Story of Indian Solar Sector – Matter of Time & Not Whether

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The Prime Minister of India, Narendra Modi, has sharpened the focus on renewables when he said recently, “As fossil fuels put the planet in peril, hopes for future prosperity in the developing world now rest on bold initiatives.” He added, “Solar technology is evolving, costs are coming down and grid connectivity is improving. The dream of universal access to clean energy is becoming more real. This will be the foundation of the new economy of the new century.” By saying this, Modi opened the paradigm in the renewable adoption in India..

Adoption of Renewable energy as expected has continued to grow with the increasing global energy consumption, particularly in developing countries, and a decline in the oil prices. Despite the increase in energy consumption, interestingly for the first time in the last few decades, global carbon emissions associated with energy consumption remained stable in 2014 while the global economy grew. This may well have been possible due to increased penetration of renewable energy and energy efficiency particularly in solar.

The rapid price decline seen by the solar sector, an upward revision of the Indian solar mission, the launch of an international solar alliance of over 120 countries by Modi with the French president, François Hollande at the Paris COP21 climate summit and other factors have opened up solar not just in India but to an enormous number of countries around the world. As a result, several new business models emerged in the post-FiT world, which would enable the Country to achieve its 160 MW by 2022 target, making the same backbone to India’s pledge to the Paris summit to draw 40% of its electricity from renewables by 2030.

Hence, the story of “solarizing India’ is all about great promises and efforts to realize the potential. In my mind, there is no doubt about the fact that policy and development agenda play a critical role and the current Indian Government has shown the right will to do both. While the move to upward revise the target from 20 GW to 100 GW raised eyebrows, but making it a key ingredient in the Government’s bid to provide 24X7 power to all, connected the dots. The journey thereafter is filled with greater coordination between the centre and States and more importantly buoyed by the central government’s political will and willingness to listen to and support the State governments and private sector, investors suddenly found the Indian solar sector lucrative. Today, Solar is seen as an integral part of the India’s energy build-out through creating new economic opportunities, providing energy access to the millions of people still living without modern energy services and addressing climate change.

By analyzing the recent thermal and solar bids in India, it is safe to conclude that grid parity has been achieved which was the ‘holy grail’ and a key milestone towards large scale adoption of solar in India. The country, where the average solar tariffs were between Rs. 10.95/kWh and Rs.12.76/kWh in December 2006 has dropped to Rs 5.00 – Rs 5.50 in 2015 whereas the thermal bids during the last 6 months has landed in the range of Rs 4.00 to Rs 5.00. Thereby, safe to say India has indeed achieved grid parity and this could result in higher investor stickiness to the sector. On the same note, the Rs 4.63 tariff bid should be seen as placeholder and not debated too much till the time there are sustained ROI from the project.

India for once is going beyond all political persuasions with the States in sync with the Country’s vision. Thereby, the States are developing policies to boost solar capacity in their respective areas as per their requirements. Hence, it was not just the states that were already leaders in solar power, such as Madhya Pradesh, Rajasthan and Gujarat but relatively new ones such as Andhra Pradesh, Telengana, Karnataka, Odisha who are the game changers. While States such as West Bengal, Uttar Pradesh and Jammu & Kashmir, are working and developing policies to attract investments with an aim to build solar capacity.

According to reports, the total pipeline of yet to be commissioned project that have been allocated or are in the process of being allocated now exceeds 14 GW, thereby giving the stakeholders world over a confidence about the potential of the sector. Although discussion is limited to date, renewables form an important element of climate change adaptation, improving the resilience of existing energy systems and ensuring delivery of energy services under changing climatic conditions for India. This is timely as the country is projected to be the world’s most populous with 1.45 billion people by 2030.

The core of the debate whether the recent tariff fall, grid parity, the policy changes etc enthuse the investors enough to help India build out its infrastructure has been answered without any doubt. It is now just matter of time before India reaches its objective, but at this moment, the country should enjoy the ‘sunshine’ !