Uttarakhand Strives to Drive Solar via ‘Self-Employment,’ but Challenges Remain
The policy may be tweaked to approve larger solar capacities
Uttarakhand is a hilly state with limited solar installations and primarily depends on hydroelectric projects for its power needs. However, the state has recently started attempting to move towards a more reliable and sustainable solution to meet its energy demands in light of resistance from the communities towards new hydroelectric projects.
The cornerstone of Uttarakhand’s approach to widening the adoption of solar is “self-employment.”
The state government has launched two programs with the intention of providing self-employment opportunities to enterprising youth, migrants, and farmers to meet the requirements of energy in rural areas through the development of alternative energy sources.
The first program is “Solar Farming,” launched to provide self-employment in hilly areas and generate clean power. The minimum capacity under this program is 100 kW, and the maximum is 500 kW.
The policy is reserved for only permanent residents of the state, and at present, the cumulative installed capacity under the program is 295.40 MW. Another 167.25 MW is under development.
The second one is the Mukhyamantri Saurya Swarojgar Yojana (MSSY). Launched in 2020, projects under this program will have a capacity of up to 25 kW to be developed on land owned by farmers or land acquired on lease.
The projects can be installed within the aerial distance of 300 meters in hilly areas and 100 meters in plain areas from transformers of capacity above 25 kVA of Uttarakhand Power Corporation.
Roughly 3 MW plus capacity under this program has been installed.
State officials told Mercom a plan was adopted to install small-scale projects in larger numbers in a distributed manner so that it could cohesively perform like a larger megawatt-scale project.
This was done primarily because of the hilly terrain where only smaller capacity projects are feasible. The program began with onboarding 200 farmers who would install solar projects on their land and sell the generated electricity to the government.
Some job opportunities generated via these projects include electricians, solar panel cleaners, and security guards.
Developers have welcomed these initiatives and believe that Uttarakhand would no longer have to rely on power from outside the state once the program successfully takes off.
Rakesh Nandan Singhal, a solar farmer, said, “The government has made a deal with us…the government will procure the power we generate for two years at a predetermined rate. Unemployed locals get jobs in the process.”
Singhal added that power consumption is growing, and generation must meet the demand. Solar, he contended, was a viable option since it does not require many resources once a project is set up.
Project execution unsatisfactory
While these unique programs have been in place for some time, their execution on the ground has not been satisfactory.
Farmers who have set up projects said that solar farming is yet to become their primary mode of income, and people continue with other businesses to make ends meet.
Logistics, lack of skilled workforce, and land availability are some challenges for the programs to gain traction.
Stakeholders say no training has been imparted, and farmers often pick up the skills on their own and execute the projects.
Also, some areas do not have the benefit of adequate sunshine. Adding to the problem are the installation and commissioning charges which are 30-40% higher than in the plains.
Farmers also find it challenging to access collateral-free loans.
Transportation cost is also a constraint because equipment like solar panels can only be transported manually in some regions.
Developers say the terrain is a major hindrance and, unlike other states, is unsuitable for large-scale installations.
The power generation has been lower than what the government said they could expect.
Vendors adversely impacted
Uttarakhand has an installed solar capacity of about 500 MW as of the fourth quarter of 2022.
Developers say their profits are adversely impacted.
Anjan Chatterjee, Chief Technical and Financial Officer of Aasna Urja India, said, “There is a difference in the price of setting up a solar power project now and a couple of years ago. So we are just reducing our profit margin to keep the installations going.”
The installation cost has significantly increased because the prices of raw materials have soared. The panel, inverter, and cable prices have surged by at least 30%.
While the costs have increased, subsidies remain the same.
More importantly, developers have not received subsidies for the last year and a half from the Ministry of New and Renewable Energy, resulting in further financial distress for solar vendors.
Ideally, 30% of the capital investment should be received as a subsidy.
Himanshu Bhatt, Manager at Social Engineers, a project developer, said, “People lack awareness and are reluctant to make the initial investment. However, if you invest in good-quality modules, there is no doubt you will make a profit and can get a return of up to 18%.”
But government agencies are not as aggressive as the ones in states like Gujarat, Rajasthan, and Madhya Pradesh.
Vendors complain that if there were no delays, more projects would have come up.
Government officials said execution has not been satisfactory because the Covid-19 pandemic slowed their progress, and the imposition of basic customs duty also impacted them. But projects were slowly gaining momentum.
Course correction likely
Since the policy did not reap the desired benefits, the programs are in the process of being tweaked.
Uttarakhand Renewable Energy Development Agency (UREDA) officials said efforts are being made to integrate the central and state subsidies in a proportion of 30:50 to give a subsidy benefit of 70-80%. This would bring down the installation costs.
Vinod Kumar, Senior Energy Consultant at UREDA, said, “The program has not progressed much because of weather and installation charges. Talks are on to modify the program targeting larger capacities. We have proposed 100-200 kW and are waiting to see how much of it is approved.”
Nishant Singhal, the founder of S&S Energy Systems, another developer, said, “The program is especially beneficial to people who are coming back from other parts of India after Covid. However, the policy needs revision because it allows only 20-25 kW capacity projects which cost around ₹1.3-1.4 million (~15,760-16,972) and generate a profit of roughly ₹5,000-6,000 (~$60-72) per month which is not good enough. Now the suggestion is to increase the capacity up to 200 kW. We believe this will be more viable.”
The Uttarakhand government has released a draft solar policy that targets 2,000 MW of installed solar capacity. It plans to boost the proportion of solar power in power distribution companies’ (DISCOMs) energy purchases to 18% by 2028.
The policy is yet to be approved.
On-ground developers, as well as project owners, said there is often no clarity in policies.
Pooran Arya, Senior Assistant at UREDA, said, “The target is achievable. But there are challenges as well… in some places, transformers won’t be available, or there will be land issues. The climate is also a problem.”
While the policy initiatives have potential, the execution has not been successful on the ground. A revision of the programs is in the offing, and developers, project owners, and officials expect faster solar adoption in the state.