How Developing Countries Especially BRICS (namely China, India and Brazil) Are Leading The Way In Solar Energy?

The progress in development of the BRICS countries has been marked by the increase in the quantum of clean renewable energy production. With the continuous rise in population growth, especially in the developing countries, there has been a greater increase in the demand and consumption of energy, thus strengthening concerns regarding environmental degradation and climatic changes. As a result of this, some countries have shown major shifts in critical thinking vis-à-vis solutions for meeting the energy demands, by transitioning from conventional oil and gas to renewables, especially solar energy.

The countries that are located in the arid, tropical and sub-tropical regions of the world have an advantage in terms highest receptivity of solar irradiance, due to their latitudinal positions. Brazil, India, China, and South Africa fall in these red zones. The United Nations Environment Programme (UNEP) has developed a loan programme to simulate renewable energy market helping countries like India, Morocco, Kenya, and Tunisia to finance solar power systems. Kenya has become the largest developer of solar power systems in terms of installation per capita in the world.

China is the leader in the world’s solar power sector and has the highest annual power production at 598800 kWh per year. However, there is a striking contrast between the values of per capita energy consumption. In the USA, it is as high as 12877 kWh per year, while China and India consume 3974 kWh per year and 985 kWh per year respectively. Developed countries like Norway, Kuwait, Canada, UAE, Sweden and Iceland have high levels of per capita consumption too.
The domestic solar industry in China is currently experiencing a downturn, as the Chinese government has halted the allocation of quotas for new projects, until further notice. Moreover, the tariffs on the electricity generated from clean energy has been lowered by 6.7-9% depending on the region i.e. 0.05 yuan per kilowatt hour, effective as of June 1, 2018.
In Brazil, the solar sector is progressing regardless of the political and economic environment, with an alignment of certain basic drivers i.e. availability of a competitive technology, a business sector capable of innovation and more consumers wanting the technology, resulting in a growing market. At the beginning of 2018, Brazil reached the historical mark of 1 GW of installed PV capacity and is expected to reach 2 GW at the end of the year. In addition to this, 3.7 GW of solar has been contracted by the government via auctions and the growth of distributed generation is surpassing initial forecasts.
India has the world’s third fastest expanding solar power program, ranked after China and USA. In 2017 alone, India added a record 9,255 MW of solar power with another 9,627 MW of solar projects under development. India launched its National Solar Mission in 2010 under the National Action Plan on Climate Change, with plans to generate 20 GW by 2022. India’s Solar Power capacity has increased from 2650 MWe in 2014 to the current level of 12,200 MWe and the tariff has dramatically reduced from INR 13 per kWh in 2014 to INR 2.44 per kWh.

India Outbound
November 12, 2018

source https://indiaoutbound.org/how-developing-countries-especially-brics-namely-china-india-and-brazil-are-leading-the-way-in-solar-energy/

Overview Of India-Netherlands Trade And Investment

Indo-Dutch relations has a history of over 400 years. Official relations, centered on economic and commercial bilateral ties, were established in 1947. The Dutch government identified India as an important economic partner in the early 1980s. Economic relations further strengthened after the liberalization of the Indian economy in the 1990s. In 2006, former Prime Minister Balkenende declared India, China and Russia as priority countries in Dutch foreign policy. To commemorate the 70th anniversary of diplomatic relations, PM Modi visited Netherlands in June 2017. This provided a significant boost to the multi-faceted cooperation. In addition to this, a successful festival was organized to showcase Indian music, art and dance. Multiple bilateral agreements and MOUs were signed across diverse areas, covering economic and commercial cooperation, culture, science and technology and education. Moreover, both countries share common ideals of democracy, pluralism and the rule of law.

In the financial year 2016-17, Netherlands was the fifth largest investor of FDI into India (US$ 3.37 billion), the 28th largest trading partner globally and the 6th largest trading partner in the EU. Cumulative investments amounted to US$ 22.63 billion comprising 6% of total FDI inflows between the periods of April 2000 to September 2017. Two-way trade stood at US$ 6.9 billion in 2016-17 with a balance of trade in favour of India of US $ 3.17 billion. Europe is India’s biggest trading partner and 20% of India’s export to Europe enters through the Netherlands. Indian exports to the Netherlands included: petroleum products and related materials (19.8%), apparel and clothing, textile yarns, fabrics and made-up articles (15.3%), organic chemicals (7.9%), vegetables and fruits (5.3%) and electric machinery (3.6%). Dutch exports to India included metalliferrous ores, metal scrap, plastics and general industrial machinery.

Many Dutch MNCs (Shell, Unilever) and major banks (ING, Rabobank) have their production sites and business operations in India. Dutch SMEs with niche technologies and world class expertise are also actively looking to enter the Indian market. India is a source of useful technical know-how, besides FDI, in a variety of sectors – water management, upgrading of ports and airports, dredging, agro-processing, telecommunication, energy, oil refining, chemicals, and financial services. As a result of the transparency, flexibility and stability of the Dutch tax system, there are 174 Indian companies presently based in the Netherlands. Indian companies like Tata Steel, Appollo-Vredestein and Hinduja Group have been involved in mergers and acquisitions and many are exploring possibilities for further tie-ups.

ASSOCHAM, India’s apex chamber, set up an office in Netherlands in December 2015, as a gateway to Europe and in June 2017, the Institute of Chartered Accountants of India (ICAI) opened an office in Amsterdam. The Netherlands-India Chamber of Commerce & Trade (NICCT) has set up an office in Mumba in February 2016. Netherlands backed India’s Missile Technology Control Regime (MTCR) membership.

Improvement in ease-of-travel and connectivity, with the successful implementation of the electronic Tourism Visa (eTV) in the Netherlands starting August 15, 2015, has provided a new impetus to tourism and business flows. Jet Airways has daily non-stop flights to and from Amsterdam from Mumbai, Delhi and Bangalore as well as one from Toronto. As of 2017, the Royal Dutch Airlines (KLM) is also operating three direct flights per week between Mumbai and Amsterdam.

Water is a prime sector of cooperation as exemplified by the joint water technology initiative, Dutch Indian Water Alliance for Leadership Initiative (DIWALI). Cooperation must be boosted in water conservation and irrigation. Both countries have committed to the climate change accord and hence, need to strengthen cooperation in the development of renewable energy. Thus, India and Netherlands are natural partners in economic cooperation and there is scope for further growth in the trade relations.

India Outbound
November 8, 2018

source https://indiaoutbound.org/overview-of-india-netherlands-trade-and-investment/

India’s Growth In Wealth Relative To The World

India’s growth story reflects an overall upward trend in wealth during the 21^st century, despite a setback in 2008 due to the global financial crisis and bumps caused by currency fluctuations. The annual growth of wealth per adult averaged 8% during 2000-2018. After falling by 26% in 2008, it rebounded and grew at an average rate of 7% up to 2018. After a year of slow growth, the wealth per adult in India is estimated at USD 7,020 in mid-2018, due to an exchange rate drop of 6%.

The financial assets recovered from the 2008 financial crisis and have continued to contribute substantially to the growth of household wealth, by accounting for 41% of the increase in the gross wealth worldwide. Two-thirds of this rise occurred in North America. The non-financial assets have grown at a faster rate in recent years and have provided the impetus to overall growth in all the regions, except North America, in the past year. This has accounted for over 75% of the rise in Europe and China, and all of the rise in India.
North America added USD 6.5 trillion to its stock of household wealth, out of which USD 6.3 trillion was added in the US. Europe’s contribution was an addition of USD 4.4 trillion, China’s was USD 2.3 trillion and Asia-Pacific’s (excluding India and China) was almost USD 1 trillion. However, India, Africa and Latin America saw a combined net loss. The 6,5% loss in Latin America, in part due to the economic troubles of Brazil and Argentina as well as the adverse currency movements, exceeded the percentage gains in China, Europe or North America. However, in considering smoothed exchange rates, the growth of wealth was positive in Latin America and slightly higher in India and Africa.
The biggest gains and losses can be attributed to exchange-rate movements. These have been relatively stable over the past year, in comparison with its recent history. Amongst the G7 countries, India and China, the changes in exchange-rate versus the US dollar did not exceed 3%, apart from the 6% depreciation in India and Russia.

As is typical of developing countries, personal wealth in India is dominated by property and other real assets, comprising 91% of estimated household assets. Household debt has risen at an overall rate of 7.1% with an increase in all regions except Africa, and double-digit growth in China and India. However, personal debts constitute only USD 840 or 11% of the gross assets, even after making adjustments for under-reporting. This implies that while indebtedness is a severe problem for many poor people in India, the overall household debt as a proportion of assets in India is lower than in most developed countries.
The results of the Credit Suisse Global Wealth Report reiterates the unequal growth of wealth in India. Not everybody has been able to achieve a share of the rising wealth in the country. The considerable wealth poverty is reflected in the fact that 91% of the adult population has wealth below USD 10,000. At the other extreme, a small fraction of the population (0.6% of adults) has a net worth over USD 100,000. However, owing to India’s large population, this translates into 4.8 million people. Also, the country has 404,000 adults in the top 1% of global wealth holders (share of 0.8%), 3,400 adults have wealth over USD 50 million and 1,500 have more than USD 100 million.

India Outbound
November 6, 2018

source https://indiaoutbound.org/indias-growth-in-wealth-relative-to-the-world/

Where does India stand in global wealth distribution in 2018?

The Credit Suisse Global Wealth Report provides extensive information on global household wealth. Over the last one year, the global aggregate wealth has risen from approximately USD 14 trillion to USD 317 trillion, at a growth rate of 4.6%. While lower than the previous year, this growth rate is higher than the average growth rate in the post-2008 era. Moreover, it sufficiently outpaced population growth, leading to a record increase of roughly 3.2% in the wealth per person.

However, the global level of wealth, equivalent of a global figure of USD 63,100 per person does not take into account the massive variations in distribution across the regions and countries of the world. Such geographical imbalances in the distribution of household wealth is shown below.

North America and Europe together account for 60% of total household wealth, but comprise a meagre 17% of the world adult population. The discrepancy is modest in China and in the Asia-Pacific region (excluding China and India), where the population share is about 30% higher than the wealth share. But the population share is more than three times the wealth share in Latin America, nine times the wealth share in India, and 15 times the wealth share in Africa.
As of mid-2018, in order to be amongst the wealthiest sections of the world, a person requires net assets of just USD 4,210. However, to be a part of the top 10% of global wealth holders, USD 93,170 is required, while in order to belong to the top 1%, USD 871,320 is required.
India, alongside other heavily populated countries like Russia, Brazil, Indonesia, Philippines and Turkey, belong to the “frontier wealth” range of USD 5,000 to USD 25,000. This range covers the largest land surface.
The regional pattern of wealth has been illustrated in the figure below, by assigning individuals to their corresponding global wealth positions.

The contrast between India and China is the most striking aspect of this regional composition of global wealth distribution in 2018. Comprising almost half the worldwide membership of deciles 7-9, most Chinese adults belong to the upper-middle section of global wealth distribution. This can be attributed to the country’s record of growth in combination with rising asset values and currency appreciation. China accounts for almost 18% of the top decile of global wealth holders and is slightly behind the US (20%) in terms of number of residents, but way ahead of Japan, France, Germany, Italy and the United Kingdom.
China has now clearly established itself in second place in the world’s hierarchy of wealth. In contrast, more than a quarter of the residents of India are heavily concentrated in the bottom half of the distribution. However, the high wealth inequality and immense population level in India indicate that India has a significant chunk of members in the top wealth categories.

India Outbound
November 5, 2018

source https://indiaoutbound.org/where-does-india-stand-in-global-wealth-distribution-in-2018/

Municipal bonds for solar financing

 

According to a report titled Scaling up Rooftop Solar Power in India: The Potential of Solar Municipal Bonds, third-party financing models can address two of three barriers that hinder the adoption of rooftop solar in India i.e. high upfront capital expenditure and perceived performance risk. However, they have limited success vis-à-vis access to debt capital for project developers. The inadequate availability can be attributed to limited avenues for raising debt capital, stressed commercial banks, credit quality concerns, limited long-term capital opportunities for Indian financial institutions and small ticket size of investments leading to high transaction costs.
In such a context, municipal financing, via issuance of municipal bonds, can potentially increase debt availability for rooftop solar project developers, while reducing costs up to 12%. Here, a municipal entity becomes a finance aggregator for the renewable energy project developers. The municipal bond funds are disbursed via a Public Private Partnership (PPP) approach. The aggregation of projects allows for the developers to access the debt capital markets.
There are several market advantages of municipalities as potential rooftop solar finance aggregators.

• Institutional goals and mandates: their target-based responsibilities to increase the deployment of renewable energy provides a built-incentive for rooftop solar
• Access to debt capital markets: their larger balance sheets put them in a better position than rooftop solar developers
• Superior credit profiles: most municipalities are rated investment-grade, allowing them to raise debt capital at lower costs
• Access to public guarantees: as public entities, municipalities have relatively better access to public guarantees, as compared to private project developers. These are typically needed to achieve the necessary risk-reduction for attracting institutional investment
• Diverse revenue sources: the multiple sources of revenues (property taxes etc.) available to municipalities can provide additional security to investors
• Good consumer engagement: their relatively closer proximity to consumers can help the government facilitate the aggregation of rooftop solar projects faster
Apart from the reduction in financing costs, solar municipal bonds can potentially mobilize significant untapped investments (from domestic institutional investors etc.) into the rooftop solar sector as well as build their capacity to access debt capital markets. They need to utilize innovative transaction structures.
Despite the promising role of municipalities as financial aggregators, there exist multiple implementation barriers:
• There is no statutory/constitutional mandate for municipal corporations to promote electricity or power generation
• Solar municipal bonds need to achieve high credit ratings: since the Indian debt capital market is relatively shallow, it fails to attract enough investors if the credit rating of the bond is below AA or A+. Hence, high credit ratings of the municipal bonds is critical for the success of this financing model
• The novelty of the approach implies that the transaction costs are higher than in case of self-ownership or third-party financing models

Despite being a radical and futuristic model, municipal financing for rooftop solar can be crucial for India to achieve its rooftop solar target by 2022, provided the barriers are eliminated. This will not only contribute to the scaling up of rooftop solar, but will also enable the municipal corporations to utilize a similar financing structure for other infrastructure projects.
India Outbound
November 2, 2018

source https://indiaoutbound.org/municipal-bonds-for-solar-financing/

The rooftop solar power sector in India

A report titled Scaling up Rooftop Solar Power in India: The Potential of Solar Municipal Bonds highlights the current scenario and possible way forward for the rooftop solar sector in India. It delves into the potential of municipal bonds as a means to finance the scaling-up of rooftop solar and lays out in detail the design and implementation for the same.

For India to achieve its national target of 40 GW of renewable energy by 2022, the rooftop solar sector needs to increase 32 times its present capacity. As of December 2016, the total installed rooftop solar capacity is 1.25 GW, the largest share of which has been deployed by the industrial sector, followed by the commercial and then the residential sector. The industrial sector is expected to meet the remaining target and to host a target of 12.06 GW, it has to increase its capacity by about 37 times. Assuming that the residential and public buildings will contribute 10 GW to rooftop solar by 2022, they need to increase their shares by 21 times to meet the national targets.

The considerable gap between installed and expected capacity can be met by 2022 only with significant investments in the rooftop solar capacity. These investments are subject to the costs of solar panels, capital, labor and operations, and levels of national and state-specific subsidies and taxes.

The key factors that drive the adoption of rooftop solar in India include:

• the expected cost savings in electricity:

  The gaps between rooftop solar and conventional sources of electricity is decreasing quickly. In the residential sector, it has already achieved grid parity in states like Maharashtra, Uttar Pradesh and Rajasthan. Rooftop solar has become competitive in the government sector in Haryana, Delhi, Uttar Pradesh, Andhra Pradesh and Karnataka.

• energy access (need for an alternative electricity source): the issue of access to affordable power plagues Indian households in both rural and urban areas as 304 million people still lack access to electricity (NITI Aayog 2017), despite the rapidly decreasing power deficit across India. In such a context, rooftop solar provides a less harmful and price-volatile alternative.
• “green” benefits: the social image of being “green” and environment-friendly appeals to some consumers in the commercial, industrial and public sectors, even if it means paying higher than grid power or making capital investments.
• and government mandates i.e. the need to mitigate climate change risk: the government and state-wise Renewable Purchase Obligations (RPOs) apply only to the industrial and commercial segments. The government prescribed solar-specific RPO is set to rise to 3% by 2022.

Given these drivers, the growth of rooftop solar technology in India is still hampered by multiple barriers. These barriers need to be resolved adequately by the measures that will accelerate the adoption of rooftop solar in India.

• High upfront capital expenditure or costs of installation for a non-core business activity
• Limited access to debt and finance: The suspicions around performance in this relatively nascent sector make banks reluctant to lend to solar rooftop projects, thereby leading to high borrowing costs. Developers thus, do not approach banks for loans, especially for smaller size projects due to the proportionately higher transaction cost. In addition to this, the third-party debt capital market (bond issuance) in India is still marginal. Thus, most rooftop solar projects in India are being financed with equity capital with minimal debt during development stages (BNEF 2016). As the cost of equity capital is usually more expensive than debt, the overall project cost then becomes more expensive.
• Consumer perception of performance and risks: As a relatively new technology in India, rooftop solar is not always expected to perform as expected over its lifetime. There are also trust issues since the new entrepreneurs in the market do not have much of a track record yet.
• Challenges in the implementation of net-metering policies: 27 states and union territories have issued policies as per the 2013 model net metering regulations but only a few have started actual implementation. The poor/slow progress can be attributed to issues like passive opposition from DISCOMs, inadequate policy frameworks and insufficient training at the local utility level.
• High costs of energy storage: Since solar power can be generated only during the day time, energy storage is crucial for ensuring night time usage or during times of low solar radiation. The current prices of rooftop solar systems with battery storage can be INR 90,000-1,35,000 per kW depending on voltage. The issue of consumer-owned, behind the meter energy storage can become less pressing if effective net-metering policies are properly implemented and supported by front-of the meter and grid- based storage.

 
India Outbound
November 1,2018
 
 
 

source https://indiaoutbound.org/the-rooftop-solar-power-sector-in-india/

Penny wise, pound (not so) foolish: Right decisions needed to cut import and boost exports

Last month the finance minister, Arun Jaitley announced measures to curb ‘non-essential imports,’ so that he can arrest the widening current account deficit (CAD) and probably also reverse the free fall of the value of Indian Currency – the Rupee. The moves look apt! But is it enough? Is it a case of “penny wise”?

With elections around the corner, any government would probably look for a quick fix. But are the 20 items where import duties were increased last week unfortunately not going to provide that quick fix? So, what is the solution? The Government should probably look for steps for a long-term solution. In a nutshell, the Government should look for increasing exports and lowering imports.

When it comes to imports, the biggest contributor is the energy sector (crude oil etc.). But, what is equally important is that, other mineral and metals weigh more when it comes to imports. And together (Crude/Energy, Mineral and Metal sector) contributes to 54% of India’s imports. (Table)

IMPORTS

	Commodity	Value ($ mn)	%age
1.	Mineral Fuels, oils & products	1,32,295	28.4
2	Precious Metals & articles thereof	74,710	16.1
3.	Iron & Steel and articles of iron & steel	14,637	3.1
4.	Ore, slag & ash	6,487	1.4
5.	Chemicals, Compounds of precious metals, rare earth etc.	6,038	1.3
6.	Aluminum & articles thereof	4,523	1.0
7.	Copper & article thereof	4,508	1.0
8.	Salt, sulphur, stone etc	2,511	0.5
9.	Lead, Zinc and Nickle & articles thereof	2,247	0.5
10.	Others (tin, base metals, misc. articles)	1,540	0.4
	Total	2,49,523	53.6

Source: Ministry of Commerce

Out of the total IMPORTS worth $4,65,578 million in the last fiscal year, the above 10 categories of commodities (imports worth $2,49,523 mn) had a corresponding EXPORTS worth $1,14,187 mn (out of total exports of $3,03,376 mn). Hence, these 10 categories left India with a trade imbalance of $1,35,336 (out of total trade imbalance of $1,62,202).

Let’s see how the above-mentioned commodities can help solve the issue of widening CAD and falling rupee to a great extent.

Oil & Gas sector

Domestic oil and gas production has been falling for straight 5 years now, obviously triggering more imports. In spite of arresting the trend, the government took some decisions, which have probably amplified the problem. For example, the new policy of allowing the extension of existing Production Sharing Contract (PSC) with 10% more share to the Government as profit, is a disincentive for petroleum.

With these deterrents, investment would obviously be difficult to come by, which would ultimately enhance domestic production and trim the $100 billion of IMPORT bill (22% of IMPORT). Similarly, the Government needs to push the enhanced oil recovery (EOR) policy with more incentive. EOR has a potential to substitute 10% of imports from domestic production.

Another aspect where domestic producers get a rough deal compared to imported crude is the 20% cess. This cess is not even a pass through compared to no cess for imported crude!

Apart from the above factors, bringing the entire petroleum sector under GST will work as the biggest incentive for the industry.

The steel and iron ore sector

This segment is the easiest one where things could be done easily (to help the Rupee and narrow CAD) but surprisingly nothing is done.

India’s 210 million tonnes production of iron ore is above the requirement of steel mills’ present capacity. However, imports are allowed and exports from states like Karnataka – where public sectors giant NMDC is the biggest producer – are not allowed.

Here, finance ministry can kill two birds with one stone.

1. Remove exports duty and allow export and hence earn foreign exchange.
2. Impose import duty (may be 30%) to discourage import and help lessen the widening CAD and also earn along with supporting the domestic producers.
3. Another aspect is Goa, from where the entire production used to be exported resulting into earning of foreign exchange. However, mining has come to standstill because of the interpretation of a Portuguese era law. The central Government needs to find a way to bring in changes in the retrograde – either through ordinance or by changing the relevant law whenever Parliament convenes next.

Zinc

Just like in the case of iron ore, despite India having an extra capacity (of 80,000 tonnes), India still imported 185,000 tonnes of refined ZINC (70% of it coming from Korea).

Here, the government just needs to give a little bit more push to the ongoing India-Korea CEPA (comprehensive economic partnership agreement). Imports duty should be imposed (under changed product specific rule or PSR for Zinc from chapter 79 to regional value content or RVC 35+CTH).

Copper

The Government can be the biggest beneficiary here in two ways. One way is through making the sector so attractive that the public sector miner Hindustan Copper Limited (HCL), which is in fund raising mode, gets a very good valuation. The second way is through earning forex by hiking import duty on refined copper from 5% at present to probably 7-8%.

Simultaneously, a 2% export incentive on copper cathode rods would do a great deal for HCL and help the Government push exports.

Apart from these, what the Government and probably the judiciary should also look into is the recent revelation about how vested interest parties (by bribing and other unfair means etc.) scripted the closure of the Tuticorin plant. The Government should look into early resolution and opening of the plant for the larger good.

Aluminum

China’s step to protecting its own economy is hurting India as the IMPORT of Aluminum scrap (HS code 7602) has suddenly gone up. Why can’t India (just like China) too hike import duty from the present 2.5% to 10%?  Similarly, on normal aluminum (HS code 7601) too import duty should be hiked from 7.5% to 10%. The import duty on downstream aluminum (HS code 7603-7616) should also be hiked.

                                                                        In Short

 Whether it is case of oil, gas, zinc, iron ore, copper or aluminum, all the steps stated above are “doable” without much hassle. And these steps will result in gains in terms of reduced imports worth $18.2 billion and enhance exports by 2.8 billion. So, the total gain for the economy would be worth $21 billion.

Along with the measures announced by the Government, if the steps stated above too are taken into account, India will gain in a big way in the next six months or so. Of course, additionally, India can also consider stricter restrictions on the IMPORT of Gold, Silver and Diamond (total imports of precious metals were $75 billion), so that domestic production can instead be encouraged.

source https://indiaoutbound.org/penny-wise-pound-not-so-foolish-right-decisions-needed-to-cut-import-and-boost-exports/