New Delhi: If tropical India were to convert just 1% of the 5,000 trillion kilowatt-hour of solar radiation (or, simply, sunlight) it receives a year into energy, the country will have enough to meet its energy needs—even in 2030—according to the national action plan on climate change.

The country’s semiconductor policy—aimed at getting more firms interested in making chips here—has, accidentally, provided a fillip to the makers of photovoltaic (literally, energy from light) cells, but analysts, experts and executives in the solar energy business say that bureaucracy, an underdeveloped local market and the absence of targeted incentives and infrastructure could put paid to India’s efforts to generate 10,000MW from solar energy by 2020.

Viability gap: Service engineers carrying out maintenance work on tube solar collectors on the Rakanpur-Santej road near Ahmedabad. Manufacture of solar cells and modules is capital-intensive and companies in the business have to deal with constantly changing technology. Sam Panthaky / AFP

Also See Power Trip (Graphic)

On Monday, industry lobby group, the Indian Semiconductor Association, or ISA, said in a report put out by it and audit and consulting firm PricewaterhouseCoopers that India needs a law that makes it mandatory for utilities to buy a certain amount of their power from firms generating electricity from renewable energy.

“India’s focus till now has been in manufacturing and exports. Sadly, it has not led to reasons for a healthy domestic market," said Amol Kotwal, deputy director, energy and power systems practice at consultancy Frost and Sullivan. “More than 60% of PVs (photovoltaic cells) produced in India is exported and the biggest market is Europe."

India’s solar cells industry produced cells that could generate 45MW of power in the year to March 2007, the latest year for which data is available, according to the ISA report. More capacity is expected to be added soon, provided the government does its bit.

Waiting for approvals

India’s semiconductor policy, announced by the ministry of communications and information technology in 2007, has come as a big boost to companies making photovoltaic cells. That’s because these cells are made from materials that go into semiconductors.

The policy gives 20% capital subsidy to units inside special economic zones that make semiconductors and 25% to those outside.

Companies such as Tata BP Solar India Ltd, Moser Baer India Ltd, Reliance Industries Ltd and US-based Signet Solar Inc. have pledged almost Rs60,000 crore to manufacture photovoltaic cells and modules in the country.

But many of these proposals are waiting to be cleared by the ministry of communications and information technology. If all these are cleared, the manufacturing capacity of solar cells in the country will go up to 4,500MW.

A ministry official said the government will continue receiving applications till 2010. “The government is still in the process of evaluating, both technically and financially, the existing applications," the official said on condition of anonymity. “Two committees have been set up, and the final report submitted by these committees will be again scrutinized by the appraisal committee to decide how many applicants we can support and not."

Even if the government starts clearing its proposal, it may not result in an increase in the amount of solar power being generated here because the current incentive structure is skewed towards manufacturing, said Kotwal.

The manufacturers of photovoltaic cells do not agree.

Starting up

“Unless we can get the supply and demand policies in place at the same time, we have to start with manufacturing policies first and then solar generation policies," said a senior executive with a photovoltaic cells manufacturing company investing in India, who did not wish to be identified. “Also, subsidies in India are not meant to decrease the cost of production. It is to compensate for the viability gap that exists in India…at least initially."

Manufacture of solar cells and modules is capital-intensive and companies in the business have to deal with constantly changing technology. “Incentives from the government can help cover the gap," said Poornima Shenoy, president of ISA.

“The manufacturing capacities to be created through the proposed investments are spread over a longer time period, by when the grid parity through solar generation is also expected," Shenoy added. “This would then create enough domestic demand."

Unlike wind energy, where it is the world’s fourth largest generator, India has made little headway in solar power.

In January , the ministry of new and renewable energy introduced incentives for solar power generation but manufacturers and analysts say these are inadequate.

For instance, they are capped at 5MW for each developer, 10MW for each state and 50MW overall for solar power generation facilities that are connected to the grid. That means companies will get benefits for solar power generation only up to 5MW.

For most big companies, that’s not enough, said Kotwal.“Right after the scheme was advertised, we got proposals worth 350MW. It is very unfortunate that there is a cap on these schemes," said Ireda’s Majumdar.

Still, even the ISA report admits that photovoltaic cells aren’t the best way to generate conventional electricity—that can be done much more inexpensively from fossil fuels. But such power could be ideal for rural electrification (where solar power is cheaper than extending the grid), as backup for telecom towers and roof-based systems for commercial buildings.