Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
Despite rapid expansion of solar capacity in the last two years,
India is projected to fall well short of its target for having 100
GW of solar in operation and connected to the grid by the end of
2022, according to a report by the
Institute for Energy Economics and Financial Analysis (IEEFA) and
JMK Research.
As of December 2021, India's installed solar capacity was 55 GW,
the fifth-largest total in the world behind China, the US, Japan,
and Germany. The country is on track to add another 19 GW by the
end of this year, for a cumulative total of 74 GW, IEEFA and JMK
said, or at roughly three-fourths of its goal.
Trade barriers, inadequate domestic manufacturing capacity, and
delays for siting solar farms and connecting new projects to the
grid are among the biggest impediments the industry has faced,
according to the report. These were exacerbated by COVID-related
supply chain problems.
S&P Global Commodity Insights forecasts slower growth in
India's solar PV installations than does IEEFA. "We think 60-62 GW
will be installed by the end of 2022," said Ankita Chauhan,
principal research analyst, power, in comments to Net-Zero
Business Daily.
For 2022, S&P Global is anticipating 17.8 GW of new solar
capacity, and it's expecting about 18 GW in 2023.
It's a mixed picture, said Chauhan. "The progress in solar
capacity additions has been phenomenal," she said. "There have been
regular tenders [by utilities] to invite bids from developers and
high competition in the market to bid for the projects. A
significant pipeline has been built up that will come online in the
next three to four years.
"But despite the growth, there are several execution challenges
that have been worsened by policies and then by COVID … that
created disruption," she added.
Trade barriers
Trade barriers are arguably at the top of the list of
difficulties. These were set up to both ensure that purchasers of
solar equipment received high-quality technology, but also to
protect a domestic manufacturing industry that India hoped to
jumpstart.
It hasn't always worked as intended, said Chauhan. In one
example, a duty on solar modules that's been in place since 2017
has raised the cost of imports from China, but Indian-made products
still can't compete on price, she said. In another case, incentives
to international manufacturers to set up PV operations in special
economic zones were undermined by a rule that they would still be
subject to the import duty. As a result, an industry able to
produce the latest generation of PV technology has not developed,
she said.
The IEEFA-JMK report identified the new basic customs duty on
imported cells (25%) and modules (40%) that went into effect on 1
April as yet another barrier that developers will face. It
recommended delaying the duty.
The new duty ends a period of duty-free imports of solar modules
that ran from August 2021 through March 2022. "The estimated solar
capacity additions in 2022 will be largely driven by projects
installed using the modules that have been purchased in these
timeframes," the IEEFA-JMK report stated.
The Approved List of Models and
Manufacturers (ALMM) is another policy that's causing heartburn
for solar PV developers. This is a list of approved domestic and
foreign manufacturers who have been reviewed by the Bureau of
Indian Standards (BIS), and it's been described as another
quality-check that also protects the domestic industry. Only
companies on the ALMM list can sell solar PV products to Indian
developers.
First published last year and updated quarterly, compliance with
the ALMM became effective on 1 April. As of that date, government
solar projects can only purchase from ALMM-approved companies, and
this will be extended to the private sector on 1 October.
The problem, Chauhan explained, is that COVID interfered with
the ability of BIS to conduct facility reviews outside India. "For
a country that imports 80% of its capacity, this is a problem … if
the suppliers are barred," she said.
Utility-scale PV leads the way
India's vision of 100 GW of solar capacity this year included a
split of 60 GW of utility-scale power and 40 GW of rooftop solar.
Utility-scale development has been much more successful to
date.
Currently, grid-connected utility-scale projects account for 77%
of the country's solar capacity, followed by grid-connected rooftop
solar (20%), and mini or micro off-grid projects (3%), according to
the IEEFA-JMK analysis.
The future for utility-scale solar PV looks bright as well,
pointed out S&P Global Commodity Insights in a report in April.
"The Indian government has identified tracts of land in different
states for the installation of solar PV … named as 'solar parks,'
wherein infrastructure and transmission facilities will be provided
by the government. As per the new circular dated 16 December 2021,
52 solar parks have been planned in 22 states. These solar parks
together will add 38 GW of PV capacity," it said.
It's a different story for the rooftop solar segment, said JMK
founder Jyoti Gulia in a statement. Only 15 GW of the 40 GW rooftop
solar target will be achieved by the end of 2022. "This makes it
imperative to have a more concerted effort towards expanding
rooftop solar," he said.
The challenges for rooftop solar run the gamut from a lack of
consumer awareness and financing hurdles to inconsistent government
policies, according to the report. Getting at "deeply rooted policy
restrictions" on rooftop solar is key to the sector's growth, Gulia
said.
Unlike utility projects, which typically have 25-year power
purchase agreements backing them up, industrial and commercial
rooftop solar prospects can't tap into a steady income stream to
fund the projects, the report's authors explained.
But the growth of rooftop solar in the state of Gujarat shows
one way in which this can be solved, they said, as the state
provided subsidies of 20%-40%, depending on the size of the
installation. The state also allows consumers to sell surplus
electricity for 2.25 rupees/kWh, a higher rate than in other Indian
states.
Chauhan agreed that individual states heavily influence where
solar PV is being built. "If a state is progressive … it will be
easier for utility and rooftop solar to meet their targets,"
Chauhan said.
Rajasthan, which has a great deal of desert land that's not good
for agriculture, has supported solar sufficiently enough that some
operators are now exporting power to other states, she said.
More recommendations
In addition to eliminating, reducing, or delaying duties and
other trade barriers, the IEEFA-JMK report makes other
recommendations, including:
Eliminate net metering limits. As the report explained, most
states in India currently limit net metering—the supply of
power back to the grid by rooftop renewable operations—to 1 MW
of capacity. "[This] significantly lowers the potential savings,
especially for large and medium industrial consumers," the report
said.
Remove or reduce restrictions on the "banking" of renewable
energy. When excess energy is produced, such as from an industrial
rooftop unit, the energy producer can bank the contribution against
later withdrawals from the energy authority. Without adequate
banking, the financial incentive to install rooftop solar is
reduced.
Make energy banking more attractive. The government could
encourage utilities to accept more banked energy if it allowed that
energy to count towards a utility's annual renewable purchase
obligation (RPO). This can be done in conjunction with better
enforcement of RPOs, the report said.
Subsidize battery energy storage systems, which the report said
"can be a game-changing situation" because they help integrate
renewables into the grid and balance supply and demand over the
course of days and seasons.
Long path to net-zero
India is the world's third largest GHG emitter, producing more
than 3.5 gigatons per year, or about 7% of the global inventory,
according to the International Energy Agency. At COP26, Prime
Minister Narendra Modi committed to net-zero by 2070, or a decade
later than China and two decades later than the countries aligned
with the Paris Agreement.
Shifting away from coal-fired power to solar and wind is a key
part of the nation's net-zero plan. Solar and wind combined are
about 10% of the nation's capacity, today, according to S&P
Global Commodity Insights.
For 2030, India's goal is at least 280 GW of solar capacity,
announced as part of its Atmanirbhar Bharat economic
plan in 2021 for post-COVID recovery. This includes new funding
in the current budget year for the Solar Energy Corporation of
India and the Indian Renewable Energy Development Agency, as well
as a push to build a domestic solar module manufacturing base.
Along those lines, the government awarded a combined $603
million to Reliance New Energy Solar, Shirdi Sai Electricals, and
Jindal India Solar Energy in March to develop full value chain
module manufacturing capability of 12 GW by 2025.
This is another ambitious goal that will be hard to meet,
Chauhan explained. Of the three companies, only Jindal has any
current solar PV manufacturing experience, with about 2.5 GW of
capacity in operation and another facility under proposal. Reliance
has acquired solar PV technology companies that it says will form
the baseline of its new operations.
In looking at the full supply chain, she said India has no
polysilicon manufacturing nor wafer capacity now—and those are
the first two parts of the value chain. As for the other two
parts—cell manufacturing and modules—nationwide, India can
make about 5 GW/year of cells and 11 GW/year of modules. But even
those are typically not able to produce high-wattage modules that
have now become the global standard.
If all the policies and investments work as intended, Chauhan
said India could eventually close the gap towards it domestic needs
and even compete with many exporting nations on the global market,
though it probably can't match China's prices. "But in the short
term, we see a lot of uncertainty," she said.
