STUDY AND ANALYSIS OF
FINANCIAL AND FISCAL INCENTIVES FOR SOLAR -ENERGY TECHNOLOGIES IN INDIA
by
B. CHANDRASEKAR Centre for Energy Studies
Submitted
in fulfillment of the requirements of the degree of Doctor of Philosophy
to the
Indian Institute of Technology, Delhi
March 2005
CERTIFICATE
This is to certify that the thesis entitled "Study and Analysis of Financial and Fiscal Incentives for Solar Energy Technologies in India" being submitted by Mr. B. Chandrasekar to the Centre for Energy Studies, Indian Institute of Technology, Delhi for the award of the Doctor of Philosophy is a record of bonafidc research carried out by him. He has worked under my guidance and supervision, and has fulfilled the requirements for the submission of this thesis, which to my knowledge has reached the requisite standard. The results contained herein have not been submitted in part or full to any other university, or institute for award of any degree or diploma.
Dr. Tara Chandra Kandpal Professor Center for Energy Studies Indian Institute of technology Delhi Haut Khas, New Delhi 110016 (India)
ACKNOWLEDGMENTS
The idea of doing PhD came to me in 1997, briefly after working in the education planning sector. During the brief period, I had worked on several projects for the Government of India and state governments as well. While, I was searching a topic for research even before getting registered in IITDelhi, the entire plan got firmed up with the enthusiasm, when I met Prof.
S.K.Khanna, former Chairman, All India Council for Technical Education and Prof. K. L.
Chopra, former Director IIT, Kharagpur and discussed the idea of doing research in policy issues of renewable energy. I hope the tremendous learning with this association has been atleast partially reflected through this thesis.
Firstly, I would like to express my deep sense of gratitude to Prof. K.L Chopra for providing me the constant encouragement to make my dream come true. His encouraging words not only during the study period, but wherever I was associated with him have provided Inc as a source of inspiration and a spirit of enthusiasm.
I wish to place on record the support given by my research supervisor Prof. T. C. Kandpal for providing close guidance throughout the research phase and coping with my family sentiments and going though the numerous drafts of my research papers and leading to final shapes. 1-lis encouragements during the periods of my research kept my hormone levels balanced, My deep gratitude to him will stay a long since the idea of doing research in policy in renewable energy sector would not have been possible without his invaluable and enabling multidisciplinary approach to this problem. I am greatly indebted to him for making this thesis a reality to the expectations of my research plan and objectives.
I would place on record my sincere gratitude to Prof. S.C.Mullick, former Head, Centre for Energy Studies, Prof. Avinash Chandra, former Head, Centre for Energy Studies, Prof. T.S.
Bilotti, Centre for Energy Studies, and Prof. M.K.G. Babu, Head, Centre for Energy Studies, for their constant support during the course of my research in the Centre.
not have been possible for me to even contemplate a PhD like this, if I would not have been in Ed.Cil— I extend my sincere gratitude to Dr. Yaj Medury, former Chairman and
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Managing Director, Educational Consultants India Limited (A Government of India Enterprise of the Ministry of Human Resource Development) who has been a motivating personality and who officially approved my idea of doing PhD in the interest of the corporation, where I am presently employed. I am also thankful to my colleagues in Ed.CIL who have been directly or indirectly a motivating factor during my research phase.
One part of the thesis related to survey based assessment of renewable energy technology, I disseminated a questionnaire to the Ministry, NGOs, internationally funded institutions and universities and educational institutions. I am thankful to all of them who responded to my questionnaire from Ministry of Non conventional Energy Sources, Ministry of Science and Technology, Indian Institute(s) Technology, National Institute(s) of Technology, United National Development Programme, United National Education and Scientific Cultural Organizations, Tata Energy Research Institute, Development Alternatives, Indian Renewable Development Agency Limited, Central Electronics Limited and several manufacturers involved in renewable energy businesses.
I would thank some of my colleagues in the Centre for Energy Studies, particularly in Solar Energy Lab, Mr. And chamola, Mr. Pallav Purohit, and Mr. M.R.Nouni provided me the emotional support during the course of research.
Finally, this thesis would not haVe been possible without the support of my wife Shakila Devi who has been quoting examples for motivation and of course my son Anirudh Ganesh. They have suffered through my pre-occupation and long hours of work through the computers at home, lab or even my office, sacrificing their chores. I owe my thesis to them.
(
B. Chandrasekar
ABSTRACT
The provision of financial and/ or fiscal incentives for the promotion of renewable energy technologies has been considered in many countries of the world including India. The present study is a modest attempt towards analyzing the possible impact(s) of financial and /or fiscal incentives on several aspects related to the dissemination of renewable energy technologies.
For example, the provision of such incentives can enhance the overall utilization potential of these technologies in the country. The effective capital cost of renewable energy technologies to the user can be substantially reduced by the provision of financial and/or fiscal incentives.
Alternatively, the financial attractiveness of investments made on renewable energy technologies improves considerably with the financial/ fiscal incentives. The study presents simple mathematical frameworks for analyzing the effect of individual and combined incentives on the utilization potential, effective capital cost and measures of financial performance such as payback period, net present value and benefit to cost ratio. Case studies on domestic solar water heaters and photovoltaic water pumps have also been presented in the thesis. It is found that with the provision of financial incentives (capital subsidy and low interest loan) the utilization potentials of domestic solar water heaters, solar photovoltaic lanterns and solar photovoltaic home lighting systems can be as high as 45 million, 21 million and 15 million households respectively. It is also observed that the provision of financial/
fiscal incentives should vary with the income level of the user. For example, the provision of accelerated depreciation related income tax benefit or income tax rebate on the investment made on renewable energy systems out of the capital gains to individual users can attract a large number of high income group households. Similarly the low and middle-income group users can be motivated by the provision of low interest loan.
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TABLE OF CONTENTS
Certificate
Acknowledgements Abstract
Table of Contents List of Figures List of Tables Nomenclature
Chapter 1 Introduction 1.1
1.2
1.3
Background
Renewable energy related policy initiatives of Government of India
1.2.1 Financial outlay and expenditure for renewable energy sector
Incentives for promotion of renewable energy technologies
1.1 1.1 1.5
1.6
1.3.1 Global scenario 1.6
1.3.2 Incentives in India 1.8
Chapter 2 Potential assessment of using three solar energy technologies in India (with financial incentives)
2.1 Introduction 2.1
2.2 Time trends of dissemination of solar energy technologies in India 2.1 2.3 Methodology used for potential estimation 2.2
2.3.1 Domestic solar water heaters 2.2
2.3.2 Solar photovoltaic lanterns and home lighting systems 2.4
2.4 Results and Discussion 2.7
Chapter 3 Survey based assessment of some aspects of renewable energy technology development in India
3.1 Introduction 3.1
3.2 Methodology 3.1
3.3 Results and Discussion 3.3
Chapter 4 Effect of financial and fiscal incentives on the effective capital cost of renewable energy technologies to the user
4.1 Introduction 4.1
4.2 Effective capital cost (present value) to the user 4.2 4.3 Determination of threshold values of relevant parameters 4.13
4.4 Results and Discussion 4.15
Chapter 5 Effect of financial and fiscal incentives on the measures of financial performance
5.1 Introduction 5.1
5.2 Analysis 5.1
5.2.1 Effect of financial and fiscal incentives on the financial 5.1 figures of merit
5.3 Results and Discussion 5.11
Chapter 6 Case studies on domestic solar water heaters and solar photovoltaic water pumps
6.1 Introduction 6.1
6.2 Analysis 6.1
6.2.1 Unit cost of useful energy delivered 6.1
6.2.2 Measures of financial performance 6.8
6.3 Extent of capital subsidy required for the annual installment to be 6.14 equal to net annual monetary worth of fuel savings
6.4 Surplus amount likely to be available with the user with the 6.15 provision of multiple financial/ fiscal incentives
6,5 Results and Discussion 6.16
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Chapter 7 Conclusions and Recommendations
7.1 Conclusions 7.1
7.2 Recommendations 7.4
References R.1
Annexure
Copies of the published research papers
