Solar power: One bright spot on Indias economic horizon

Solar power: One bright spot on Indias economic horizon

Over the last five years, India has emerged as one of the key leaders of the global solar power market. With an installed capacity of 32 GW and a pipeline of about 50 GW in the works, the country is on course to meet the target of achieving a capacity of 100 GW by 2022 set by Prime Minister Modi despite some huge challenges.


  • India has emerged as one of the global leaders in solar energy.

  • India's success in ramping up its solar energy capacity in a short time has demonstrated to the world that an energy decarbonisation strategy is both financially viable and profitable.

  • With prices of solar power falling to record lows - of about 3.5-4.0 cents per unit - it can emerge as a viable alternative to thermal power.

Solar power is one of the few bright spots in an Indian economy that is battling a stubborn slowdown. According to official data released by the Ministry of New and Renewable Energy (MNRE), about 32 GW of grid-connected solar capacity is already up and running in India, work on installing another 18 GW is at various stages of completion while tenders for another 32 GW of solar capacity have been floated. In a written reply to the Lok Sabha, the lower house of the Indian Parliament, Minister of State for New and Renewable Energy R.K. Singh said: “With new tenders of around 15,000 MW planned in the remaining period of 2019-20 and 2020-21, we are on course for achieving the target (of reaching a solar energy generation capacity of 100 GW by 2022).”

India a global leader in solar power

It may be recalled that soon after coming to power in 2014, Indian Prime Minister Narendra Modi had set an ambitious target of 175 GW of renewable energy capacity, including 100 GW from solar energy. Despite several challenges, India seems to be on track to meet that target. In the process, the country has emerged as one of the global leaders in solar energy. It has emerged from nowhere over the last five years to become the fifth-largest country in the world - after China, the US, Japan and Germany - in terms of total installed solar power capacity and the second-largest in the world, after China, in terms of new capacity additions.

Decarbonisation and the fight against global warming

India's success in ramping up its solar energy capacity over such a short period of time has demonstrated to the world that an energy decarbonisation strategy is not only financially viable but can also be profitable. It is cheaper, faster and more environmentally friendly to run solar energy farms than thermal power plants that emit greenhouse gases and cause lasting damage to the ecology. Renewable energy such as solar power (and wind energy), on the other hand, helps countries meet their carbon reduction targets in the fight against climate change. With India's power demand projected to surge in the coming years, adoption of solar power is an ideal way to balance the requirements of economic expansion and sustainable growth.

Massive potential for growth

With about 250-300 sunny days a year on average, India can potentially generate up to 750 GW of solar power. The government has already started thinking beyond its very ambitious target of achieving 100 GW of solar power capacity and 175 GW of renewable energy capacity by 2022. According to IBEF, a Ministry of Commerce-run trust that disseminates news about the Indian economy, business and related topics, the government has set a target of 500 GW of renewable energy by 2030. With prices of solar power falling to record lows - of about 3.5-4.0 cents per unit - it can emerge as a viable alternative to thermal power.

Challenges galore

The sector faces several challenges such as its infirm or intermittent nature, difficulties in grid connectivity, bankability and the limited supply of quality solar panels. Solar energy can be generated only when the sun is visible. The sector will, therefore, face downtime for much of India's four-month-long monsoon season, on cloudy days and during dust storms. This can impact grid stability and, in extreme cases, lead to grid collapse. That's because, at current levels of generation, about 32 GW of solar power suddenly stops feeding into the grid between 5pm and 6pm every evening. This sudden withdrawal destabilises the grid and unless it is replaced immediately with alternate power sources, there is every possibility of a grid-wide power outage. This problem will continue to persist until it becomes technologically and financially viable to use battery technology to store the excess energy produced during the day and release the same during the peak hours at night.

Then, the recent move by some states to renegotiate existing contracts to bring tariffs down is threatening the viability of these projects and the bankability of the entire sector. The central government has sent out an advisory to states on the inviolability of contracts, but this hasn't stopped some state governments from going after contracts signed by their political predecessors. Experts say this issue needs to be resolved at the earliest to retain investor interest and to ensure bankability of these projects. And finally, there is the question of solar panels and modules, which are mainly imported from China, Malaysia and Vietnam. Since these panels and modules account for 75-80 per cent of the cost of a solar power project, largescale imports mean 75-80 per cent of the benefits of Indian solar power investments are going to foreign manufacturers of these goods.

Low capacity utilisation

As mentioned above, solar energy can be produced only when the sun is visible. In the power sector, there is a clear distinction between the installed capacity, which means the production capacity of the generating plant if it was to operate 24 x 7 throughout the year, and the capacity utilisation factor (CUF), which is the plant's actual output as a percentage of its theoretical maximum capacity. Because of the intermittent nature of solar energy, it has a CUF of 11-31 per cent, according to the MNRE. The Draft National Electricity Plan released by the Central Electricity Authority (CEA), the power sector regulator, in December 2016, states the CUF of solar plants in India should be taken as 20 per cent. Thermal plants, on the other hand, have a plant load factor (PLF), the equivalent of CUF, of 60-80 per cent and hydropower plants can, under some conditions, raise their PLF beyond 100 per cent.

International Solar Alliance boosts India's global leadership credentials

Prime Minister Modi has leveraged India's leadership in the solar energy sector to launch, in partnership with France, the International Solar Alliance (ISA), a treaty organisation of 121 countries, most of them lying between the Tropic of Cancer and the Tropic of Capricorn. The goal: efficient exploitation of solar energy to reduce the global dependence on fossil fuels. The ISA, which is the largest grouping of sovereign states after the United Nations, is also the first multilateral body to be headquartered in India. It is a great initiative though the uptake has been more measured than expected and slower than what's now needed but the organisation and the location of the ISA head office in India is a huge step up for India's global leadership aspirations and a direct spin-off of India's solar energy ambitions.

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