India has demonstrated great commitment and execution capabilities in installing solar capacity across the country. It achieved a cumulative 20 GW of solar energy installations in 2017 itself which was National Solar Mission’s original2022 target.This number is expected to further expand by another 10% to 22 GW by end of March 2018. Out of this total installed solar capacity, 7295 MW of solar power capacity was added in FY 2017-18 itself, compared to 5526 MW addition in FY 2016-17. The major southern states of Karnataka, Andhra Pradesh and Telangana led the solar growth last year. For the first time, solar energy was the biggest source of new power capacity addition in India.Solar tariffs also touched historical new lows of INR 2.44 per unit in India during last year.
However, the government still has the mammoth task of achieving 100 GW of solar installation target by 2022 and would require billions of dollars in additional funding and investment to achieve its renewable energy target. The rate of new tender announcements and auction completions have slowed down at the end of the last year mainly due to uncertainty created due to the possible imposition of the 70% safeguard duty on import of solar panels. The other major challenge facing the solar industry in India is that a number of states such as Maharashtra, Gujarat, Tamil Nadu, and Punjab have reached a power surplus status and hence capacity addition might slow down in these states.
Policy Scenario Remains Supportive Amidst Strong Growth Across Segments
The Ministry of New and Renewable Energy (MNRE) announced a new policy providing incentives to distribution companies for commissioning rooftop solar projects. One of the biggest hurdles in accelerating rooftop solar deployment has been the reluctance of utilities in providing timely approvals and grid connections. Under this policy, DISCOMs would be given a monetary incentive for achieving pre-set targets of rooftop solar additions. Besides this, ambitious bidding trajectory for adding 100 GW capacity of utility solar energy has also been laid down for the next three years. Major schemes for implementation of Solar Park, Solar Roof Top Scheme, Solar Defence Scheme, Solar scheme for CPUs Solar PV power plants on Canal Bank and Canal Tops, Solar Pump, Solar Rooftop etc. havealso been launched over the last two years.
India is not only leading the way in installing solar at home but also promoting solar energy in other developing countries. The International Solar Alliance (ISA) is the brainchild of the Prime Minister and has started to gain traction. The French President pledged to provide over $860 million for solar projects in developing countries by 2022during the recent ISA summit in India. The member nations of the ISA have targeted to invest $1 trillion for creating 1,000 GW (or 1 TW) of solar power capacity by 2030. The Indian Prime Minister presented a financial plan focusing on concessional and less-risky funding for solar projects to help nations gain access to affordable solar technology and raise the share of solar power in their respective country’s energy mix.
Other amendments in tariff policy to promote renewable energy include enhancement in solar RPO to 8% by March 2022, bundling of renewable power which will ensure affordability, no inter-state transmission charges for solar and wind power etc.
India is also seeing a sharp growth in solar products and off grid segment. Over 1.42 lakh solar pumps and 41.8 lakh solar lighting systems were installed in the country as of November 2017 and solar projects of 23,656 MW capacities have been tendered with LoI for 19,340 MW being issued. The capacity of “Development of Solar Parks and Ultra Mega Solar Power Projects” scheme has also been doubled to 40,000 MW. India has distributed 28 crores LED bulbs over the last three years and has launched the ‘Atal Jyoti Yojana’, to benefit over seven million school going children under the Solar Study Lamp Scheme.
The Rooftop Solar Segment is Seeing A Strong Push by the Government
The government of India has been aggressively promoting rooftop solar in the country as India suffers from a paucity of land and high real estate prices. The government recently implementedthe“Grid Connected Rooftop and Small Solar Power Plants”program which will aid in the installation of 2100 MW capacity through Central Financial Incentive (CFA)in the residential, social, Government/PSU and institutional sectors. Moreover, concessional loans for solar rooftop projects amounting to $1,375 million have been granted to leading PSU banks in India like State Bank of India, by multilateral development institutions such as the World Bank, Asian Development Bank and New Development Bank.
The government has also proposed a new scheme“Sustainable Rooftop Implementation for Solar Transfiguration of India” (SRISTI), to provide financial aid of INR 23,450 crore for 40,000 MW of rooftop solar installations.As per this program, a maximum subsidy of INR 18,000 per kW will be provided to the residential sector, while INR 5,500 per kW will be given for all social, institutional, government and commercial sectors.India has planned to install 100 GW of solar power by 2022, out of which 40 GW will be rooftop solar installations. However, the country has achieved a meagre 1.6 GW of rooftop installations as of December 2017.
According to the Rooftop Solar Map 2017 by Bridge to India, Tamil Nadu had the largest rooftop solar capacity with 163 MW, followed by Maharashtra with 137 MW and Rajasthan with 88 MW as of March 2017. According to Bloomberg New Energy Finance, cost of electricity from rooftop solar has nearly halved in the last five years.
The Railway Minister launched Mission 41k energy plan for Railways, which is expected to save INR 41,000 crores over the next decade by changing the overall energy mix of trains by using more renewable energy sources like solar and wind energy. 11 railway stations in Palakkad and Thiruvananthapuram divisions have decided to install rooftop solar panels withtotal capacity of 390 kW to reduce their electricity bills. It is expected that the installation could reduce electricity tariff from INR 8.10 per unit to INR 3.64 per unit for 25 years.The Indian Railways have adopted solar in a big way setting up solar panels at the rooftops of its offices and railway stations.
Another new and laudable step undertaken by the southern hi-tech city of Bengaluru is the application of light detection and ranging (LiDAR) technology to map the rooftop solar potential of the city. The city aims to generate 1,000 MW of rooftop solar energy by 2022. Such initiatives will be directed towards assessing on ground risks and true potential, and eventually aid in developing a clear and actionable plan to achieve this target.
Key Solar States Driving the Solar Revolution in India
The state with the highest solar installations in 2017 was Telangana followed by Karnataka, Andhra Pradesh and Rajasthan.Karnataka, Andhra Pradesh, Tamil Nadu, Telangana, Rajasthan, Madhya Pradesh and Punjab together accounted for 80% of India’s total installed capacity. While Karnataka, Andhra Pradesh, Tamil Nadu, Telangana and Rajasthan have added more than 3 GW of solar capacity each, Madhya Pradesh and Punjab have added another 2 GW and 1 GW respectively.
Karnataka leads Maharashtra, Uttar Pradesh and Gujarat in terms of installed as well as tendered pipeline capacity. That state installed a whopping 2 GW of solar power in 2017. The state has also upwardly revised its solar installation target to 6000 MW by March 2021 out of which 40% will come from rooftop solar installations. Karnataka’s estimated solar power potential has also been increased to 24.7 GW from 20 GW earlier. The state is regarded as having one of the friendliest regulations and policies towards distributed solar generation. The solar policy in Karnataka encourages public private participation in this sector, solar rooftop generation and decentralized generation where grid is inaccessible. Karnataka is also inspiring farmers to lease their land for wind and solar farm development. The state recently inaugurated the first phase of the world’s largest solar park of 2000 MW capacity spanning across 13,000 acres.
Telangana is another southern state that installed 2 GW of solar power in 2017. The state has shown tremendous growth in surpassing leading solar states like Gujarat to becomethe second largest solar state in India currently. Telangana recently crossed the 3 GW mark in the first quarter of 2018 becoming one of the first Indian states to surpass 3 GW mark intotal solar installations. Telangana is focusing on a distributed development model rather than accelerating solar installations through the solar park approach. The state’s decentralized solar power policy has helped in attracting solar developers and reducing transmission losses. It is planning to generate 5,000 MW solar powerby 2019. Telangana hashuge solar potential and is targeting to install 2,000 MW of rooftop solar by 2022. Favourable state policies like reducing red tape in government departments through fast approvals and 100% refund of VAT, GST, stamp duties etc. have ensured support for solar installations. The state has in a few short years of its creation become a solar superpower through enactment of progressive policies and rapid execution. The addition of large solar power capacities has not only reduced the power deficit but also helped in keeping the prices of power affordable.
Andhra Pradesh is another leading solar state. For comparison sake, Andhra Pradesh’s power consumption is only one-third that of Maharashtra, but its installed solar capacity is three times in comparison. The state has plans to achieve at least 5000 MW of total solar power capacity addition over the next five years. Its solar policy aggressively supports developing solar parks as well as distributed generation hand-in-hand. The state government is promoting solar installations on the rooftops of public buildings, commercial and industrial establishments on gross and or net meter basis. Andhra Pradesh solar policy also provides incentives in the form of exemption of transmission and distribution charges and losses, cross subsidy surcharge, electricity duty for captive consumption etc. Andhra Pradesh has seen a large number of industries adopting solar power as it has become cheaper than buying grid based power.
Rajasthan has the highest solar potential in India due to its vast land area which is mostly uninhabited and also receives very high solar radiation. The state has the potential to become a major solar power generator as well as exporter of this power to other states. The state government announced its solar energy policy in 2014 to add an additional capacity of 25,000MW in Rajasthan. The state also has Net metering scheme to promote rooftop generation. Jodhpur has the maximum projects in the state. Rajasthan’s 500 MW Bhadla solar park witnessed record low winning bids of INR 2.44/ kWh by Acme Solar Holdings Pvt. Ltd and SBG Cleantech Ltd.
The 2009 solar policy of Gujarat has a target for solarinstallations of upto 1 GW. However, there is a drawback in the state’s solar policy that permits only home owners to set up rooftop solar plants to take benefit of all incentives, and not allowing leasing of roofs. Gujarat which was once the trailblazer in solar capacity additions has slowed down as the state became power surplus. Gujarat under the current PM had installed a large number of solar power plants at relatively high rates. This made the distribution utilities reluctant to buy more solar energy. This allowed other states particularly the power deficit states of the south to lead the march. However, Gujarat has again started to add more wind and solar power over the last year and is planning to add 250 MW over the next couple of years.
Tamil Nadu accounted for almost one-fifth of India’s total renewable energy generation in 2016-17. Tamil Nadu has long been the leader in terms of wind power capacity in India accounting for a lion’s share of wind energy generation. Now it plans to increase the solar power installed capacity by 5,000 MW in the coming years. The state has the potential to increase its solar capacity by six times till 2027. Renewables account for more than 35% of the state’s total power generation fleet. The state also has a strong pipeline of about 2 GW of solar projects.
The government of Maharashtra has set an installation target of 7500 MW of solar power generation capacity by 2019. Compared to other states, Maharashtra has not installed solar energy at the same rapid rates. However, the state has started to become more focused on renewable energy and has a huge potential to add more solar power.
Uttar Pradesh is also slowly but steadily moving ahead in the solar race. The government of Uttar Pradesh has set a target of 10,700 MW for solar power installation by 2022 and projects to source 8% of its power needs from renewable energy sources. The state is infamous for its shoddy power infrastructure and developers are also jittery in signing new projects given the bureaucratic lethargy in the state. Recently, UP’s largest solar power plant was inaugurated by Prime Minister Modi and French President Emmanuel Macron. The 75 MW solar power plantwasbuilt at a cost of around INR 500 crore by French firm ENGIE, spanning across 380 acres of land.
Chandigarh has been named as the rooftop solar capital of India. The Union Territory had issued a notification making installation of solar panels mandatory on the rooftops of residential houses measuring 500 square yard and above as well asgroup housing societies.Installation of rooftop solar power plants was made compulsory for new construction and the owners of existing houses were given two years to comply with the direction. With only two months left for the two-year deadline to expire, the Chandigarh administration is all set to issue notices to owners to have failed to comply.
According to a survey conducted by BTI, the industry voted for Madhya Pradesh, Andhra Pradesh and Gujarat as the top three states in ease of doing business for solar projects, while Uttar Pradesh, Maharashtra and Tamil Nadu were ranked as the least attractive. Karnataka, Andhra Pradesh and Telangana were voted as the top three states on attractiveness of their open access solar market.
India is amongst the few countries to host some of largest solar power plants andalso has the highest solar electricity production per watt installed. The 648 MWKamuthi Solar Power Project, Tamil Nadu is worth mentioning here. The plant was built in a record time of eight months and is the largest solar plant at a single location, which can provide enough electricity to power 150,000 homes. Kurnool Solar Park in Andhra Pradesh has emerged as the world’s largest solar park. With 1000 MW capacity, the park is fully commissioned and operational.
35 solar parks of total capacity exceeding 20,500 MW have already been approved in 21 states.As a result of capacity enhancement under Solar Park Scheme last year, three new solar parks were approvedinRajasthan, Gujarat and Mizoram with total capacity exceeding 1500 MW.
Risks & Challenges
As per Indian government’s Make in India policy, domestic solar companies have been encouraged to manufacture solar components and equipment in India. However, cheap imports from China and other neighbouring countries have almost completely captured the domestic market with a share of more than 90%. The government of India has therefore, proposed a 70% preliminary safeguard duty and 7%+port duty on imported modules.
This has created regulatory uncertainty in the country and developers are afraid of signing new PPAs or making further commitments.
The other major risk is regulatory uncertainty around the Goodsand Services Tax (GST) which qualifies modules for a concessional rate of 5%, but there is still no clarity around rates on other equipment. Overall, the country suffers from a lack of a clear and unified solar policy vision. Often government policies are conflicting in nature which leaves developers in a state of confusion. The country still has to install 80 GW in the next five years and inconsistent policies might imposechallenges to further growth of the industry.
Other than that, the continuously falling price of solar projects has led to cancellations of several on-going solar tenders. For example, 2017 witnessed states including Uttar Pradesh, Andhra Pradesh and Tamil Nadu renegotiating projects which were previously allotted at higher tariffs. Not even one PPA has been signed for the 1 GW Jharkhand solar tender.
As prices continue to fall, solar will become more and more financially lucrative. It will not only become attractive from theenvironmental perspective but will also become an attractive investment proposition in the long run. As the solar market matures, the government will slowly withdraw all the incentives.
The truth is that even if MNRE makes guidelines, the real power to enforce those lies with the state DISCOMs. In order to achieve the 8% RPO target by 2022, the MNRE has allotted state targets, but state’s performance has not been very impressive so far.
Though the government is trying hard to promote solar aggressively, some of its policies still lack clarity and structure, which has led to a slowdown in installations. It is imperative for the Indian government to implement policies that remove uncertainties for the industry and create an environment conducive for solar growth. The government needs to realize that the largest renewable capacity expansion program is being taken up by India, globally. Currently, renewable power in the country constitutes around 18% to the total installed power generation capacity. The government’s target is to take this figure to 40% by 2030 as per its global climate change commitments.