India announced last year that it would take its installed solar energy capacity from near zero to 20,000 MW in a matter of just over a decade, by 2022. This is quite an ambitious agenda and several people had doubts regarding the feasibility of such a plan, especially during these tough economic times.
However, the good news is that the private sector is taking the lead and hopes to achieve this target within the time-frame. This is good news for India because the public sector remains notoriously bureaucratic and inefficient in an economy fueled by entrepreneurship. The private sector is well positioned to take the lead, with several multi-billion dollar companies interested in the project.
The government of India has been auctioning the solar projects. A total of 620 MW of solar projects have already been auctioned to 37 companies.
Lanco Infratech was one of the biggest winners. Lanco Infratech plans to build 200-300MW of solar energy in India. The solar energy that is being produced is in the form of both solar photovoltaic and solar thermal. Lanco Infratech is well positioned to take this ambitious agenda forward as the company is growing at a fast rate with some of the biggest infrastructure projects in the country. Having an experience in several large infrastructure and power projects certainly helps.
Another encouraging fact about solar power development in India is that there are several initiatives at the state level as well, apart from the national goals. A number of smaller but skilled companies are going the state-level route. In fact, Tata Power, the largest private producer of power in India has also opted out of the federal government’s plans and is instead working with the state governments. The Western state of Gujarat is the leader in the development of solar energy, owing to favorable policy and adequate geographic locations along the Rann of Kutch. Gujarat also happens to be the fastest growing state in the country, clocking an impressive growth of over 11% last year.
India will of course need a favorable government policy along with solid engineering skills. As is usually the case, there was a lot of aggressive bidding which has caused the cost of per unit of solar electricity in India to drop below the expected value. This can mean lower margins for the companies involved. It is however hard to say whether this will have a negative impact. A similar scenario was seen in the mobile phone industry – India has one of the cheapest calling rates in the world and the companies still remain profitable. Ultimately, through lower costs and higher efficiency, it is the citizens who will benefit.
Even though India produces millions of engineers each year, it still faces a lack of skilled workers. This deficit will need to be addressed by the government before moving further not only on the solar energy goals but for the economy in general. In fact, a number of economists believe that infrastructure development, which has taken a back-seat is the real bottleneck of the growth of the Indian economy.