At 15 million degrees, 110 times wider than Earth and an atmosphere so vast that the Earth is within it, the Sun is the greatest and grandest phenomenon. It is these sunny days which hold immense potential for diverse needs of a growing country — India. A relatively small quantum of solar energy holds the potential of meeting all our energy needs; existing and projected. From larger perspective, growth trajectory of Indian solar power adoption is a testbed of one of the most important questions of our time: can developing nations reduce carbon footprints as they fulfil economic potential? Over the next 20 years India will see the greatest demand for energy among all countries. Not just economic growth, but the population (estimated to grow by 270 million), will goad this demand. For a country aspiring to become a $5 trillion economy, carbon-free growth is an existential imperative. We are fortunate that most parts of India have 300 – 330 sunny days in a year, equivalent to over 5000 trillion kWh per year. Average solar incidence stands at a strong 4 – 7 kWh/sq.meter/day. India is ripe for a solar power revolution.India’s commitment at COP 26 of 500 GW of renewable energy by 2030 translates to a 4x increment of operating assets. Historical energy elasticity of 1-2x is a given, considering the trends in GDP growth. It is a fair estimate to say that the country will need electricity generation capacity of upto ~ 900 GW by 2030. Per Central Electricity Authority (CEA) estimates, demand for power from renewable energy is set to increase from the current 40% to 70% given controlled coal capacity additions. In actual terms on present growths the real power supply to the grid will be 35% at best from renewable energy by 2030. Solar power must bridge the gap. Growth in solar photovoltaics is hugely scalable, sustainable and serviceable. Our goal of 500 GWp of renewable energy by 2030 means India will generate 50% of its needs if the target is met. This exceeds the Paris Pledge of 40% energy from non-fossil fuels. At present, about 66 MW of aggregate capacity is installed for various applications comprising one million industrial PV systems. On a macro level, solar energy has emerged as a key contributor to the grid connected power generation capacity. Energy security through solar power is the underlying advantage of all this. The National Institute of Solar Energy assessed India’s solar potential of about 748 GWp assuming 3% of waste land area covered by Solar PV modules. Solar energy clearly has a central place in India’s National Action Plan on Climate Change.Besides leveraging its growing green energy market to boost manufacturing, India wants to play a role in global supply chains. The Government plans to create an additional domestic solar equipment manufacturing capacity of 25 GWp each, of solar cells and modules, and 10GWp of wafers by April 2023. Polysilicon is the building block for solar PV manufacturing from which ingots to make solar cells are cut. China dominates this space. With modules making up nearly 60% of a solar power project’s total cost, any price increase will impact the internal rate of return (IRR) from such projects, many of which have already signed power purchase agreements (PPAs). Trendline growth is further impacted because of low investment returns and payment delays. It must be appreciated that climate financing has no role to play in addressing huge losses impeding the renewable energy sector as a whole. Correction has to be led in-country, the entire sector asks for forward looking regulations. Challenges woven into the rising annual demand for solar installations signify enormous underlying potential for the development of domestic solar module production. The Indian solar industry relies heavily on imports of solar cells, modules and solar inverters. At present, India’s domestic manufacturing capacity is not enough to fulfil the solar target. India’s cell-making capacity is a little over 3 GWp a year. The module production capacity in the country is around five times that of solar cells. Demand for indigenously made solar cells is generally low because module suppliers demand cells of higher grade (in terms of wattage, efficiency, etc). In addition to this, due to the narrow cell production scale for most cell manufacturers, domestic cells are more expensive. Given these factors, domestic module suppliers prefer imported cells of superior quality. To get to the stated 2030 solar targets, India needs to install more than 250 GW of solar energy capacity in less than 10 years, or minimum 25 + GWp of solar energy capacity annually — more than twice what has been achieved in recent times. Rapid targeted growth would require millions of solar modules and every solar module would need a steady supply chain of materials for manufacturing. The answer lies in jump starting a fast scaling solar power panel production in-country. Standalone EPC players will cater to ISPPs and corporations. This will increase demand for EPC players, as developers opt to outsource turnkey projects due to a lack of internal expertise. The EPC market is fragmented project sizes typically ranging from 10 to 25 MW. Scale-driven procurement efficiencies will diminish as rapidly declining costs and improving technology options inhibit the long-term framework agreements that characterize conventional-energy procurement structures. In addition to non-optimal policy and regulations, there are very considerable techno-economic risks in setting up and operationalising module manufacturing facilities. The manufacturing space is dominated by imports. Given global overcapacity in this segment, module-manufacturing facilities likely will not be built in India unless mandated by local regulations. If that happens, the lower-cost economics of Indian manufacturers could delay grid parity by two to three years. Global procurement is unlikely to remain a differentiator as more players achieve scale and become adept at it. A pool of low-cost project equity developed from retail or other cost sources can add up to a distinct advantage. Besides this, local design and engineering will play a major role in India’s solar market. Eventually, global players will see the benefits of manufacturing locally and specifically for the Indian market. Competition from local players could further drive down systems costs.
India’s solar potential is real and the support environment is improving fast, to forecast a $6 billion to $7 billion capital-equipment market and close to $4 billion in annual revenues for grid-connected solar generators. Longer-term value will come from efficiently executed projects, low-cost (and often innovative) financing, and localization. In contrast to the global nature of the upstream industry (solar modules), local players will dominate the downstream side in the initial years; this includes project development, installation, and distribution. A vital aspect is module manufacturing facilities in-country. To be a global leader in solar energy India must create policy conditions for solar technology diffusion across the country, quickly. Going forward, we must also focus on emerging technologies such as monocrystalline, bifacial and half-cut cells, micro inverters and tracking equipment. These hold promise for disruptive gains in solar efficiency.
