Harnessing Solar energy, Options for India

Several studies indicate that it is not the technology or the economics of solar solutions that is
stalling large-scale adoption, but institutional mechanisms. 5,6,7 The issues regarding institutional
framework thus merit a closer examination. Some of these are delineated here and will be stressed
upon repeatedly in this section:
Capital subsidies: They may be vital to promoting large-scale adoption of solar applications
as they currently entail high upfront costs. However, the subsidy structure must be such that
issues like those mentioned here do not lead to government subsides, counteracting the
long-term goal of sustainable practices in a sector. See Table 10 for the demerits of capital
subsidies.
Access to financing: Down payment requirements and high interest rates have been the
major barriers for service providers operating in a commercial mode without government
subsidies.
Customising the operating models with end-user cash flows and needs: Two considerations
while targeting the rural poor are: the nature of their income flows and the value addition
that solar lighting will have on their vocations, livelihoods and lives.
Quality of products: It is of utmost importance to ensure that good quality products are
marketed and a reliable servicing follows sales; else villages will end up as ‘solar trash
yards’. 8,9
Maintenance: One of the major advantages of solar applications is the long life span coupled
with relatively low maintenance requirements. However, it must be emphasised that the
presence of local service centres along with warranty and maintenance contracts are
essential for the success of the projects. Also, batteries typically require replacement after
three to four years. This underscores the need for service centres.
With this background, the extent to which solar technology can contribute to rural energy needs is
estimated. In addition, the relevant institutional framework for different options available is
examined, and changes that could make the framework more effective are suggested.
Table 10: Demerits of Capital Subsidies
Stifling
innovation
If subsidies are tied to specific models, products customised to
end-user needs may not be rewarded.
Market
distortion
Distortion in
technology
choice
Lack of sense of
ownership
A criticism of some of the World Bank-backed projects, for
example, has been the distortion induced by subsidised products
tipping the scales against commercially operating service
providers.*
Considering the costs and insolation requirements of solar
applications, subsidies under the JNNSM must not unduly favour
these vis-à-vis other, perhaps more viable, options such as biomass
or micro-hydro.
End-users might not appreciate the true value of the product if they
do not pay the actual costs. However, this should be balanced with
the users’ ability to pay.
Note: * NCI/Soluz,Inc., Innovation in Rural Energy Delivery, 2006,
http://www.soluzusa.com/documents/NCI-Soluz_Innovation_in_Rural_Energy_Delivery.pdf,
accessed 2 November 2010.
Solar Photovoltaic Applications CSTEP | Page 63