India’s solar thermal market has existed for over two decades, with the primary applications being solar cookers and water heaters. Then solar photovoltaics (PVs) came into the market, and the focus shifted away from solar thermal.
Challenges such as the lack of regulatory and policy support, high capital costs, low awareness levels and lack of direct normal irradiance (DNI) data have restricted the solar thermal market in the country. Therefore, despite the early start, this segment has experienced sluggish growth and remains largely underdeveloped.
Jaideep Malaviya, secretary general, Solar Thermal Federation of India (STFI), however, differs with this view. Quoting Solrico, a Germany-based agency for solar market research and communication, he points out that India was the third largest market in terms of newly installed solar thermal capacity with about 750 megawatt thermal (MWth) installed in 2015, after Turkey with about 1,450 MWth and Brazil with just under 1,000 MWth. In fact, the international community recognises India as a hub for solar thermal development, he says.
One of the key factors plaguing this market is the growing focus on power generation technologies with even solar thermal equipment manufacturers diverting their portfolio to produce PV equipment. Malaviya observes that while solar power generation caters to the supply-side management of electricity, solar thermal is directly involved in demand-side management. The latter uses solar energy for heating applications, thereby helping save electricity and achieving a peak load shaving of 1 GW for every 100,000 square metre of solar heating installations.
On the domestic front, the Ministry of New and Renewable Energy (MNRE) has plans to develop the thermal market by keeping it under the purview of the National Solar Mission. There are multiple applications of solar thermal technology in the market including cooking, air drying, steam generation and thermal cooling. However, the most popular and the largest remains solar water heating.
Solar water heaters
The solar water heater (SWH) market is broadly classified into the residential, commercial, institutional and industrial consumer segments, accounting for 76 per cent, 11 per cent, 8 per cent and 5 per cent respectively of the domestic market. The MNRE has set a target of achieving 15 million square metres of SWH installations by 2017 and 20 million square metres by 2022. While the country has an estimated SWH potential of 140 million square metres, the cumulative installed capacity stood at about 10 million square metres as of December 2016. Various states have issued mandatory notifications for SWH including Andhra Pradesh, Haryana, Madhya Pradesh, Delhi, Gujarat, Rajasthan, Tamil Nadu, Uttarakhand, Karnataka, Telangana and Kerala.
Until 2014, the MNRE offered 30 per cent subsidy to all beneficiaries, which was the primary growth driver for the segment. The subsidy went directly to MNRE-approved manufacturers or channel partners, who then passed on the benefit to consumers. With the introduction of evacuated tube collector (ETC) solar water heaters, the subsidy was discontinued in October 2014. Since ETCs have a better return on investment as compared to flat plate collector-based SWH systems, the financial support was removed to encourage the segment to become self-sustainable. In the absence of financial incentives, the MNRE continues to provide research and development (R&D) as well as awareness-oriented support through regional training centres and the Bureau of Energy Efficiency to drive SWH sales.
In December 2016, STFI and the Indo-German Chamber of Commerce (IGCC) entered into a partnership for the Solar Payback project, which is aimed at increasing the use of solar thermal in industrial processes. The three-year project will be funded by the International Climate Initiative and will be implemented across India, South Africa, Mexico and Brazil, with a cumulative budget of Euro 2.96 million. In addition to the German Solar Association BSW-Solar and three German companies, the national solar industry association of each target country will be a part of the project. Solrico, Fraunhofer ISE and the German Investment & Development Corporation will act as the facilitators of the project.
Solar Payback’s key activities include drafting national solar process heat roadmaps, developing financial and business tools for planners and investors, and providing policy-based recommendations for the respective energy ministries.
Issues and challenges
Quality control remains the biggest challenge in the solar thermal market. With a market size of about 1.2 million square metres per year, it is essential to provide quality equipment to developers and consumers. However, due to the invasion of cheap Chinese alternatives, the business of domestic manufacturers empanelled with the MNRE has been heavily impacted. Malaviya says, “The price war initiated by Chinese suppliers in a bid to undercut Indian manufacturers has resulted in Chinese companies accounting for a large part of market share, which has severely affected the quality of systems in the country. Even though Bureau of Indian Standards provisions are in place to control the quality of equipment, there is limited implementation by the MNRE.”
While the solar power generation segment thrives on the back of competitive bidding, no such tendering options are available for projects in the solar thermal segment. This has resulted in high capital costs of solar thermal energy systems. Added to this is the lack of attractive capital from banks and non-banking financial institutions, which provide loans at high interest rates for shorter tenors as opposed to low rates for longer terms.
Further, there is no clarity or authoritative data available on DNI or solar thermal equipment imports for analysing the size of the industry that can possibly be catered to by domestic manufacturers. The lack of incentives for manufacturers, especially in light of the influx of cheap Chinese equipment, works against the growth of the solar thermal segment in India.
Recommendations and outlook
According to Malaviya, a solar heat obligation (SHO) should be introduced in the country to make the use of solar thermal technology necessary for industrial purposes, akin to the renewable purchase obligation that is mandatory for the power generation segment. Industries with upwards of 10,000 litres of annual fuel oil for process heat should use solar thermal energy to meet at least 10 per cent of their consumption, and underachievers can meet the obligation through energy savings certificates. Along with this, it should be mandatory for all new process heat plants to meet 10 per cent of their consumption through solar thermal technology. In addition, incentives may be given to entities meeting their SHO targets.
The market and the government must work together to create a demand for solar heating in the country. At least 100,000 square metres worth of demand should be created within the next three years through large-scale technology-agnostic tenders. Agencies such as the Solar Energy Corporation of India and the Indian Renewable Energy Development Agency can be brought in to reserve funds for exclusive R&D in this segment. Moreover, DNI can be linked to solar thermal performance-based incentives and any reductions can be penalised.
Given India’s high solar irradiance level, strong manufacturing capability and vast industrial opportunities, the solar thermal market is expected to grow in the coming years backed by appropriate regulatory support. Also, initiatives such as the mandated use of SWH in upcoming solar cities and projects such as Solar Payback can go a long way in developing this market in India.