Solar : Past, Present and Future

The inception of India's solar energy transformation can be traced back to the launch of the Jawaharlal Nehru National Solar Mission (JNNSM) in January 2010, commonly referred to as the National Solar Mission. With an initial target of generating 20 GW of solar power by 2020, the mission gained momentum swiftly. Such was the pace of progress that by 2015, the nation had already achieved the 20 GW target, prompting a momentous adjustment to set a new goal of 100 GW by 2022. This remarkable feat not only highlighted India's dedication to clean energy but also demonstrated its potential to rapidly adopt and deploy solar technologies.

However, India's ambition in the realm of solar energy did not stop there. In a defining move in August 2021, the government further elevated its solar aspirations by setting an even more audacious target of reaching 300 GW by 2030. This revision not only underscores India's commitment to sustainability but also positions it as a global frontrunner in renewable energy deployment. Such a bold trajectory showcases India's role in steering the world toward cleaner energy solutions, all while addressing pressing concerns about climate change and energy security. The journey from 20 GW to the envisioned 300 GW stands as a testament to India's resolve and its capacity to lead the way in solar energy innovation and implementation.

Back in 2011, the total solar power production was a mere 0.5 GW. However, the subsequent years witnessed an extraordinary growth trajectory. By 2022, the installed solar capacity had surged to nearly 80 GW, showcasing an astonishing Compound Annual Growth Rate (CAGR) of approximately 84% over this period. However, India didn't quite reach its goal of having 100 GW by 2022, but it was very close. 

Solar Tariff over the years :

When it comes to solar tariffs, there are some key points that highlight the cost-effectiveness of solar energy in comparison to traditional sources:

1.  Affordability Compared to Coal:

Solar energy has proven its financial viability. Presently, the cost of electricity generated through solar photovoltaic (PV) systems is approximately 18% lower than the average cost of electricity produced by coal-fired power plants. This reduction in cost makes solar power an attractive and competitive option for meeting energy needs while simultaneously reducing carbon emissions.

2. Cost-Effective Installation:

India has achieved remarkable progress in reducing the cost per megawatt (MW) for setting up solar power plants. This achievement positions India with the lowest cost per MW for solar power installation globally. This reduction in installation costs is due to advancements in technology, streamlined regulatory processes, and increased investor interest in the sector. Such favorable conditions have enabled India to attract substantial investments in solar projects.

3. Global Decline in Tariffs:

On a global scale, the price of solar PV electricity has experienced a significant decline. As of April 2021, the levelized cost of solar PV electricity reached as low as rupees 0.77 per kilowatt-hour (kWh). This price point is considerably cheaper than even the lowest solar PV tariff in India. This phenomenon emphasizes the international trend towards more cost-effective renewable energy solutions and strengthens the case for embracing solar power.

Yearly Global Decline in Tariffs ( Price per KWH) :

These factors collectively highlight the economic feasibility of solar energy adoption. The consistent reduction in solar tariffs, both domestically and internationally, signifies the potential of solar power to provide affordable and sustainable energy solutions while reducing the reliance on conventional and polluting sources of energy. As technological advancements continue to drive down costs and increase efficiency, solar energy is poised to play a pivotal role in shaping a cleaner and more affordable energy future.

Capacity addition trend in India :

When discussing utility-based solar capacity and its rapid expansion trend, there are several key points that shed light on this remarkable development:

1. Dominance of Utility-Scale Capacity:

Out of the impressive 63 GW of commissioned solar capacity, a significant chunk, nearly 53 GW, is derived from the utility-scale segment. Within this category, Open Access (OA) projects make up only about 14%, while the lion's share of 86% originates from power purchase agreements (PPAs) with distribution companies (discoms). This distribution signifies the considerable role utility-scale projects play in India's solar energy landscape.

2. International Investment and Long-Term PPAs:

The rapid expansion of utility-based solar capacity owes much to the interest of international investors. This attraction is fueled by the presence of standardized and secure long-term (25-year) power purchase agreements (PPAs). These agreements provide a stable revenue stream, making utility-scale solar projects an attractive investment option.

3. Factors Driving Growth in Discom PPAs:

The rise in discom PPA projects is underpinned by several factors:

- Solar Parks Accelerating Development: The creation of solar parks has streamlined the process of obtaining land and establishing evacuation infrastructure. This efficiency has facilitated faster project implementation.

- Shift from FiTs to Auctions: The transition from feed-in-tariffs (FiTs) to reverse bid auctions has introduced greater competition, ensuring that tariffs reflect market realities. This change has resulted in more cost-effective solar energy procurement.

- Enhanced Payment Security: The introduction of increased payment security mechanisms for project developers involved in central agency-tendered projects has bolstered investor confidence. This security ensures that developers receive timely payments, reducing financial risks.

The expansion of utility-based solar capacity signifies India's strides towards a sustainable energy future. The substantial contribution of utility-scale projects, driven by international interest, robust long-term PPAs, and favorable policy changes, demonstrates the nation's commitment to large-scale solar energy adoption. As these projects continue to evolve, they not only contribute significantly to the energy mix but also stimulate economic growth, create jobs, and reinforce India's role in global renewable energy development.

Utility-scale Solar Capacity Addition Trend :

Rooftop solar energy in India has witnessed a transformative journey characterized by challenges, growth, and recent successes. The initiative gained traction in December 2015 with the launch of the first phase of the grid-connected rooftop solar program. This ambitious endeavor aimed to incentivize residential, institutional, and social utilization of solar power. Subsequently, the second phase, endorsed in February 2019, set a lofty target of achieving 40 GW of cumulative rooftop solar capacity by 2022. Central financial assistance (CFA) was introduced to motivate this expansion.

However, the initial progress was slow. In its nascent stages, India's rooftop solar market faced hurdles such as limited consumer awareness, inconsistent policy landscapes between central and state governments, and a lack of accessible financing options. Yet, recent times have witnessed a remarkable shift. A surge in rooftop solar installations has been spurred by factors like declining technology costs, escalating grid tariffs, heightened consumer awareness, and the pressing need for cost savings, particularly within the commercial and industrial sectors.

Over the past year, the residential segment has experienced a notable upswing, driven by robust state government initiatives. A standout example is Gujarat's Surya Urja Rooftop Yojana. This program's incentives led Gujarat to achieve the highest cumulative rooftop installed capacity among all states, approximately 1.6 GW. Under this scheme, the state offers a substantial 40% subsidy for systems below 3 kW and a 20% subsidy for 3 kW to 10 kW rooftop solar installations. These endeavors collectively exemplify India's progress in fostering rooftop solar adoption, with increasing awareness, innovative state-level programs, and favorable market dynamics propelling the nation towards achieving its ambitious solar energy goals.

Rooftop Solar Capacity Addition Trend :

Global solar market

In 2022, solar power maintained its position as the leading contributor to newly added global power generation capacity, underscoring its supremacy among renewable energy sources. Among the 362 GW of new renewable capacity added during the year, solar photovoltaic (PV) accounted for a remarkable 66%, connecting 239 GW to the grid. This impressive share represents a substantial increase from the 56% contribution in the previous year, emphasizing solar's growing importance in the global energy transition. Notably, solar's dominance was evident as it installed twice the capacity of all other renewable technologies combined. 

The trend in renewable capacity expansion has shown consistent growth in recent years, driven by both the ongoing global energy crisis and supportive policy measures. Total renewable capacity additions surpassed the previous year by 56 GW, marking an 18% rise from 2021's 306 GW. The surge in solar PV capacity in 2022 effectively offset the decline in annual wind installations, which decreased from 95.3 GW in 2020 to 93.6 GW in 2021 and further down to 77.6 GW in 2022. 

While these developments are positive, it's crucial to maintain perspective. Solar power's contribution to overall electricity demand remains relatively small, comprising only 4.5% of global power production in 2022, up from 3.7% in the preceding year. This signifies a notable growth acceleration of 22% in 2022, compared to the 16% growth (0.5 percentage points) observed in 2021. In contrast, other renewable sources collectively provided about 25.4% of the world's power generation, registering a 3% increase from the 24.6% share in 2021. Despite this, non-renewable sources still hold a dominant position with a 70.1% share, although their presence decreased by 1.6 percentage points in 2022, reaching an unprecedented low.

Challenges

The solar industry in India faces a range of challenges that have hindered its growth and potential. These challenges include:

1. Lack of Momentum in Rooftop Solar Installation:  

Despite governmental efforts, the adoption of rooftop solar installations in India has not gained the expected momentum. A key factor contributing to this is the absence of a compelling Return on Investment (ROI), mainly due to the upward trend in solar prices.

2. Impact of Basic Customs Duty (BCD):

The announcement of the Basic Customs Duty (BCD) on imported solar cells and modules, starting from April 1, 2022, by the Ministry of New and Renewable Energy (MNRE) has introduced challenges. While intended to boost the competitiveness of domestic modules, the BCD has raised concerns for solar PV manufacturers operating within Special Economic Zones (SEZs), where over half of India's solar cell manufacturing units and about 40% of panel manufacturing units are located. The BCD imposition has the potential to significantly affect around 15 GW of solar projects that were awarded prior to the announcement. These projects, initially intended to begin operations before April 2022, faced delays due to the pandemic. Unfortunately, the grandfathering provision was not extended to these projects, leading to additional costs for end-consumers.

3. Underdeveloped DISCOM Ecosystem: 

India's distribution company (DISCOM) ecosystem is primarily built around thermal energy. Shifting to solar raises concerns about cost competitiveness and Transmission and Distribution (T&D) losses, which could impact profit margins for DISCOMs.

4. Limited Access to Finance: 

Access to financing for rooftop solar projects is easier for creditworthy commercial and industrial (C&I) clients with higher credit ratings. However, for clients outside this category, the credit schemes offered by banks are often unattractive. This situation is especially prevalent in the Micro, Small & Medium Enterprises (MSME) sector, which holds substantial untapped rooftop solar potential. The lengthy loan grant process for rooftop systems, high interest rates (exceeding 14%), and the scarcity of non-collateralized finance options deter MSMEs from adopting solar solutions.

These challenges collectively hinder the growth and expansion of the solar industry in India. Addressing these issues requires collaborative efforts from government bodies, regulatory authorities, financial institutions, and the private sector to create an environment conducive to sustained solar adoption and development.