With a target to have an installed capacity of 175GW in renewable energy by 2022, of which 100GW is expected to come from solar, India is poised to become one of the most vibrant markets for solar power in the coming years. At present, India holds the fifth position globally in terms of renewable energy installations. It has set an ambitious target of increasing its share of renewables in the overall installed capacity from 8% today to 40% by 2030, making it one of the largest markets for clean power.
In 2018, India added around 9.5GW of renewable energy capacity with 7GW solar and 2GW wind power respectively. As on September 2018, India’s total solar power generation capacity grew to around 26GW with 87% utility-scale installations and 13% in rooftop solar projects.
According to industry estimates, 2019 will see a record installation in solar power, primarily driven by large or utility scale installations. Of the new renewable capacity installation of 16GW forecast for 2019, around 11GW is expected to come from utility-scale installations and another 2.5GW from rooftop solar.
The road towards achieving India’s target of 175GW renewable (including 100GW in solar) will need an estimated investment of around $75 billion, through debt and equity. The viability of solar power projects is under pressure for various reasons. The steady fall in tariff rates in various state projects is one major challenge for investors. The average tariffs reported through 2018 hit rock bottom at around Rs 2.5 a unit. The rising cost of solar panels (mainly imported from China and Malaysia) has only added to the industry woes. The 25% safeguard duty on panels imported from China mid-last year to support domestic manufacturers has added an additional layer of cost to solar projects. The 10GW fresh tender for solar in May 2018 with a condition of being linked to 5GW in panel manufacturing did not find any serious takers leading to its cancellation.
More recently, the Solar Energy Corporation of India, the government body that implements India’s solar power mission, issued tenders for 3GW of fresh capacity but with a condition that the panels be manufactured in India. But despite these efforts to promote local manufacturing of panels, they remain relatively less competitive compared to Chinese imports that rank better both in terms of quality and price.
A major part of the demand for solar power continues to come from industrial and commercial consumers. With the current penetration being less than 11%, 40GW is expected to come from solar rooftops to meet the 100GW target by 2022. By adding 1,550 MW of solar rooftop capacity within 12 months leading to September 2018, the capacity has grown by 75%. However, a large part of this fresh demand came from industrial and commercial users (70%), and just around 9% from residential consumers.
Residential rooftops that allow power consumers to double up as producers offer immense scope if the cost of installation is viable for domestic users. Currently, with a heavy frontend investment, financing solar rooftops through commercial banking channel is still a major challenge for residential and small business consumers.
There is also a strong need for technological intervention for better grid management that will allow faster growth of solar power in the country. At present 90% of the solar capacity is installed in Western and Southern states in the country where supply is far exceeded by the demand. Investment in more efficient grid management through technology will allow better utilization of capacity by enabling a smooth flow from power surplus states to power-deficient ones. Also, demand-supply misalignment can be better managed by investments in digital technology like smart grids and smart homes. Today, off the shelf technology like the Internet of Things is available for pushing excess power generated into the grid thereby improving the overall efficiency of the power network in the country. Better utilization of power generated will not only reduce the overall unit cost of power for consumers but also make heavy investments in solar power more viable for investors
India enjoys a unique advantage to be the leader in the global solar power sector thanks to the year-round availability of the sun in most parts of the country. In the last couple of years, India has made all the right moves to ensure that we stay on course to achieve the 100GW solar power target by 2022. What we do in terms of policy and technology push over the next three to five years will determine if we truly find our place in the sun.
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