Narendra Modi hasn’t said much about how he’d govern India if he wins
the general election in May. One thing is clear: he’s signaling a clean
energy revolution to end blackouts and revive economic growth.
The election frontrunner pioneered India’s first
incentives for large-scale solar power in 2009 in sun-baked Gujarat
province a year before Prime Minister Manmohan Singh backed the
technology. Modi also shook up utilities, giving his state uninterrupted
electricity supplies, a rarity in India.
India for years has sought to modernize its ramshackle
utilities and end power shortages that cripple industry. Swooping in by
helicopter to open India’s biggest photovoltaic plant, Modi called for
more environment-friendly ways to power the economy. The solar program
in his home state lured investment from Essar Group controlled by the
billionaire brothers Shashikant and Ravikant Ruia, and SunEdison Inc.,
backed by New York-based BlackRock Inc.
While Modi “could enable the speedy deployment of
renewables by faster decision making,” it remains unclear if he would
boost the industry’s scale, said Madhavan Nampoothiri, founder of
Chennai-based RESolve Energy Consultants, citing a slowdown of new solar
projects in Modi’s home state.
India has suffered a power deficit every year since at
least 1984. Increasingly, the shortfall is hampering efforts to combat
slower economic growth and Asia’s fastest inflation. The consumer-price
index rose 8.1 percent in February from a year earlier, the Statistics
Ministry in New Delhi said yesterday.
Power Deficit
More than 400 million people lack electricity. Power
retailers were behind on 155 billion rupees ($2.5 billion) of payments
to their suppliers as of Jan. 31, reducing their ability to provide
electricity to customers. Blackouts may spread as state utilities in
Delhi, Haryana and Maharashtra slash consumer bills in a populist wave
before elections. That’s jeopardizing a $31 billion government bailout
of the industry, which requires companies to boost rates.
“The power sector needs tough politics, and the only
person in politics today who might be capable of that kind of toughness
is Modi,” said S.L. Rao, the head of India’s central electricity
regulator from 1998 to 2001, according to his website. The utility
industry “has reached a stage where either we change the whole system
quickly or it will collapse.”
Rao, who was appointed to the regulatory body by an independent committee, said he maintains no political affiliation.
Manifesto Awaited
Modi, 63, is the chief minister of Gujarat. He and his
Bharatiya Janata Party haven’t yet published an election manifesto. At
the same time, he’s indicated he wants to reduce India’s dependence on
coal, which generates 68 percent of electricity. The fossil fuel is
supplied by state monopoly Coal India Ltd. at a 44 percent discount to
global prices.
“We have to focus on generating more power from our
abundant renewable energy resources,” Modi declared at a rally for
10,000 supporters in central Madhya Pradesh state on Feb. 26. “The time
has arrived for a saffron revolution, and the color of energy is
saffron.”
Invoking the three colors of the Indian flag, Modi
pledged an energy overhaul that would rival the so-called green and
white revolutions in the 1900s. Those turned India into a major
agricultural exporter and the world’s top milk producer.
Modi’s View
“God has showered our country with an abundance
of renewable energy,” Modi told the crowd of poppy-seed farmers gathered
near a sea of reflective solar panels. “If these renewable resources
were exploited properly, we wouldn’t have required mining coal or
spending so much on importing crude and petroleum products.”
He blamed Singh’s Congress party for presiding over a
“country grappling in darkness.” He didn’t give details about his own
policy. Opinion polls indicate Modi’s Hindu nationalist BJP will get the
most seats as voters punish the ruling Congress party for the nation’s
economic slump. While Modi’s early backing of solar helped make
Gujarat home to about 40 percent of India’s solar capacity, it also
meant the state’s utilities signed contracts with developers at tariffs
double prevailing rates before the technology’s costs plunged. His
government hasn’t awarded any new solar projects in more than three
years.
Industry executives believe Modi will act in favor of
solar. “If Mr. Modi becomes prime minister, he has already articulated
his wind and solar vision,” said Vineet Mittal, managing director of
Welspun Energy Ltd., owner of the plant where Modi spoke. “I wouldn’t be
surprised if he came out with a 200,000-megawatt target by 2025,” about
10 times Singh’s goal, though he said Congress would back renewables
too.
Plunging Prices
For his part, Singh has spurred a 44-fold expansion in
solar installations. India has 2,444 megawatts of sun power capacity,
up from practically nothing in 2009. It’s forecast to be the
sixth-largest market this year, behind China, Japan, the U.S., Germany
and Italy, Bloomberg New Energy Finance estimates. Singh’s administration intends to more than triple
India’s solar capacity to 10,000 megawatts by 2017, enough for about 40
million Indian homes. It wants photovoltaics working as cheaply as coal
by 2022. It’s on track to surpass those goals five years earlier than
expected, aided by a plunge in solar prices and higher costs for oil,
gas and coal, according to Tarun Kapoor, the joint secretary at the
Ministry of New and Renewable Energy.
“Modi has been talking of his big ideas during rallies
across the country, but he has been very, very frugal with specifics,”
said Satish Misra, senior fellow at the Observer Research Foundation
think tank in New Delhi, raising doubts about his ability to deliver in
an industry where state administrations hold more sway than the central
government.
States’ Role
India’s power grid is controlled by the states. Local
governments ensure free or below-cost electricity to farmers while
buying it from generators using ever increasing debt. Modi tackled the issue in Gujarat by splitting
electricity for agriculture from the rest of the market. Farmers get
cheap power for only a few hours a day. Uninterrupted supply is
guaranteed to paying businesses, households and industries.
Gujarat’s distribution utilities are the only ones
with an A-plus rating from the Ministry of Power and its one of only two
states that didn’t suffer a power deficit in the 10 months to February,
according to Central Electricity Authority data. “The renewable sector is very much driven by state
chief ministers more than the central government,” Sumant Sinha, chief
executive officer of Goldman Sachs Group Inc.’s ReNew Power Ventures
Pvt., said in an interview. “Even if the central government gives the
right policies, when it doesn’t flow down, it’s a problem.”
Copyright 2014 Bloomberg
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