How are solar parks aiding development in India?

This post first appeared on the World Bank’s Sustainable Energy for All Blog. 

Once upon a time, there was a little boy named Bala who was born in a small village in Pavagada Taluk, Karnataka, where, agriculture was the main source of income—much like in many other villages in India. But as he grew up, he saw most of his friends choosing to move to cities, because scant rainfall had made it impossible to pursue agriculture and make enough money to make ends meet at home. Village elders turned to superstition to explain the phenomenon, while others blamed climate change for the drop in rainfall. Eventually, Bala also moved to the city of Bangalore, but always dreamed of bringing prosperity back to his village.

Looks like Bala’s dream will come true in 2016. Early next year, India’s Prime Minister Narendra Modi will break ground for one of the largest solar parks (2 GW) in the world—in Pavagada Taluk.

That’s a true story. The little boy in it is GV Balram, Managing director of Karnataka Renewable Energy Development Limited (KREDL), the man behind the Pavagada solar park. Villagers in Pavagada Taluk are proud of him and share this story with everybody involved in the solar park project.

Engaging local farmers was key to Bala’s dream

Land is key to building solar parks. But in a densely populated country like India, large swathes of land that can be used for this purpose have been tough to come by. But Balram, having grown up in a village, had a different perspective on this compared to other solar entrepreneurs. He knew that farmers are typically emotionally attached to their land. So, instead of land acquisition or transfer, Balram gave farmers the option of leasing out their land for 25-35 years. Given how farmers have suffered little due to no crop yield in recent years due to low rainfall, the land lease model, farmers could help them earn nearly $300 per acre/year and still have the land stay in their names. From impoverished farmers to wealthier ones, currently, more than 2,000 farmers are in the process of signing leases for around 10,000 acres of land.

Balram does not want to stop at just land lease payments to farmers. He is motivating local farmers to create a cooperative, which will provide basic health, education and other livelihood services to residents of Pavagada village. He also has plans to offer jobs to local villagers inside the solar park. He also plans to keep two percent of the cost of the solar park project towards the social development of Pavagada.

Why are solar parks a good idea?

Solar parks follow a “plug and play” model for potential investors, by designating and developing one or more blocks of land as a concentrated zone for solar development. Individual solar plants will share common infrastructure like power evacuation and roads, reducing costs. The major interest in these concentrated hubs have been due to their ability to achieve economies of scale by developing shared infrastructure facilities for each business located in the zone. Moreover they reduce unforeseen risks for investors by acting as a single window clearance agency and providing certainty with respect to investment and relevant policy, regulatory and incentive frameworks.

With around 300 days of sunshine every year, India has among the best conditions in the world to harness solar energy. However, the steep up-front costs of solar projects, high borrowing costs and lack of access to long-term capital have stalled solar energy growth. Now, the government has set a target of 100 GW of solar by 2022, of which 20 GW is for solar parks.

KREDL is partnering with the World Bank and others to understand best practices globally and to reduce the cost of financing for shared infrastructure inside the solar park. If all goes well, the Pavagada solar park will be the first worldwide with a capacity of more than 1 GW, putting Pavagada on the world map. The Asia Sustainable and Alternative Energy Program (ASTAE), which is a trust fund program, financed a grant for the World Bank team in preparing the groundwork to develop its own lending to the Pavagada Solar Park and a similar project elsewhere in India. ASTAE support has been crucial in allowing the Bank to develop templates for required financial management and procurement actions, as well as the environmental and social screening actions that all solar parks will have to follow if they wish to be sustainable and well managed. It has also helped the World Bank communicate international best practices to the Indian team gearing to implement the solar park.

The climate agreement reached in Paris has given a great deal of legitimacy to pursuing clean energy options for a low-carbon future, moving solar energy from the fringe to the mainstream of national debates on energy policy. India, like Morocco, Jordan, South Africa and China, for example, is aiming to replace at least part of its fossil-fuel dependent energy requirements through solar energy. Pavagada is a key part of that plan.

Is bigger better?

Concentrating solar power in one location brings economies of scale, but not without operational challenges. Clouds or continuous rainfall over a solar park site can shut it down for days. Although solar energy is free, it is not reliable across different seasons and not fully predictable, which makes it difficult to schedule power across an electricity grid. But this can be managed through storing energy and using other renewable energy technologies (pumped storage hydro, in the case of Karnataka). Powergrid, India’s central transmission utility, is building a green energy corridor (transmission network) to export power from large renewable energy parks to other states in the country which may neither have the land available, nor the solar resources that Karnataka enjoys.

Pavagada Park is a blueprint for how risks associated with large-scale renewable energy projects can be managed. Good planning and cooperation between local communities and the public and private sectors can help transform a remote village into a thriving community. The sprawling fields of solar panels could potentially make it a popular tourist destination.

As of December 2015, electricity supply in Pavagada areas has been generated from natural gas. Once completed, Pavagada Park is expected to reduce carbon dioxide emissions by 20 million tons and save 3.6 million tons of natural gas annually. When I met Balram during a site visit to Pavagada recently, he was accompanied by his son Amit, who is over the moon to see his father’s dream come true.

Publication does not imply endorsement of views by the World Economic Forum.

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Author: Amit Jain is a renewable energy specialist with the World Bank.

Image: Solar panels are seen in India. REUTERS.