THE need to generate power from renewable sources of energy is being increasingly emphasised due to growing awareness about climate change. V Subramanian, secretary in the ministry of new and renewable energy, feels the cost of solar power generation would come down over time due to technological improvements. Subsidy to producers of solar power is inevitable at this juncture, he told G Ganapathy Subramaniamin an interview. Excerpts. Why should the government subsidise solar power? The estimated cost of generating solar power is around Rs 15 per kilowatt hour (KWh). This is the cost of supplying photovoltaic power to the grid, without involving any batteries for storage. Since the unit cost of power generated through conventional sources is far lower and the cost at which power is bought by state electricity boards is cheaper, the government has decided to subsidise solar power generation. The incentive is up to Rs 12 per Kwh for electricity generated from solar photovoltaic and a maximum of Rs 10 per Kwh for electricity generated through solar thermal power plants. We need to provide subsidy in order to encourage generation of clean energy. This subsidy is only for power supplied to the grid. It is not applicable for any private supply or captive use. The subsidy component would go down over a period of time. How will the subsidy, once awarded, go down? The initial cost of solar photovoltaic systems is high because raw materials like silicon wafers are imported. We expect costs to come down over a period of time due to advances in technology. In the next four to five years, we expect conversion efficiency of solar power plants to improve to 18% as compared to 14% or 16% now. The industry, on its part, is trying to reduce consumption of silicon wafers. As a result of these measures, cost of solar cells and modules should come down by about 33%. Therefore, the subsidy component can be reduced over a period of time. There is a built-in provision to bring down maximum subsidies by 5% each year for capacities commissioned from 2010-11 onwards if the current programme is not reviewed in 2009-10. Do you believe the subsidy offer would attract a large number of investors? As much as 97% of the power generation capacity based on renewable energy is built on the strength of incentives and government policies. This includes wind energy, power from waste, bagasse co-generation and biomass conversion programmes. For the sake of clean energy, incentives have been provided. We are confident of the solar power scheme since it is a direct, upfront subsidy. The programme would be implemented through IREDA and there is no chance of bureaucratic red tape coming in the way of the delivery system. State electricity boards will not feel any disincentive since they are buying power at commercial rates, similar to what is paid to other electricity producers. Moreover, we are also providing state electricity boards with an incentive of 10 paise per unit sourced from solar power generation. How much progress have we made in generating renewable energy? By the end of 2007, installed capacity of solar photovoltaic systems in the country has increased to 125 MW in various applications like lighting, rural telecom and offshore oilwell-head platforms. We have street lighting systems, lanterns, home lighting and pumping systems run on solar power, apart from stand-alone units. Installed capacity in the case of wind energy has increased to 7,092 MW, followed by 1,975 MW in the case of small hydro projects, 615 MW in the case of bagasse co-generation, and 524 MW in the case of biomass conversion. In the short-tomedium term, we can generate more power from renewable sources as compared to nuclear power. We have set the ball rolling with the subsidy scheme for solar power and the initial response is very positive. There are people who do not want their investments restricted to 50 MW, but we have kept in mind the need to keep the window open for opportunities from various parts of the country. Can we quantify the projected benefits from the subsidy for solar projects? Every solar plant with 1 MW capacity would produce 2 million KW of electricity, taking care of 5,000 families if we go by the government's commitment of providing at least 1 KW of power to each rural household. Apart from this, each of these plants would create 25 to 40 jobs directly and another 400 indirectly.