Illusions of cheap solar


    Policy makersmust offer a clearer set of regulations on solar for Nepali consumers to benefit from the significant reductions in the costs of solar power being achieved elsewhere

    Nepal’s social media fondly refers to Kulman Ghising as the “God of Light.” Ghising is the Managing Director of Nepal Electricity Authority (NEA), the monopoly state owned utility. He is widely credited for leadership in ending load shedding (forced blackouts).

    At an interaction program for solar net-metering hosted by Energy Development Council (EDC), the main presenter Ashish Chalise, Chief Executive Officer of Saral Urja Nepal, an energy services company, reminded Ghising that in Hindu culture the “God of Light” was Surya Bhagwan (Sun God).

    Chalise was attempting to draw Ghising into accelerating NEA’s initiative on solar net metering. Like all Gods that are felicitated, Ghising remained stoically unmoved allowing himself only a faint smile at the corner of his lips.

    The discussion that followed provided for heavenly reflections.

    Heaven and earth 

    Solar net metering is the process by which electricity consumers can feed their excess solar generation [generation they don’t consume] into the grid to offset consumption from the grid. It is like paying an advance and drawing against it.

    Ghising remarked that NEA was keen to integrate solar energy and other forms of non-hydro generation within its generation mix. Thus far, NEA has signed power purchase agreements with 18 MW of solar power plants. The utility remains open to signing more power purchase agreements, he said.

    Ghising’s remarks weren’t specifically on solar net metering. The 18 MW of power purchase he referenced was for larger utility scale solar power plants.

    Ghising explained that NEA was seeking to capitalize on the rapid decline in solar module prices. NEA’s first solar tender resulted in prices of NPR 9.5 per unit. Following that NEA and the Ministry of Energy, Water Resource and Irrigation (MoEWRI) conducted a study and concluded that NPR 7.3 per unit would be a more appropriate power purchase tariff for solar.

    There was pressure to keep prices low, Ghising reiterated, encouraging solar developers to do more to reduce prices further.

    A reporter from a business daily at the event quickly seized on this theme.

    “If auctions for solar power in India were producing INR 2.4 (NPR 3.84) per unit, why was NEA offering such high-prices at NPR 7.3 per unit,” he demanded to know.

    Solar developers fired back saying those prices were unsustainable, to which there were other counter claims of solar enterprises being thugs, to which there were even more counter claims and so on and so forth. A perfectly sensible discussion about the promise, potential and need for solar net metering rapidly degenerated into a hopeless distraction about costs, thus providing a stark reminder for why it is that gods live in heaven and human beings on earth.

    From the heavens above, Sun God was probably looking down at us struck by the irony of the situation.

    Without having installed a single MW of large scale solar plant, Nepal was already working towards reducing the costs of solar energy. It was a bit like preparing to get a baby to win gold in the 100 meters sprint at the Olympics when the baby hadn’t even taken its first step, or in Nepal’s specific case, the baby hadn’t even been born.

    Stairway to heaven

    Solar in Nepal is currently in the process of a reincarnation. In the era of load shedding, solar was largely regarded as what you used to charge your batteries. When load shedding ended, the need for solar died.

    It is only in Nepal that solar has now been reborn as an alternative generation source that can integrate into the grid and provide a diversified source of supply. In the rest of the world, where sharp decline in solar prices have been recorded, solar had always been about integrating with the grid.

    The decline in solar costs is not merely because of the fall in module prices. It is also because solar has been nurtured and enabled within reliable electricity grids where there are no, or negligible, blackouts, voltage is stable and overall power quality is high. For Nepal that is now trying to kickstart and catch up with the advances in solar, it is a tragic mistake to build a policy to promote solar motivated primarily by cost reductions in module prices.

    Such a policy would be like using the low international ocean shipping costs to infer the cost of transport between Birgunj and Kathmandu. If we had an ocean between Birgunj and Kathmandu, that would have been relevant. Modules are one part of the puzzle, but it needs many other things to work—most importantly, a stable reliable grid.

    NEA has yet to release a convincing study that documents the capability of the grid to absorb the intermittency of solar. NEA has yet to issue clear guidelines and procedural steps for net metering. Government has yet to release a clear policy on the process for solar plant development. Financial institutions have yet to finance a single MW of solar. Nepali engineers have yet to design and install a single large solar plant.

    Without even the basics in place, the dedicated focus on bringing down the cost of solar energy is bit like trying to find the stairway to heaven. In case you are still searching: the stairway to heaven doesn’t exist. It is an illusion.

    Only way to heaven

    Solar module prices have dropped rapidly over the last few years, 20 percent alone since 2017. Auctions for solar power in India have resulted in eye-popping low prices, like the ones the reporter quoted. Solar prices are now regularly beating the price of electricity from other conventional sources.

    Nepali consumers must benefit from this. But how should policies balance the need to achieve low costs while also getting things started?

    Clearer processes, rules and regulations. Take India’s story as an example. Prior to launching those solar auctions, India spent considerable time establishing the regulatory, policy and structural framework for solar. It established a separate power trading company to buy solar power and comingle it with other generation sources. Once it got a critical mass of rules in place, there was an unrelenting commitment to using auctions and open markets. Their markets have delivered. The reporter that was in awe of India’s prices should have asked why it is that Nepal hasn’t gotten its process on solar clear yet.

    Nepal’s processes for solar power are a mess. It has been copied from whatever applied to hydro with a search, find and replace of ‘hydro’ to ‘solar.’ The resulting policy framework doesn’t work.

    Low prices on solar power, like the ones being observed in India, are achievable in Nepal. But for that, Nepal’s policy makers must offer a clear set of rules, policies and guidelines on solar and then let markets do its work.

    There is only one way to get to heaven: you must first die. You cannot have someone else die and you get to heaven. It is the same with solar. The cost reductions in the rest of the world are achievable in Nepal only if we first fulfil our own Karma (responsibilities).