Interview with Dr Ajay Mathur

“Renewable electricity and hydrogen will be the future engines of growth”

A coalition of nations working together to promote solar power uptake and address their energy needs, the International Solar Alliance (ISA) has come a long way since its inception in 2015. With 95 signatories and more on the way, the ISA has been making tremendous efforts to scale up solar power development across the globe by facilitating capacity building, access to finance, and pilot development, and enabling long-term visibility. In an exclusive interview with Renewable Watch, Dr Ajay Mathur, Director General, ISA, gives his perspective on the evolving global energy landscape and the critical role of solar power, energy storage and green hydrogen. He highlights the ISA’s experience in promoting solar power uptake across its member nations, its focus areas, and his vision for the ISA.

What is your perspective on the global solar power sector before and after Covid-19? What kind of changes are you expecting in the future?

Round-the-clock (RTC) renewable electricity will soon become competitive with fossil fuel-based power. This is expected to happen across all geographies between 2022 and 2030. However, going forward, this must become the default strategy or priority as far as energy supply is concerned – whether for political decision-making or, more importantly, financial decision-making.

This will have huge implications, especially in terms of the new capacity to be added in every developing country, as that will be based on renewables and not fossil fuels. Meanwhile, in developed countries, it will become much more viable to shift from fossil fuels to renewable energy. Further, the rate of energy transition will be

completely dependent on the investments in these projects. Various countries have set very ambitious clean energy targets and to meet these goals, it is important that grid parity of RTC renewables is achieved within the next few years.

In the wake of the global pandemic the ISA launched “ISA Cares”, an initiative dedicated to the deployment of solar energy in the healthcare sector in Least Developed Countries (LDCs) and Small Island Developing States (SIDS) that are ISA member countries. We believe that solar in healthcare is now more important than ever. If we look at the range of medical interventions made recently, not limited to Covid vaccines, they have reiterated the importance of having proper cold chain facilities. In most developing countries, the problem with maintaining a cold chain in rural areas is the lack of reliable electricity. Solar can help bridge that gap as the power from solar plus battery is cheaper than that from diesel gensets.

What is the current ISA membership and what are the targets for this year?

95 countries have signed the ISA framework agreement, while 77 countries have signed and ratified the same. However, this number is changing by the day. For calendar year 2021, we would prefer to take the number of countries that have ratified over 90, and the number of countries that have signed over 100. Thus, our focus is more on ratification.

What are the ISA’s focus areas for the future?

The ISA is working towards making solar power, and renewables in total, a political priority for energy supply. For this, countries need to take advantage of daily learnings. In the solar power space, there are new technologies, sources of investments and prices being discovered every day. So, our first focus area is knowledge sharing and bringing out an annual publication on advancements in solar technology, investments and markets. Thus, if a country or a company wants to invest in solar power, it can do so based on today’s learnings.

In addition, it is vital to make extensive volumes of funds and human capital available for solar power development. This human capacity is not just limited to designing solar plants, but also includes policymakers and regulators, as well as bankers. So, we are looking at capacity building across the entire value chain. We have witnessed that capacity building is becoming a priority for financial agencies as well. In a solar power plant, there is a greater initial cost, while operating costs are almost nil. Thus, solar investments are far more vulnerable to the cost of capital, and it is important that we make cheaper money available in every part of the world.

The last thing that the ISA is focusing on is helping LDCs and SIDS in making the first project happen. This is not just for the sake of setting up a project, but also to get policies and processes to change, and to scale up project development. Thus, these projects act as agents of change to bring in money, build up human capacity, bring in technology and create the required supply chain. On the other hand, users in these countries start getting the benefit of locally sourced and produced electricity that is cheaper than fossil fuel-based power.

What has been the ISA’s experience regarding financing of solar projects? What can be done to ease access to affordable finance across ISA member nations?

There are two kinds of problems with solar financing. One, investors have uncertainty regarding returns, and two, the small scale of projects in many regions. Thus, the ISA is focusing on easing access to affordable financing in these specific regions. Project implementation and demonstration, along with the creation of policy support, provide long-term visibility to investors.

Since capital is invested for 25 years, the ISA is working on the creation of a blended finance risk facility that will reduce the cost of capital, enhance capital flows in various countries and facilitate capacity building. The issue is that there are three funding sources – investments from banks, risk management funding from multilateral and bilateral organisations, and readiness support from philanthropic organisations. The ISA wants to enable greater coordination and collaboration amongst these three types of financiers, especially for implementing solar projects in LDCs and SIDS.

Thus, the first step is to assess the current challenges and identify the level of effort required in terms of easing access to affordable financing. This would help us understand the real world global financing issues.

What role do you expect green hydrogen to play in the near future?

Two kinds of fuel, renewable electricity and hydrogen, will be the future engines of growth. While biomass, or nuclear, or even thermal, will surely be used, energy economies will largely depend on renewable electricity and hydrogen. Presently, hydrogen use is limited to the fertiliser industry and refineries, where it is produced from gas. This hydrogen costs around $2 per kg.

There are two challenges in scaling up green hydrogen use. The first challenge is identifying a range of other sectors where hydrogen can be viably used. For instance, by 2030, the steel industry will become the single largest industrial end-user of energy in India, and hydrogen can be a suitable carbon-free solution for meeting these intensive energy requirements.

While in the short term it does not matter where the hydrogen comes from, whether coal or gas, in the longer term it must come from the splitting of water using renewable electricity. The second challenge is that the current cost of producing this green hydrogen is about $5 per kg, and to compete with gas-based hydrogen, it must come down to $2 per kg. To scale up green hydrogen, both challenges need to be addressed in parallel.

Could you highlight some of the key policy gaps that exist in solar power uptake in most countries?

The greatest challenge is the integration of variable renewables, whether solar or wind, into the grid and ensuring grid stability. Thus, energy storage – pumped storage, battery storage or any other kind – assumes a critical role. Going forward, these storage facilities should be used as buyers of electricity during the day and sellers of electricity at other times, when renewables are unavailable. Further, to establish a proper balance between renewables and the grid, interconnection of various grids is important. This will enable export of surplus renewable electricity and import of hydro or other forms of power for meeting energy requirements when there is a shortfall.

How is the role of the ISA likely to evolve in the coming years?

The most important role of the ISA is supporting countries in addressing the challenges that restrict solar power uptake and to accelerate solarisation. Thus, the ISA is helping countries formulate enabling policies, develop pilots, facilitate financing, and enhance capacity building so that they may rapidly scale up solar power projects.

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