It's David Vs Goliath on the World's Solar Power Stage

Would India's 'One Sun One World One Grid' project be fructuous when China's BRI is already well ahead?

India’s 'One Sun One World One Grid' (OSOWOG) initiative has started calling out for bids to kickstart the programme. The vision behind it is that ‘The Sun Never Sets’, as the grid plans to be lit up by the sun at some geographical location, globally, at any given point of time. It aims to first connect India with Southeast Asia, and then the Middle East and Africa to the west. The Ministry of New and Renewable Energy (MNRE) has invited proposals for making a long-term OSOWOG roadmap and figuring out two or three cross-border projects that can be initiated soon, “preferably one with each of the Middle East, South East and Africa regions, considering India as the grid fulcrum for these identified pilots”.

While this is quite a feat, there is another that rivals it — China’s Global Energy Interconnection (GEI) that is part of the Belt and Road Initiative (BRI). GEI is, however, more than a few steps ahead of India’s plan. China has already signed 31 agreements with countries for GEI and set up seven offices worldwide.

INDIA’S SOLAR POWER

There are multiple facets at play here: whether countries would agree to this initiative based on their own regional energy demands? Would countries be able to fund it along with India? And what will be the supply chains involved?

International Solar Alliance (ISA) is an India-based organisation that is pushing this project. It is the first treaty-led multilateral organisation to be headquartered in India and plans to mobilise US$ 1 trillion in investments by 2030. India also has one of the largest interconnected grids with five regional grids. It has moved up the solar power capacity leaderboard from 10th worldwide in 2014 to 5th position, according to the International Renewable Energy Agency (IRENA).

The renewable energy sector in India could be a prime source for investors, with the potential to attract US$ 10 billion annual investments as per the Bank of America’s global head of energy and renewable business. A recent analysis by IRENA found that the costs for setting up solar PV projects have dropped by about 80% in India between 2010 and 2018. Yet, India is not in a place, on its own, to fund massive projects such as the OSOWOG in other countries.

“It is a long political process. It involves countries ceding a bit of their sovereignty to a supranational authority that will oversee the grid,” says Aditya Valiathan Pillai, a senior researcher at the Centre for Policy Research (CPR) to The Ken.

The ISA is also pushing for the formation of a US$10 billion World Solar Bank (WSB), in collaboration with the World Bank. India may become the lead member with a 30% stake in WSB, amounting to a US$ 3 billion commitment. This comes in the backdrop of Beijing creating the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), seen as a potential rivals to the World Bank and IMF.

The catch lies in the fact that India imports most of its solar panel material from China due to the cheaper cost. Solar cells and modules worth US$ 1,179.89 million were imported from China in the first nine months of FY 2019-20, according to R.K. Singh, the Minister for Renewable Energy. Additionally, this expansion was created mostly by private companies, some of whom are private equity-funded, rather than by the government.

India has tried to foster a domestic solar industry by imposing a two-year levy on imports, yet domestic manufacturing has not taken off on that great a scale.

VYING FOR THE PIE

India opting for the OSOWOG initiative is in a major play to strengthen its importance in the region, especially against China’s GEI. The GEI has the added benefit of other components such as road and maritime trade to back its case up, along with greater access to funding, and cheaper supply chains.

China has the added advantage of its powerful renminbi (RMB) which is increasingly being used across the region. Malaysia's RMB use grew by 214% over the last three years, Russia's by 56%, and Thailand’s by 50%.

Geopolitical tensions will also come into play, and potential candidates will be forced to make a choice between the two rivals, India and China.

The success of the OSOWOG project will largely depend on the relationship between India and the countries in question. A World Bank-sponsored report on power sector integration summed up the reality in 2010. “If there is one overriding requirement for regional integration to be successful, it is that countries need to have the political will to cooperate with their neighbours.”

India has been one of the few countries that have been successful with international electricity pool-sharing ventures where it shares excess power bilaterally with Bhutan and Nepal. In August 2018, India also signed an MoU for grid interconnections between the members of BIMSTEC (India, Bangladesh, Myanmar, Sri Lanka, Thailand Bhutan and Nepal).

However, some other grid interconnection plans have been unsuccessful, such as that of the Greater Mekong Subregion (GMS) interconnection, running through Thailand, Laos, Vietnam, and China. It is plagued by poor infrastructure and low volumes of electricity despite having been around since the late 1990s. The idea of a South Asian energy grid, proposed by SAARC in 2004, also remains just that.

CONCLUSION

  • There is the question of whether there is even a need for such a centralised grid. With the advent of efficient batteries like the lithium-ion and others, there is the capacity to store energy cheaply and efficiently. Eventually, with strong decentralised solar projects in each country, there may be no need for large power plants.
  • It is clear that for India to step up its goal of being the solar power generator of the world, it needs to increase its domestic manufacturing for solar modules, as well as ancillary products like lithium-ion batteries. There must be a strong strategy on long-term development in line with the ISA’s goals that address price competitiveness and profitability. India is largely an energy deficient nation, and there is the added incentive to generate jobs in the energy sector.
  • The policy approach should be to ensure domestic manufacturers get the upper hand in producing goods, with more waivers and easier loans. The focus has to be on creating an end-to-end solar PV manufacturing capacity to include solar PV modules, cells, wafers/ingots and polysilicon.

Author: Synergia Foundation Research Team

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