No.2 (Source: DGESL website)

Lack of power grid availability Solar Energy is ideally suited for providing power to those areas which dont have power lines connecting it.Large parts of India dont have electricity grid connectivity and it is cheaper to power them through solar energy rather than extending power lines Increasing expensive and unreliable electricity supply - The rates of electricity prices are going up rapidly each year due to a combination of factors like higher costs of fossil fuels, increasing capital expenditure by utilities and privatization of power. Not only is the power expensive, the quality and reliability of the supplied electricity is very poor. A study has found that poor farmers who receive free electricity in India are willing to pay for quality electricity supply rather than do with the unreliable free power Solar Energy approaching Grid Parity The costs of Solar Energy has been decreasing rapidly over the last 2 years. Despite solar energy prices being higher than other forms of electricity, it is expected that solar energy will equal that of grid prices in the next 5 years in most parts of the globe. Solar Energy is the only form of Energy whose cost trend has been declining over the long term while all other major forms of energy have seen their costs increasing.

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Strong Support from the Government Solar Energy needs a push from the Government in terms of regulation and incentives as it is a costliest form of power currently. The Indian government through the JNNSM has provided strong support to the growth of this industry. The government has set a target of 20 GW by 2022 with 1000 MW of solar power to be set up through private investment by 2013.11 CERC guidelines aims at providing 20% + returns to private investors through a higher guaranteed rate to electricity generate from solar power ( FIT) Solar Energy is a Non-Polluting Green Form of Energy The biggest advantage for solar energy is that it is a non-Carbon Dioxide emitting form of power .While other fossil fuel forms of Energy place have large unaccounted costs in terms of pollution, health hazards, global warming and environmental destruction (BP Oil Spill), Solar along with other forms of Renewable Energy have none of these harmful effects. Solar Energy is virtually Unlimited While Coal,Gas,Oil are eventually going to be depleted over the next 20-100 years ,and Solar Energy is a virtually unlimited source of energy . The amount of Solar Energy striking the earth is much more than humans will ever need.

The Jawaharlal Nehru National Solar Mission


MNRE ,GOI launched on January 11, 2010, JNNSM with the objective to create conditions, through rapid scale up of capacity and technological innovation to drive down costs towards grid parity. The Mission anticipates achieving grid parity by 2022 and parity with coal based thermal power by 2030. The Mission has a target to add grid connected solar power generation of 1000 MW by 2013, an additional 3000 MW by 2017 and 20,000 MW by 2022 through mandatory use of Renewable Purchase Obligation(RPO) by utilities backed with a preferential tariff. It had twin objectives of addressing India's energy security challenge and combating the threats of climate change. The GOI has introduced several policies and incentives since to boost investor confidence in this sector and enable India to be a Solar Energy Super Power.

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Key highlights of the Jawaharlal Nehru National solar mission include

To create an enabling policy framework for the deployment of 20,000 MW of solar power by 2022.

To ramp up capacity of grid-connected solar power generation to 1000 MW within three years by 2013; an additional 3000 MW by 2017 through the mandatory use of the renewable purchase obligation by utilities backed with a preferential tariff. This capacity can be more than doubled reaching 10,000MW installed power by 2017 or more, based on the enhanced and enabled international finance and technology transfer. The ambitious target for 2022 of 20,000 MW or more, will be dependent on the learning of the first two phases, which if successful, could lead to conditions of grid-competitive solar power. The transition could be appropriately up scaled, based on availability of international finance and technology.

To create favourable conditions for solar manufacturing capability, particularly solar thermal for indigenous production and market leadership.

To promote programmes for off grid applications, reaching 1000 MW by 2017 and 2000 MW by 2022 .

To achieve 15 million sq. meters solar thermal collector area by 2017 and 20 million by 2022.

To deploy 20 million solar lighting systems for rural areas by 2022.

Figure No.5

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JNNSM is divided into 3 phases with the ultimate goal of reaching grid parity with coal by 2030. 1)Phase I(up to 2012/2013)remaining period of 11th five year plan & first year of 12th year plan Target of 1100 MW 2) Phase II (2013-2017) remaining 4 years of 12th five year plan Target of 3000-10000 MW 3) Phase III (2017-2022) 13th five year plan 20000 GW overall

Figure No.6 :The targets for JNNSM Source:MNRE documents

The Objectives of the Solar Mission 1) Solar Lighting-Deploy 20 million solar lighting systems for rural areas 2) Solar HeatersAchieve 15 million sq. meters by 2017 & 20 million by -2022 of solar thermal collector area 3) Solar Manufacturing Global Leader in Solar Manufacturing with Targets 4-5 GW equivalent of installed capacity by 2020 including setting up of dedicated manufacturing capacities for poly silicon material to annually make about 2 GW capacities of solar cells 4) Off Grid Solar Applications Solar Mission has set a target of 1000 MW by 2017 Funding of the JNNSM will be done by 1) Renewable Energy Credits (REC) State Electricity Regulatory Commissions (SERC) to fix a minimum percentage of energy purchase from renewable sources of energy 2) NTPCs Trading Arm NTPC Vidyut Vyapar Nigam Ltd ) is chosen as the nodal agency for entering into a Power Purchase Agreement (PPA) with solar power developers.NTPC will mix expensive solar power with cheaper coal power . 3) Incentives

Zero import duty on capital equipment, raw materials and excise duty exemption Low interest rate loans, priority sector lending Coal tax Budgetary Support for MNRE though 2011 Budget has not given anything UNFCCC Funds Again not certain as no international agreement

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First Phase (How it has fared so far)


Details of Grid Solar PV Power Projects under JNNSM (A)Solar PV Project New NVVN(a) Migration(b) IREDA(c ) Total(a+b+c) Number MW Number MW Number MW Number MW 4 20 11 10.5 15 30.5 2 4 2 4 0 0 10 9.8 10 9.8 8 16 8 16 2 10 2 10 3 5.25 3 5.25 1 5 3 11 3 5 7 21 1 5 8 8 9 13 1 1 1 1 2 7 7 8.5 9 15.5 21 105 8 36 12 12 44 153 1 5 7 7 8 12 3 5 3 5 5 8 5 8 30 150 13 54 80 100.05 126 304.05 (B)Solar Thermal Project New NVVN(a) Migration(b) Total(a+b+c) Number MW Number MW Number MW 1 50 1 50 1 20 1 20 5 400 3 30 8 430 7 470 3 30 10 500
Table No.3: Project capacities allocated by MNRE Source : MNRE

State

Andhra Pradesh Chhattisgarh Gujarat Haryana Jharkhand Karnataka Madhya Pradesh Maharashtra Orissa Puducherry Punjab Rajasthan Tamilnadu Uttarakhand Uttar Pradesh Total

State Andhra Pradesh Gujarat Rajasthan Total

Smaller 2 MW PV Projects India has set a target of 1100 MW for the first phase with around 100 MW allocated for 2 MW projects which have the best chance of being built. The 2 MW project winners are already flipping the projects as many non-serious players won the projects. These companies were speculators and has no intention of building the plants anyway Transfer Projects It has also allowed 80 MW projects to be transferred to JNNSM rate which has led to strong state objections. The State nodal agencies have also started objecting to the tariff policy as 80 MW of Solar Projects were awarded the base FIT of Rs 17.91 as they were transferred to the Indian Federal Subsidy from their initial PPAs with individual states. Note these solar project

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developers who have managed to get transferred will get tariffs which are almost 60% higher than the lowest bidder for the 5 MW Solar Project at Rs 10.95.This will also mean a much large taxpayer outgo to the 16 Project Winners for the 80 MW than for the 150 MW projects Larger PV 5 Projects and Bigger Solar Thermal Plants The rest of the 620 MW projects are in serious trouble with no major construction happening. The developers might find it profitable to lose their deposit money rather than building the plant. The government will have to potentially bailout these companies if it wants to see its Solar Mission be successful. While the first phase is already in trouble the government is already thinking of auctioning another 296 MW of solar projects in April which doesnt look like that it can help as the majority of the First Phase projects are already in trouble. Following table shows relevant details of projects sanctioned during 2010-11 under Off Grid Solar applications of JNNSM Sr. No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Table No.4 Released CFA State (In Lakhs of INR) Andhra Pradesh 438.5 Arunachal Pradesh 216 Assam 650 Bihar 225 Chhattisgarh 1043.65 Delhi 0 Gujarat 13.75 Haryana 407.08 Himachal Pradesh 12636.03 Jammu and Kashmir 2089.33 Jharkhand 176.6 Karnataka 42 Kerala 4.5 Lakshadweep 1387 Madhya Pradesh 932.16 Maharashtra 20 Manipur 160 Meghalaya 437 Nagaland 10.41 Orissa 0 Punjab 440.75 Rajasthan 2371 Sikkim 186.18 Tamilnadu 35 Tripura 90 Uttarakhand 1828 Capacity (In KWp) 1687 320 500 1022 2336 2 53 1375 529 6091 416 195 10 1100 3068 150 144 760 72 50 766 10907 148 107 68 2547

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27 28 29

Uttar Pradesh West Bengal Others Total

1304.08 25 653.02 27822.04

4337 100 1542 40402

Figure No.8(Source: MNRE)

Solar Research and Development National Centre of Excellence (NCE) to be established Research Council to be set for Guidance 50 startups to be funded to develop solar related technologies Government Fellowship program to train 100 scientists Ultimate Aim to reduce solar costs and BOS costs to achieve grid parity Solar Heater Incentives Off Grid Solar Subsidies The main objectives of this section of the scheme are: To promote off-grid applications for meeting the targets set in the JNNSM. To create awareness about the usage of solar systems To encourage and promote sustainable business models To support channel partners and potential beneficiaries To organize consultancy services and seminars, awareness campaigns To help replace kerosene and diesel, wherever possible

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1. For off-grid Solar PV Installations of a maximum capacity of 100 kW per site, and for mini-grids for remote electrification with a maximum capacity of up to 250 kW the subsidies are as follows 2. Subsidy, which is calculated on the basis of a cost benchmarked by MNRE, is notionally equal to 30% of benchmarked cost of solar power systems. For 2010 it is fixed at Rs.90 per Wp with battery storage, and at around Rs.70 per Wp without battery storage. These subsidies will be changed every year. 3. Solar PV plants in micro-grid mode/local distribution network, to meet unmet community demand for power in unelectrified rural areas, will be provided a capital subsidy of Rs 150/watt in special category states of NE India, Sikkim, Himachal Pradesh, and Uttarakhand, a capital subsidy of 90% of installation cost. In Border areas and islands like Lakshadweep, Andaman and Nicobar Islands the subsidy availed will also be 90% for solar PV installations. Note soft loans of 5% interest rate can also be availed. Role of Different Entities in the Solar Power Mission 1. RESCOs (renewable energy service providing companies): These companies install, own and operate the renewable energy systems. 2. Financial and Microfinance institutions: These institutions are mainly into providing loans to the consumer and accessing the interest subsidies through refinancing 3. Financial Integrators: These firms serve the manufacturers and service providers by integrating different sources of finance available for them. 4. System Integrators: These entities are the ones which provide design, supply, integration and installation and O&M to the clients. 5. Program Administrators: Administrators include central and state ministries and departments, state nodal The First Phase of the JNNSM has not inspired much confidence and compared to successful programs in Germany seems a total failure. State much better than the Federal Government. The fast declining costs of solar energy IMHO will pretty much make this policy obsolete anyway in a couple of years.

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CURRENT SITUATION
JNNSM in Jeopardy due to Irrational Bidding, Financing Difficulties and Small Plant Size The Indian Governments launched the ambitious JNNSM was done with much fanfare with a target of reaching 20 GW of Solar Capacity by 2022 under 3 phases from the 81 MW currently. While the government had the best intentions and had laid down a well-defined 10 year plan with subsidy support for both Solar Thermal and Solar PV Technology, it has already run into problems. Due to high interest the government went in for bidding of projects which led to firms. This has put the entire exercise in question with the biggest private utility saying JNNSM is a failure. Without extensions of deadlines it looks highly unlikely whether the 37 winners will actually put up the plants.

Figure No.7: REC Market

The 150 MW Solar PV and ~500 MW of Solar Thermal Capacity which has been put to bidding are seeing massive discounts to the base price which would allow normal return. This will eventually lead to project winners abandoning these projects or delaying it inordinately, leading to a failure of the first phase. India from the base prices of Rs 15.31 set by CERC and the Solar PV project bidding for 150 MW is going to see equally ferocious discounts. Tata Power, which is Indias largest private utility, is staying away from these auctions due to the above problems. Renewable has a huge growth potential with Solar Energy the brightest Green Energy Sector. This has attracted companies in droves lMission. However huge competition in this subsidy driven sector is not necessarily good for the growth of Renewable Energy as irrational bidding by small players would lead to project failures.

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Figure No.8: The milestones achieved and goals set under JNNSM.

State Banks in India have already cast doubts on lending finance to these solar projects which depend on debt for 70% of the capital requirements. The convoluted nature of payments which involve the financially weak Electricity Distribution Companies, the trading arm of NTPC and Developers has made the Banks wary of lending to the new solar sector. Also in case of Solar PV, the restriction of 5 MW per Business Group has made it unattractive for some of the multibillion large utilities from taking part in the process. The involvement of large utilities is necessary for the development of the nascent solar sector. They bring in the required financial heft, project management skills and power expertise. Winning of these projects by fly by night operators out to make a quick buck by flipping wont do the government any good.
Figure No. 9

Solar short list raises spectre of fresh scam FC


These companiesEnergy Headed Fordiscounts as Unknown Firms Win JNNSM Solar PV Auction have offered large a Crash and rank ahead of corporate majors like Indian Oil India Solar Energy Corporation, Punj Lloyd and Mahindra Solar. Their selection and very low quoted tariff rates have raised the spectre of another scam in the making. The companies have been short-listed on the basis of tariff discounts they proposed to offer. They have quoted extremely low tariffs, which according to industry experts are unrealistic. On analysis it can be said that half of the 30 lowest bidders on the short list are unknown companies. They have been selected for setting up 150-mw solar photovoltaic projects in first phase. One firm was allowed to submit only one bid to set up a 5-mw plant.

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Solar Energy in India has the potential to be the biggest Energy Opportunity in the World because of a multitude of favorable factors. The Government of India has also signaled strong support for Solar Energy with 20 GW Target by 2020 which equals that of China .The JNNSM which was unveiled with much fanfare has promised much but teething problems threaten to crash the Solar Party in India. While some of these problems were discussed earlier like a) Debt Financing of Solar Projects b) Irrational Bidding c) Small Plant Sizes of 5 MW d) Unhealthy Competition ,other problems have cropped up. India was trying to avoid the fate of the Czech and Spanish example of renewable energy subsidy boom and subsequent bust by auctioning the projects to lower bidders. However this has resulted in a new set of problems seen with this type of bidding which has been seen in China. The biggest problem is that the winners of the Solar PV Projects are mostly unknown small firms who have bid so low that make the returns negative for investors according to the MNRE.Bidding has gone as low as 23c/Kwh which is crazily low considering the debt costs in India are as high as 13% annually. Compare that to China where debt is priced as low as 34% and the winners are huge utilities. With even Indias Tata Power saying that the projects are not bankable as there is confusion how the electricity tariffs will go to developers, its difficult how these unknown firms could manage the financing .While the companies will lose their bid deposits if they dont finish the projects, Indian Solar Energy will be the biggest loser as the failure of the Phase 1 of JNNSM of 1000 MW by 2013 will lead to even further delays. Already JNNSM has been criticized by a parliamentary panel for the tardy progress. Note some states have taken the lead in pushing solar energy on their own, namely Gujarat which aims to put up more than 500 MW in the next year or two.

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Figure No.9 : the list for 'selected' 30 Solar PV projects (each 5MW) under Batch-1 JNNSM in 2010-11 (Source:MNRE)

LOOKING FORWARD
Over Phase I of JNNSM, 1 GW of solar power is targeted by 2013. As a significant first step towards achieving this, the GoI, through a tariff-based reverse auction process, successfully selected 37 developers offering 620 MW (450 MW of solar thermal and 150 MW of solar PV projects) to sign PPA with NNNV. Further, about 100 MW of projects, were allowed to migrate under the JNNSM at FITs specified by the CERC (Rs 17.91/kWh for PV and Rs 15.31/kWh for solar thermal). The auction settled the debate on the viability of CERCs feed-in tariffs as qualified bidders bid substantive discounts over CERC tariffs up to Rs.5.75/kWh for solar PV and Rs.4.82/kWh for solar thermal. Despite unavoidable criticisms of the reverse auction process , caps on capacities,etc., investor participation was overwhelming and the government and NVVN deserve credit in having conducted the process in a time-bound manner and conveying the seriousness of the program to the global community. Phase I is at best a proof of concepts, the test of which is not just the successful award or even commissioning of projects but in its scalability, given the 20 GW target set out under the mission by 2022. It is time therefore to ascertain the progress under Phase I and prepare for

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Phase II of the mission. Of particular interest is the realization of the solar thermal potential in India, which is central to achievement of the ambitious targets under JNNSM. Solar thermal technologies are emerging in nature and there are only a few operating plants around the world, although several are in the planning / development stage. Solar thermal plant designs ideally require accurate local irradiation data and extensive engineering inputs in calibration and design of solar fields. Relying simply on the satellitederived data can lead to faulty conclusions, as some players are finding out with groundmeasuring instruments. The above uncertainties combined with the lack of solar development experience amongst bidders and the fact that very few solar thermal bidders actually aligned with solar technology providers at the bidding stage, has increased the riskperception amongst lenders and made it extremely hard for these projects to get nonrecourse financing. Over three-fourths of all projects under JNNSM face challenges in achieving financial closure. This remains an important area to be addressed by the government and multilateral financial institutions (MFIs). With over 4 GW of solar thermal plants likely to be operational globally by 2013, the technical requirements for selecting Phase II solar thermal developers ought to be made more stringent. While tariff-based bidding worked well in development of conventional thermal plants in India, it should not be applied blindly to emerging solar thermal technologies and the process must provide for demonstrating technical qualifications, which go beyond mere letters of support from technology providers. If required, the central government should get the technology proposed be evaluated by a panel of experts or the NCE. A better approach would also be to have specific solar thermal projects developed like Case-2 projects, with substantive preparatory activities undertaken upfront by the government and solar resource data provided to bidders. The government and MFIs have a significant role to play in building capacity amongst the commercial banks in assessing and financing solar projects. The role of the World Bank and ADB in utilizing their global solar experience in supporting local and foreign commercial banks in India is critical to the success of the program. Three other aspects of JNNSM need to be advanced significantly over the next two quarters. First, demonstration projects under Phase I of JNNSM have to be conceived and awarded quickly, as these are meant to further research and local adaptation of newer technologies and to provide operational data for commercial deployment to happen. Involving Indian PSUs, e.g., NTPC

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and BHEL and identified technology centers like IIT, Rajasthan and the Solar Energy Centre of MNRE in such pilots is essential to further research, enable dissemination of operational data and to provide for localization of manufacturing along the value chain.

Second, field measurement of irradiation and mapping of solar resources across the country needs to have been done for at least one full year before Phase II planning commences. Third, the government has to aggressively further the localization of manufacturing, particularly along the solar thermal value chain. This is intricately linked to the pilot projects, which will determine the preferred technology choices in India for commercialization and will require greater coordination amongst the ministry of industries and commerce and the user industries of MNRE and MoP to realize the dreams of low cost solar development in the country.

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CHAPTER3 CHINESE SOLAR ENERGY PROGRAM

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CHINESE SOLAR PROGRAMS


Through the centuries, scientists have found innovative ways to harness the power of the sun from magnifying glasses to steam engines. Converting more solar power into electricity is high on the political agenda in many countries, amid the push to find domestic energy sources that are less polluting than fossil fuels. Solar power is more entrenched in European countries like Spain and Germany, which have promoted its development with strong incentives called feed-in tariffs that require electric utilities to buy solar power at a high, fixed price. The United States accounted for $1.6 billion of the worlds $29 billion market for solar panels; California is by far the leading solar state. In the last two years, China has emerged as the dominant player in green energy especially in solar power. It accounted for at least half the worlds production in 2010, and its market share is rising rapidly. Chinas Big Three solar power companies Suntech Power, Yingli Green Energy and Trina Solar all announced in August 2011 that their sales in the second quarter were up between 33 and 63 percent from a year earlier. But, analysts say, China has achieved this dominance through lavish government subsidies in its solar industry. China has a cost advantage. Loans at very low rates from state-owned banks in Beijing, cheap or free land from local and provincial governments across China, huge economies of scale and other cost advantages have transformed China from a minor player in the solar power industry into the main producer of an increasingly competitive source of electricity. The price of a solar array, measured by cost per watt of capacity, had fallen 42 percent since December 2010, the agency said. Solar panel prices plunged by 42 percent per kilowatt-hour in the past year as manufacturers have sharply increased capacity, particularly in China.
China's Commitment

Chinas efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China. The Chinese government charges a renewable energy fee to all electricity users. The fee revenue goes to companies that operate the electricity grid, to make up the cost difference between renewable energy and coal-fired power. In China, power companies have to buy lots of new equipment anyway, and alternative energy is increasingly priced competitively.

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But Chinas commitment to renewable energy is expensive. Although costs are falling steeply through mass production, solar power is still at least twice as expensive as coal.Concerned by the high cost of solar -- which can be four times more expensive than fossil fuels -- and fears that solar power won't deliver on some of the anticipated goals, the Chinese government is not about to subsidize solar power on a national level. In 2009, through two major supportive programs, Golden Sun and the Solar Rooftop program, about 160 megawatts of solar PV systems were installed in China. That more than doubled the country's total installed capacity. Another major factor that has rendered the Chinese government reluctant to unveil a feed-in tariff is the change in overseas demand. The global financial crisis froze China's exportoriented solar industry from late 2008 to early 2009, pushing the government to create alternate solutions such as developing the domestic market. Since then, the international market has rebounded, reducing the need for a domestic program. Suntech Power Holdings, a leading Chinese solar PV manufacturer and one of the two largest such companies worldwide, estimates that China will account for only 5% of its total sales in 2010, while about 85% will go to Europe and North America. Unlike Suntech and other solar PV manufacturers, project developers who already have solar power plants in China are expected to get hurt. The subsidies through the Golden Sun Program can cover only half of the upfront investment, those developers may break even or suffer losses. If developers cannot get returns on their investment, it might be hard for China to achieve its planned 20 GWs PV installation capacity target by 2020, but the real question is whether this goal still exists or even remains realistic. China's new energy industry development plan, which includes the nation's renewable energy targets for the coming decade, is still in discussion, and it will not be formally announced in the short term,

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Table No.5: Chinas new installed PV system capacity from 2004 to 2009 (Unit: MW)

Source: China National Development and Reform Commission

Chinas energy policy went through different focuses at different stages of economic reform: 1) in the 1980s, while facing energy shortages yet still wanting to be self-reliant, Chinas energy policy promoted energy conservation and efficiency improvement through direct government technical support and program/project implementation and administration; 2) in the1990s, with government shifting focus to improving the effectiveness of regulatory oversight, China passed several important energy laws to establish the legal framework to promote energy efficiency, reduce emission and utilize renewable energy; 3) in the 2000s, energy security and environmental protection were perceived as strategically important for the sustainability of Chinas economic development, thus energy policy is increasingly multifaceted: top down industrial restructuring became one important policy tool that moves the national economy away from high energy-demanding, high-polluting industries; clean technology and renewable energy are heavily promoted through various policy support and subsidy programs; energy and environmental targets were incorporated into assessment mechanism, intended to encourage more effective policy implementation at the local levels. In 2009, China rolled out two national solar subsidy programs: the BIPV subsidy program and the Golden Sun program. They clearly demonstrate Chinas determination to support the adoption of PV.

The BIPV subsidy program:


In March 2009, China announced its first solar subsidy program, the BIPV (Buildingintegrated photovoltaic) subsidy program, offering upfront RMB20/watt for BIPV systems and RMB15/watt for rooftop systems.

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Chinas Ministry of Housing and Urban-Rural Development announced a stimulus plan for BIPV applications in mid-April, offering RMB 20/watt for construction material- and component-based BIPV projects and RMB 15/watt for rooftop- and wall-based projects. On July 2009, the media reported that 111 rooftop-based or BIPV projects nationwide with a combined capacity of 91 MW have been allocated subsidies totaling nearly RMB 1.2 billion

The Golden Sun Program:


In 2009, Chinas Ministry of Finance, Ministry of Science and Technology and the National Energy Administration of the National Development and Reform Commission, announced the launch of the Golden Sun Demonstration Project, the second national solar subsidy program, on July 21, 200012. The project is to facilitate the growth and expand the scale of the PV power generation industry. The effort will be made through fiscal subsidies, scientific and technological support, and market incentives to accelerate the industrialization of PV technological and enable large scale development of the PV industry.13 The summary of this project is listed below14: 1. The government will subsidize 50 percent of investment for solar power projects as

well as relevant power transmission and distribution systems that connect to grid networks. 2. For independent photovoltaic power generating systems in remote regions that have no

power supply, the subsidy will rise to 70 percent, the ministry said in an announcement on its web site. 3. Grid companies are required to buy all surplus electricity output from solar power

projects that generate primarily for the developers own needs, at similar rates to benchmark on-grid tariffs set for coal-fired power generators. 4. To qualify for the subsidy, in addition to other requirements, each project must have a

generating capacity of at least 300 kilowatt peak, while construction will have to be completed in one year and operations will have to last for at least 20 years. 5. The government plans to install more than 500 megawatts of solar power pilot projects

in two to three years. 6. The total generating capacity in such pilot projects in each province in principle should

not exceed 20 megawatts [GLF note: a most interesting target considering that for the full 500 MW of subsidized project to be deployed, almost all the provincial-level jurisdictions would need to have such a qualifying solar project].

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Feed-In Tariff (FIT)


In addition, a nationwide Feed-in Tariff (TIF) subsidy for large-scale PV system is also anticipated. A feed-in-tariff policy will mandate that Chinas two state-owned electricity transmission and distribution companies will subsidize solar companies by paying them above-market rates for the electricity generated from solar sources. However, the timing and details of the FIT subsidy is still quite uncertain15. An official at the Energy Research Institute at NDRC revealed that it will take at least two years to decide on a national FIT policy16. However, a number of solar companies, including Yingli, Suntech, and LDK Solar have announced large solar projects in the past year that are at least partially dependent on adoption of a national FIT policy17. Currently, the Chinese government has set up a benchmark FIT at 1.09 Yuan/kWh in the 10 MW Dunhuang solar project. If a national FIT policy for utility scale-solar plants is adopted, it is predicted that this new type of solar policy will drive much faster growth in the Chinese solar market as compared to Chinas existing roof-top subsidy and Golden Sun program, which focuses on remote offgrid installations18. It is expected that the tariff will fall between US $0.16 and US $0.22 per kilowatt hour of electricity produced at large-scale photovoltaic arrays. Any feed-in tariff could also provide a particular boost to China-based manufacturers as a result of the governments controversial Buy Chinese procurement policy for domestic infrastructure projects19. The Golden Sun program targets larger utility-scale projects, probably mounted on the ground instead of buildings, and more than 300 kw, and complements the Solar Roofs Program, which as the name implies, is meant for roof top projects not less than 50 kw. The Golden Sun policy explicitly excludes projects which fall under the Solar Roofs Program from benefiting under the Golden Sun program. Below is a summary of some key features in the two programs.

BIPV Program Applications

Golden Sun Program

Grid connected rooftop and BIPV Grid connected rooftop, BIPV, and systems ground mounted systems Off-grid systems in rural areas

System Size

>= 50KW

>= 300KW

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Subsidy

RMB15/W for rooftop systems RMB20/W for BIPV systems

50% of total cost for on-grid systems 70% of total cost for off-grid systems

Other Terms

Conversion requirement:

efficiency

minimum For grid connected systems, on-site consumption is encouraged. Excess electricity would be sold to the

16% for monocrystalline, 14% for multicrystalline, and 6% for thin film

utility. Buy back rate is based on local benchmark coal-fired grid price.

Provincial/Municipal Subsidy Programs


The Golden Sun program sets a cap of 20MW for each province, which also includes installations under the BIPV subsidy. Assuming all 34 provinces (including autonomous regions and municipalities directly under the central government) will participate in this program, according to the PV Groups analysis, the total subsidized installations by year 2011 will be capped at 680MW. With todays system cost, national subsidy offered by either program alone is not enough to ensure a reasonable return on investment. Thus, PV developers will have to rely on additional subsidy from regional and local governments22.

Beijing: On January 7, 2010, Beijing announced its first comprehensive policy on


promoting the development of solar energy. Peoples Daily Online reported that Beijing will implement 6 major Golden Sunlight projects in order to accelerate solar energy development and application, promote the development of the new-energy industry and develop Beijing into a solar energy technological, research and development center, a highend manufacturing center as well as an application and demonstration center. The 6 major "golden sunlight" projects are composed of a 20,000 kW rooftop solar photovoltaic (PV) power generation project, a 50,000 kW on-grid solar power station demonstration project, a solar campus project, a solar thermal water project, a rural solar power project and a solar energy-powered nightscape lighting project. Between 2010 and 2012, Beijing plans to spend RMB 1.44 billion in promoting the development of solar energy, of which RMB 0.16 comes as central government fiscal funding, RMB 0.98 billion as municipal financial and fix asset investment, and RMB 0.3 as district/county fiscal funding. Any BIPV projects and over 20 MW PV projects in Beijing can enjoy RMB 1/Watts annually for three consecutive years on top of the national

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subsidies23.

Jiangsu: Jiangsu Province Development and Reform Commission issued its own solar
energy subsidy policy on April 2009, and became the first province to implement the solar electricity buy-back (Feed-in Tariff) policy24. Its policy targeted to generate total 260MWp solar rooftop power by 2011, and provide supplement subsidies for electricity generation, solar rooftop power and the ground installation in 2009, 2010 and 201125. Jiangsus three-year solar PV development plan was officially laid out in the

on June 2009. Under the plan, Jiangsu aims to install 400 MW of solar
PV (consisting roof-top, ground-mounted, and building-integrated projects) by 2011. To support this development, a generous feed-in tariff for the next three years is provided along the following scale (in Yuan/kwh): Year Ground-mounted Roof-top Building-integrated PV 2009 2010 2011 2.15 1.7 1.4 3.7 3.0 2.4 4.3 3.5 2.926

Table No.6:Three year PV Solar plan of China Source: Authors compilation from NDRC data

Jiangsus three-year solar PV development plan is also not shy about naming the specific solar companies that the province favors, such as Suntech and Trina Solar. The plan aims to help Suntech become an international enterprise with over 5 billion Yuan in annual income within three years while supporting Suntechs other projects in Jiangsu to build a solar research center and a technology transfer center27.

Hainan: The Hainan Province Development and Reform Commission, the Hainan Province
Office of Construction and the Hainan Province Office of Science and Technology jointly issued Implementing Opinion on Promoting Scale Utilization of Solar Power in Hainan Province. The Opinion instructs various departments of provincial government to grant incentives such as fiscal subsidies and reductions and exemptions from taxes to further the efforts of research development and manufacturing of solar energy infrastructure. Suntech has taken advantage of the preferential treatment and is developing a solar PV power plant in

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Hainan in cooperation with the local government28. Other provinces and municipalities such as Hebei, Shandong and Shanghai also came out similar solar energy promotion policies29 after the central government rolled out these two national solar subsidy programs.

Figure No.9

Recently, China doubled its solar capacity target from 5GW to 10GW by 2015 and 50GW by 2020. In the past China was the largest factory, churning out goods for export. Now it will be the greatest consumer and bellwether in the solar market. China has longed to sit on the other side of the negotiating table, and now it has that chance. This new solar plan shows a determination to support the local solar energy industry, as well as to respond to a changing global market. The changes include increased plans for solar installations, as previously mentioned, as well as the market shifts in Europe as a result of changes in European FiTs. With Chinese manufacturers trying to meet increased demand both domestically and abroad, they are facing a demanding market. For a long time Chinese manufacturers specialized in quantity, but now quality is of extreme importance both for exports and for use within China. The great challenge now is for China to become a consumer of its own products, while

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meeting other requirements such as more stringent environmental and safety standards. Only those competitive players in the field will survive. However, ambition is not everything. With less than 1GW already installed, the plan to install 9GW in 4 years and 40GW in another 5 years may be a figment of the policy makers' imaginations and not based on assessment of actual projects. It's hard to predict how the goal will be achieved when it is driven by executive order and not from market-driven force. We'll keep our eyes focused on China as solar manufacturers face new challenges and adapt to their own country's increased demands.

Current scenario
Stiff Competition
China has recently invited bids for 280 MW of Solar Projects to be built in Northern and Western China. These projects are to be built in 8 of these provinces with 60MW projects planned in Xinjiang, Gansu and Inner Mongolia, as well as a 50MW project in Qinghai, a 30MW plant in Ningxia and a 20MW project in Shaanxi Province. Unlike other countries China has opted to have separate Feed in Tariffs for different provinces and these rates are quite low at 20c/KwH.These low rates lead to low returns but stiff competition is being seen particularly from State Owned Giant Utilities like Datang,Huaneng,Guangdong Nuclear and others. Some of these companies have bid for all the 13 projects on offer in order to get a head start in the Solar Energy Business.

Extremely Slow in promoting Solar Energy


China is the Largest Energy Consumer in the World and its Energy Demand continues to grow at a fast clip.However China has not enacted a national feed in tariff policy despite having the worlds largest solar manufacturing capacity. Chinas solar companies account for 35-40% of the worlds solar production which is estimated to be 12-15,000 MW in 2010.Compared to global demand, Chinas installed capacity is minuscule at only 300MW cumulative installations by 2009.This despite China being the largest wind energy installer in 2009 and forecast to be the biggest in 2010 as well. The increase in Chinese solar demand has been very slow and cautious. Last year China had given out projects under the Golden Sun program but after that there has been little progress. While India has taken the lead in promoting solar energy through JNNSM which sets a target of 20 GW by 2022.

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Returns have been Zero to Negative for Investors in Chinas Solar Projects
The competition has been extremely high for these projects leading to zero to negative returns for investors. This is due to a) Low electricity rates on offer b) Aggressive bidding leading to even lower rates.

Giant state utilities can easily bid to win even if they lose money in the process. Some of the solar companies that are bidding are Yingli,Suntech and Canadian Solar. Suntech has said that it has lost money in the projects it executed under the old program in China.Looks like this time wont be any different.

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CHAPTER 4: COMPARISON BETWEEN INDIAN AND CHINESE SOLAR ENERGY STATUS & POLICIES

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As the decade comes to an end and a new one begins, Asian countries have established themselves as the driving forces in renewable energy. According to a recent report released by The Pew Charitable Trusts, investment in renewable energy is being led by Asia, especially China and India. Altogether, clean power projects carried within the G-20s jurisdiction may reach US$2.3 trillion by the end of the decade, the report projects, having based its calculations on Bloomberg New Energy Finance data. Asia is leading because of its strong clean energy policies. China, India, Japan and South Korea, the regions clean energy powerhouses, will account for 40 per cent of global clean power project investments by 2020.30 China-China will remain the leader under all three scenarios the report used as models (Business-as usual, Copenhagen, and Enhanced Clean Energy). The Asian giant has the potential to attract a total of US$620 billion over the next decade. Recent figures confirm what the Pew report estimates. In 2009, China invested US$30 billion in clean energy. It accounted for 50 per cent of all investments in wind energy in 2010, or US$13.5 billion. Driving these impressive figures is the countrys unwavering adoption of sustainable development strategies and acknowledgement of the necessity to shift the economic development model. The country sees clean development as an essential part of social development. India-India has also become stronger due to solid clean energy policies and will rank third by 2020 under all the models employed by The Pew report. This represents a huge leap, since in 2009 it was projected to be number ten. The country is expected to attract $169 billion in clean energy projects over the next decade. Its renewable energy generating capacity may grow to 91GW, or five times from what is currently installed.

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Energy Hungry Tigers and Dragons: Comparing India and China Indias thirst for natural resources is not comparable to China and its impressive 7 percent average economic growth is not as high as Chinas thundering 9 percent, yet the country faces a dire energy shortage that needs to be addressed with clean technologies as soon as possible. If population alone is an indicator, Indias resources could be more strained than Chinas in the future. By 2030, Indias overall population is projected to surpass Chinas, and the ranks of the middle class will swell to 170 million. The expanding population increased overall energy demand by 3 percent in the last 15 years, while demand for oil and coal has quadrupled. In addition to severe water, air and land pollution produced by conventional energy, India also suffers from a sizable annual energy deficit. From April to December of 2009, energy deficits ran at 9.8 percent, forcing factories across the country to enact blackout periods during peak demand. Low energy capacity forced India to rely on imports in this period of increasing demand. Imports for coal grew to 16.7 percent from April to December of 2009, up from the 9.7 percent growth in 2006-2007, an increase that exposes India to rising commodity prices and negatively affects its energy security. The Indian government has taken action to offset these risks by investing in the increasingly lucrative clean technology industry. Although Indias renewable energy market is not nearly as mature as Chinas, focused government activity and potential opportunities have heightened interest in the sector. With 500 million people lacking access to electricity and instead relying on dirty coal, this growing economy indeed has the potential to make leaps and bounds in renewable energy and clean technology. The rapid spread of solar lighting systems, solar water pumps and other solar power-based rural applications can change the face of Indias rural economy was even affirmed Prime Minister Manmohan Singh at the launch of the Solar Mission in Jan. 2010.

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Table No.7 :Comparison between India and china

Investment Climate In 2009, Indian renewable energy attracted $2.3 billion in private investment, placing it tenth in the G-20s investment ranking, well behind Chinas leading position at US$34.6 billion. The markets five-year growth rate was 72 percent, which put India ahead of developed countries like Canada but still behind Chinas 147.5 percent growth. Indian renewable energy attracted US$190 million in venture capital, down 13 percent from the previous year. Compared to Chinas US$331 million in VC investments, roughly equal with its 2008 figures, Indias drop in investment reflects both the impact of 2009s economic downturn and slight vulnerability of its still-nascent renewable energy market. Despite this downturn in private investment, the government remains committed. The Union Budget of India for 2010-2011 allocated an unprecedented 46 percent of the total budget to develop infrastructure. This includes a 61 percent budget increase totaling US$223.5 million directed to the MNRE as part of Indias comprehensive National Action Plan on Climate Change. At the end of 2009, the government also launched the JNNSM, a program dedicating $932 million to expanding solar power infrastructure. Indicative of Indias other clean technology incentives, the Solar Mission reduces capital costs for solar energy investors by granting a 5 percent concessional duty on all equipment needed for installing photovoltaic and thermal units. This mission expands such applications. As a result, the movement for decentralized and disbursed industrialization will acquire an

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added momentum.Non-solar related policies include reduced duties on permanent magnets and electricity generators encourage the development of wind power, as well as an exemption from basic customs and special duties for geothermal energy generation. The sector that attracts the most investment is energy generation, which, including bioenergy and small hydropower largely mirrors China top renewable energy industries although not the same volume. India is also one of the worlds top producers of wind energy with an annual 10,891 MW, just trailing Chinas 12,200 MW. Market Outlook With so much needed infrastructure construction80 percent of the India of 2030 is yet to be builtand new government backing, the opportunities in smart infrastructure development and energy are great. On the other hand, Indias relatively developed and subsidized domestic solar energy may provide a challenge for foreign firms hoping to enter the market and directly compete with local firms, much like China Complex bureaucracy also inevitably acts as a barrier to efficiency. The policy disconnect between government ministries, states, and sub-sectors makes it difficult for direct national policy to penetrate the layers of red tape and local interest that separate political jurisdictions. Democracy is not a particularly efficient system of governance, and the inherently disorganized nature of Indias parliamentary democracy also makes sustained, long-term renewable energy planning and funding more vulnerable to the head butting of political parties. In this constant management flux, India is still working to overcome the traditional obstacle of clean technology that has previously hampered its development worldwide: high capital costs and high risk. China is solving the problem with forward-thinking, deep government commitment, but India still needs to navigate past this barrier. Indias main problem is not lack of knowledge but the lack of successful transition from research-based knowledge to sustainable commerciality.

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CHAPTER 5: RECOMMENDATIONS FOR INDIAN PROGRAM

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From a solar thermal perspective the Guidelines for selecting new grid connected solar power projects have failed to address many concerns and pre-requisites to ensure a successful rollout. the main concern is regarding the payment security to solar power developers, as there is no assurance that an adequate mechanism is there to support the NVVN in the requisite manner so as to ensure that it can fulfill the expectations of investors by providing appropriate security to solar power developers. It is important that policies are modified to ensure the success of the mission objectives in pioneering a graduated shift from economic activity based on fossil fuel to one based on non-fossil fuels and from reliance on nonrenewable depleting sources to renewable sources of energy as stated by the PM while launching NAPCC on June 30, 2008. Project Deadlines The guidelines allow 28 months from the date of Power Purchase Agreement (PPA) for commissioning the project whereas experience from other markets such as USA and Spain have indicated this to be around 36 months from the date of financial closure. Given that post-PPA execution, at least 6 months will be required for financial closure of solar thermal power projects. This timeline is likely to be much longer for the first few projects since the model PPA by govt. nominated agency (NVVN) has not been considered bankable by investors, bankers and financial institutions. Penalties for Delays Stringent penalties for delays (ranging from 20% to as high as 100% of the performance guarantee) have been proposed without due consideration to the practical requirements for a successful project. This lapse is being perceived as significant and detrimental to the development of solar thermal power projects by leading international experts. Delays due to lack of Solar Resource Data Penalties for delays are despite the lack of availability of solar resource data, the main source or raw material for the generation of power. Typically solar resource data is required to be computed from 12 year solar cycle period and projected over 25 years to estimate the electricity generation potential of the site and determine the economic feasibility of the project. Delays may be expected in procuring requisite data accurately to assess project feasibility and secure guarantees of performance from technology providers.

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Delays in Clearances Further delays may be anticipated on account of land acquisition (a typically sized 50 MW project requires 2 km by 2 km area), power evacuation arrangements by the state grids (most potential locations are in desert areas and nearest sub-station may be 25 km away) and allocation of water (600 million liters per annum for 50 MW project with estimated 25% capacity utilization). This is in addition to environmental and other mandatory clearances which may take longer than assumed. The timelines for these clearances and allocations would be outside the control of the project developers and will be hard to estimate for the first few projects. PPA issues Issues such as PPA bankability (NVVN, PPA signatory, has a low capital base and a balance sheet that does not enthuse bankers), payment guarantees for 25 years, price guarantee with a fast-tracked legally implementable remedial framework for delays; penalties for higher (and lower) than CERC specified generation (23% CUF) from a non-firm source and lack of deemed generation clauses have added to the project risk factor. Hybrid solar projects All operating solar thermal power projects world over utilize 8 25% fossil fuel for plant parasites. Although CERC tariff mechanism provides for 10% auxiliary consumption there is no clarification how or where this auxiliary requirement would come from. Allocation of projects: need for long term policy While the Govt. is right in seeking a bid guarantee to gate the selection process to financially sound companies, the solar project developers need comprehensive and reliable feasibility assessment for getting requisite guarantees from their technology provider prior to providing the bid guarantees.Analysis of project feasibility prior to project implementation is expensive (US $ 200,000 - $ 500,000). Most developers were expecting to invest in project feasibility after project approvals. In the absence of reliable feasibility, foreign technology partners are unable to provide project parameter guarantees (project cost, technical performance, electricity output and economic feasibility). Some developers have suggested that all short-listed applicants that do not qualify under Phase I due to quantity restrictions, may be provided priority in the selection process during Phase II of the Mission.

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Such a clarification would encourage more companies to apply during the selection process. Indigenization One of the key mission objectives is to achieve grid parity through indigenization. Foreign technology companies interested in investing in local manufacturing are unable to do so due to insufficient local demand. An off-take of 500 MW, as envisaged in the guidelines, during the 3-year period is insufficient and discourages investments in domestic manufacturing. A longer term position would encourage development of domestic manufacturing in meeting the mission objectives. Grid connectivity Grid transmission network and sub-station capacity to handle immediate generation from solar thermal power projects are considered inadequate. Transmission projects must be fasttracked to these regions and grid connectivity augmented to usher the benefit from grid connected solar projects Why are foreign companies not enthused? Most countries implementing solar power projects have higher feed in tariff support, lower rates of interest, and allowance for 25% usage of fossil fuel and loan guarantees mitigating the risk factors. The guidelines announced have negated the inherent advantages of cheaper materials and manpower availability in India and created artificial barriers for the entry of international solar thermal power and technology companies. Few other suggestions which we think might be fruitful areas follows The cap on equity dilution should be immediately removed. The central and state governments should offer attractive unit cost valid for at least 2 years which should be same for all states. If any state wants to offer more it should be allowed and the % increase should be declared as incentive for precommissioning of the project over the targeted date. There has to be a proper assessment of the bidders and their seriousness of implementing the project.

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No focus has been made on solar desalination plants along Indian coast. No technology cap should be made. Imports of total plant should be allowed to bring in competition in the domestic sector and create a balance. Since the target till 2020 is quite huge the states should be given full freedom to act as ultimately our objective should be achieved. The reverse bidding should be stopped and should not allow unhealthy competition as it will water down the mission and the dream.

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CHAPTER 6: CONCLUSION
In the post Copenhagen era India has undertaken many climate policies like Low carbon strategy; A Carbon Tax on Coal to Fund Clean Energy, National Mission on Sustainable Habitat (NMSH), Jawaharlal Nehru National Solar Mission (JNNSM), Green India Mission (GIM), Climate Change Science, Himalayan Ecosystem under the different Ministries of the GOI are contributing in creating awareness about the climate change, its impact on health and means to mitigate this impact. Some of the major initiatives among them are: Ministry of Renewable Energy is promoting following sources of renewable energy: Solar energy: it is planned to install solar energy plants in one million households Biomass Hydel energy Wind energy and Geothermal energy sources also being explored Cleaner fuels being promoted through administrative and legal ways Public awareness and inclusion of subject of climate change in educational curriculum at school levels Water conservation and harvesting is another area where lots of efforts are being put in.

Indias Integrated Energy Policy envisages CO2 emissions for 2031/32 to be 5.5 Gt to 3.9 Gt compared to 1.34Gt in 2007,while BLUE Map Scenario limits the increase of 2.2Gt in 2030 based on an average annual GDP growth of 8% to 9% between 2006-07 and 2031-32.The projection CO2 emission reduction under BLUE Map scenario,2010-50 was seen in different sectors where buildings constitute14 % ,transport 37%,industry 17% and power sector constitute 32% respectively. India has 150GW of renewable energy potential, about half in the form of small hydropower, biomass, and wind and half in solar, cogeneration, and waste-to-energy. Developing renewable energy can help India increase its energy security, reduce the adverse impacts on the local environment, lower its carbon intensity, contribute to more balanced regional development, and realize its aspirations for leadership in high-technology industries. The government has set ambitious targets. It aims to increase the capacity to generate renewable energy by 40GW to 55GW by the end of the 13th Five-Year Plan (2022). The

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National Action Plan on Climate Change (NAPCC) has set the even more ambitious goal of a 1 percent annual increase in renewable energy generation which stands at about 3.5 percent in 2008. Meeting this goal may require 4080GW of additional capacity in renewable energy capacity by 2017, depending on Indias demand for power and plant capacity. The Jawaharlal Nehru National Solar Mission (JNNSM) has set its own ambitious target of adding 1GW of capacity between 2010 and 2013. It seeks to increase combined solar capacity from 9MW in 2010 to 20GW by 2022. During the planning period from 9th to 11th plan, the progress solar power is satisfactory in the sense that the capacity addition in MW were recorded as 3475 up to the 9th plan which catapulted to 6761 and 12230 in the 10th plan and 11th plan ( up to 31.12.2010) respectively although the estimated potential capacity were too higher than the generation. The target of renewable energy during 2011-12 -2016-17 was published where the wind energy target constituted 13400MW followed by solar energy , in comparison with 21700MW up to 31.03.2011 as against 21700MW during 2011-12-2016-17.For the generation of such targeted energy during the specified period ,India needs Rs 12878/- crore separately for biomass, solar, wind etc.The different barriers in the renewable energy barriers and the way of success in the following manner. In the barrier of financial viability, there are [1] Skewed financial incentives for facilitating investments in renewable energy, [2] Too many incentive programs, [3] Failure to adequately address utilities long term financial concerns, [4] Failure to develop least cost resources first, [5] Inadequate long term funding sources. The suggested solutions of these barriers are, [i] Provide streamlined, market based government interventions, [ii] Create national renewable energy fund to mitigate impact on utilities, [iii] Enable direct purchase and distributed generation of renewable energy, [iv] Facilitate financing of renewable energy.

In the support infrastructure, the barriers are, [1] Inadequate evacuation and access infrastructure,

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[2] Lack of good quality data, [3] Underdeveloped industry value chain. Their remedies are, [i] Make renewable energy evacuation a high transmission priority, [ii] Introduce and enforce take or pay for renewable energy generation, [iii] invest in high quality, integrated resource monitoring systems, [iv] Catalyse R&D and supply chain innovations and investments.

In the regulatory approvals, the barriers are, [1] Delay in clearance and approvals, [2] Long development cycle, [3] Land and resource acquisition issues

Their remedial measures are [i] Move to unified, light-touch regulation for renewable energy, [ii] strengthen state nodal agencies and state regulators.

Although In the world of manufacturing, technology and infrastructure China has stolen a march over India in the field of solar energy India had a head start over China, but china over the recent years has taken the lead over us. The Government of India needs to create a level playing field in the energy sector. The question of subsidies for solar power producing plants has to be reworked. Many small generating solar power plants have quoted and won rates that will prove unviable in the long run. This will lead to either these plants closing down after a short period or will have substandard material resulting in frequent break downs. This in turn will lead to power cuts and industry will come to a standstill.In addition many of those new solar power plants have no prior experience in the field of power generation.The stalwarts in power plants like TataBP solar have stayed away as they found the terms offered unviable.The government also needs to start coaching,training men in all the demands solar power industry will throw up. If quick action is not taken the local industry will wither away and we will be flooded with Chinese made products in the world of solar.

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