India’s Transition to a solar-powered future: Part 2

Source: UN

In our 2-part blog series on solar energy, we dive deep into the future of energy, and the large opportunity to make India a nation fuelled by Solar energy, given its widespread availability and significantly reduced costs.

In Part 1 of the series, we covered challenges and opportunities that exist across the plant setup and generation steps of the solar energy value chain.

In this part, we aim to cover ground on what makes up the rest of the energy value chain: distribution, consumer utilization and asset afterlife management. These components are key to increasing adoption of different sources of renewable energy, as they can impact tariffs and overall energy demand.

As we decarbonize energy, the grid faces a three-pronged problem:

• Energy consumption will rapidly increase as we electrify mobility, heating, and industry.
• Renewable energy supply is intermittent in nature and not generated 24*7
• Energy production will become decentralized, hence matching energy supply and demand as well as minimizing conversion losses will pose a problem

Grid of the future (Source: Energy Atlas 2018)

These problems can be further visualized from the lens of the value chain components:

3. Transmission and Distribution (T&D)

Challenges

• Inefficiency in Transmission: Transmission refers to movement of power over large distances. Transmission cables are made of limited efficiency ACSR (aluminum conductor, steel reinforced) and these materials haven’t seen much innovation / improvements over the last 100yrs.
• Distribution losses and lack of grid resiliency: Distribution refers to electricity supply over a short regional area. India’s T&D losses are ~20%, almost two times that of the world average — due to primitive technology. The current grid design is primitive and based on the earlier electricity consumption levels. Fast forward to today, consumption is expected surge exponentially as we switch to EVs and our demand for heating and cooling solutions goes up. The grid needs to be redesigned to accommodate the increasing consumption and reduce distribution losses.
• Lack of digitization of grid: The grid will have to become interconnected as it becomes decentralized. Currently in the Indian context, there is a lack of data visibility at the distribution level, and as a result, discoms cannot plan ahead around demand as per forecast of peaks and generation shortages. This is due to lack of digital metering infrastructure which can dynamically provide updates about demand, and a data layer on top of it which is easily accessible by all utilities, discoms and energy marketplaces.
• Lack of energy storage: As we had discussed in the last part, energy storage is key to unlocking renewable energy access. Currently, the grid only matches demand and supply, as coal power can be generated 24x7, as per demand. Renewable energy is intermittent, causing a mismatch between demand peak and generation peak. This will require energy to be stored in advance, and be dispatched when required. Along with this, distributed generation will mean millions of small decentralized producing units which generate energy at different frequencies, which will have to be synced to avoid frequency regulation problems at a grid level. Energy storage is required to stabilize and balance the overall grid.

Opportunities

• We believe advanced materials will have to be developed for manufacturing more efficient transmission cables, resulting in increased grid capacity as larger amounts of power is carried per unit of cable length.
• Digitalization of the grid will happen and change the way we use electricity. The stakeholders will become connected via Smart metering infrastructure, and platforms will emerge for analyzing energy consumption and sharing data across multiple touchpoints in the flow of electricity. This will help the discoms and utilities forecast the demand and budget supply accordingly, and reduce power outages. A digital layer can also enable free flow of energy from any producer to any consumer, hence eliminating waste of surplus energy production and improving utilization of installed renewable capacity. As the grid becomes “smart”, improved visibility can enable better planning.
• Demand response aggregators will bundle flexible demand consumers and provide them as a pool to discoms/utilities. These pools will help in peak shaving as they will be able to shift their demand to non-peak times and similarly can also consume more when excess energy is available. In India, the time of day (ToD) tariffs is a relatively newer concept, but will prove to be very effective in shifting peak loads in the longer run. Globally, numerous vertical services have also emerged which intelligently manages and shifts non-essential consumption like EV charging can happen when fare is lowest at the night shifting demand to non-peak hours. We expect to see a similar trend in India when ToD tariffs become ubiquitous.
• As we had elaborated in part 1, storage will be a mix of long duration energy storage(LDES) and short duration energy storage(SDES). LDES will be useful for catering to seasonal fluctuations and supply for long outages whereas SDES will be helpful for peak load shaving and frequency regulation.

4. Consumer utilization

Challenges

• Low data analytics on energy consumption: Since ages, electricity consumption is aggregated at a monthly level and analysis of consumption behavior is limited. Fluctuations that can flag nuances like abnormal consumption at a device level, energy leakages etc. are not captured, resulting in unoptimized consumption. Research shows that energy use in buildings results in 17.5% of global emissions and energy use in industry contributes to another 24.2%. Hence, it becomes imperative to optimize energy usage from the end consumer.
• Loss in DC/AC conversions of decentralized production: Alternating Current (AC) electricity has reduced transmission losses and is easier in terms of voltage control by transformers. Accordingly, the Grid transports electricity as AC, and electronics which internally work on low power DC are conventionally adapted to use AC through external adaptors. On the other hand, solar PV panels produce DC power, which has to be converted to AC for being used by appliances or for transmitting energy back to the grid. This is done using an inverter which results in conversion losses. Even good quality converters / inverters result in 10–15% losses which get further amplified by losses in AC to DC conversion at an electronic appliance level.

Opportunities

• IOT solutions are already being used in industries to optimize consumption from HVAC systems, lights and other appliances. We believe similar hardware solutions, which will help consumers track energy consumption in real time and get intelligent insights to optimize demand, will become prevalent in residential and commercial buildings as well. They would also enable visibility into dynamic tariffs and help with shifting non-essential demand to non-peak, cheaper tariff hours.
• Remote areas which lack access to the grid can be installed with DC appliances and DC wiring systems for directly consuming DC power from distributed energy resources. This will help reduce power consumption, as DC variants consume ~50% less energy compared to their AC counterparts. It will also prevent conversion losses and provide more energy to energy-poor areas.

5. Asset Afterlife

Challenges

• High costs of recycling: Solar panels have a large lifespan of ~25 years. Previously installed panels will reach their end-of-life in the coming years and we will soon be faced with large volumes of solar panel waste. Currently, recycling costs are at ~$20–30 against landfill dumping costs of $1–2, which makes the practice of dumping popular, even though solar panel component metals like cadmium, tellurium leak into surroundings when dumped.
• Recycling solar panels is also a trade-off between cost and material recovery. Glass occupies ~76% of the weight of solar panels but amounts to only 4% of value. Recovery of precious and high value metals requires chemical and thermal processes which are costly and difficult to scale. Easy-to-scale mechanical recycling processes are not able to extract pure metals, and hence lose relevance. The cost increases exponentially for higher purities of precious metals extracted, while the shrinking precious metal content in developing PV technology further impacts the unit economics of the recycling process.
• Finally, there is limited second-life use of refurbished cells, as the price gap between new solar cells and refurbished ones is minimal.

Opportunities

• The IEA estimates that the market value of raw materials recovered from solar panels could reach $450 million by 2030 — approximately the same as would be required to build 60 million new solar panels or to generate 18 GW of electricity. The value of recoverable materials might surpass $15 billion by 2050, which would be enough to power 630 GW.
• Similar to the innovation happening in battery recycling, we expect cost-effective, scalable processes to emerge in solar panel recycling. Battery recycling is becoming decentralized, with black mass production taking place closer to waste generation and metal extraction being done centrally. We expect solar recycling to also scale in a similar fashion, with higher purity of metal extraction. In addition to this, innovative models will emerge around use of damaged/refurbished cells for making cheaper panels or for use in ancillary applications.

Solar Energy Sector Map

The Indian climate-tech landscape has evolved to create technology-led solutions for the challenges we discussed in part 1 and 2. We expect plethora of startups scaling up similar to global counterparts across the value chain. Here’s a brief snapshot of the activity taking place in the sector.

Startups across the Solar energy value chain

At Avaana Capital, we believe that technology and innovation will help address these difficult trade-offs and develop solutions-at-scale, to enable this transition to a renewable future. We are thrilled to partner with disruptive technologies in the energy sector and would be delighted to discuss more — please reach out to us at info@avaanacapital.com if you’re building in the space.