Powering-up future industrial growth: catalysing rooftop solar and CHP
Sustainability Outlook spoke to Fortum India to understand what is required for renewable energy interventions to power up India’s industrial sector. Rooftop solar and group captive CHP are gaining momentum and opportunities exist for equity and policy changes to further catalyse industrial use of renewable energy.
Meanwhile, the RPO mechanism continues to be the key lever for creating a change in energy behaviour among states, and ultimately, among captive industrial consumers.
[Top Right: Mr. Manoj Gupta, VP Solar, Fortum India]
[Bottom Right: Mr. Vikram Jadhav , VP CHP, Fortum India]
Sustainability Outlook (SO): Can renewable energy sources ever become the mainstay for industrial applications? How far off is the current technology to enable this to happen?
Mr. Manoj Gupta, VP Solar (MG): Definitely, renewable energy, especially solar thermal applications are going to play a big role in achieving cost savings for cooling and heating applications. We believe rooftop solar is also going to reduce the cost burden for the industries which are running on diesel sets and will definitely reduce diesel consumption.
SO: What are the key challenges to the uptake of these interventions?
MG: The key challenges today are the regulatory issues mainly with respect to metering issues and open access charges. Solar power is mainly put on the rooftops of factories and all power generated is consumed internally. Hence, we believe that open access charges* should not be applicable to these sorts of renewable energy projects. Further, these projects create a REC benefit, however, this is not recognised as yet.
The underlying issue is that there are no clear norms on metering within factories to separate out energy consumption facilitated by solar power, and hence, there is no clear way to enable factories to isolate energy consumption for a Net Metering or a REC purpose.
SO: What could make a bigger impact to green energy in India – a focus on fuel substitution, or efficiency interventions? (Could you give us some examples or case studies in the Indian context?)
MG: MNRE is really doing a fantastic job for supporting the Renewable Energy Generation and putting up RPO/SPO obligations directly on state and ultimately to the captive consumers. However implementation of Penalty mechanism for not meeting RPO/SPO will give a big boost to this sector. The support of State regulators is still lacking to implement these Renewable obligations. All Real Estate developers can also be forced to use Solar on Rooftop and various other applications in society.
SO: Many Indian industries (such as textiles, chemicals & fertilizers, F&B sectors) are fragmented and exist in clusters of small and medium sized enterprises.What are the opportunities and challenges when designing interventions at a cluster level rather than specific solutions for large individual customers?
Mr. Vickram Jadhav, VP CHP (VJ): In the context of Combined Heating and Power (CHP), it is true that industries mentioned by you are ideally placed to implement high efficiency CHP solutions face challenges due to their small scale in India. Few of these coexist in clusters which make a case for a Group Captive CHP Plant but policy challenges such as Group Captive Equity structuring requirements, open access impediments and constraints in utility corridor are factors one needs to account for before deciding on such investments.
SO: Could you clarify the exact nature of these policy challenges and constraints?
VJ: In terms of equity restructuring, the Group Captive Special Purpose Vehicle needs to have an injection of equity by the Group Captive Power Users aggregating to 26% and these users need to consume 51% of the power generated by the plant in the same proportion 26/51. In case this condition is violated, the SPV is penalized making the entire cost structure unviable because many levies including Cross Subsidy charges are charged.
Secondly, the CHP plant will necessarily rely on the grid to export and supply the power to its group captive users i.e. the CHP will need ‘open access’. In most of the states the DISCOM’s create impediments in practically granting open access.
Finally, a utility corridor: is required to lay steam lines, condensate lines to supply steam to its users. However the utility corridor is absent or not planned for the CHP to construct this utility corridor in most industrial clusters.
SO: Do these challenges make it difficult to create a compelling business case for CHP plants?
VJ: There is a need for an experienced global player in the CHP space to demonstrate their capabilities before anyone can look at this opportunity. But there are fundamental advantages to rolling out CHPs in India.
By locally centralising the production and supplying industrial clusters with heat and electricity, several benefits can be gained for the industries and society more largely.
Being next to use, combined heat and power production in an industrial cluster increases considerably the security of supply, reducing the need for very costly and mostly diesel-run, high emitting back-up power or production losses due to industrial process failures.
By focusing on their core operations, customers can reduce their operational costs, optimize the use of their land and capital, increase efficiency by focusing on their core competence and operate with an overall more sustainable production process, including fuel and waste handling and, at the same time provide increased security of supply for the industry while supplying the grid with electricity.
SO: We originally met Fortum as part of the JNNSM Phase II pre-bid meetings. What is your outlook for the Phase II of JNNSM?
MG: Phase-II of JNNSM is another step to support solar and to achieve Grid Parity at the earliest possible. However the time wise implementation of Phase-II will give boost to the industry. MNRE/SECI can open bidding in a fast pace so that the developers can plan themselves at least for next 3-4 years. I think, opening bid for 2-3 GW in next 12 months will give a clear view and growth to the industry.
There are definitely challenges with respect to the shortage of equity. Further, there is a regulatory hurdle with respect to implementation of rooftop solar market and open market sale of solar power. Once these hurdles are removed, opportunities will arise to build good business models for rooftop solar and open market sale of solar power.
SO: Last thoughts on key growth areas in solar in India?
MG: Yes, watch out for rooftop solar and also for solar thermal application for steam and heating/cooling requirements.
* Open access charges are major charges to be paid by open access consumers to distribution licensee, transmission licensees and other related entities, other than the power purchase cost paid to the generator or supplying entity. http://indianpowersector.com/home/open-access/oa-charges/
Mr. Manoj Gupta is the Vice President Solar for FORTUM in India. Prior to joining FORTUM, he was the Head – Business Development for Solar Projects with a large solar power developer company.
Mr. Vickram Jadhav is the Vice President CHP for FORTUM in India. Previously, he worked for Solar Turbines – A Caterpillar Company where he worked as Head – Sales and Marketing (South Asia).
Image credits: Fortum