Most significant roadblocks to India’s solar energy goals

Updated: October 18, 2021 4:58 PM

According to the Ministry of New and Renewable Energy (MNRE), India imported $2.5 billion worth of solar wafers, cells, modules, and inverters in 2019-20.

Paris Agreement, installed energy capacity, solar equipment imports, Ministry of New and Renewable Energy, solar wafers, cells, modules, and invertersIndia's solar business is now largely dependent on solar equipment imports.

By Manjesh Nayak

As part of the Paris Agreement, India has committed to produce 40% of its installed energy capacity from non-fossil sources by 2030. India’s 2022 target of renewable energy (RE) is 175 GW which includes 100 GW of solar power. Recently, India has also set an aspirational goal of installing 450 GW of RE by 2030. According to the Central Electricity Authority’s Optimum Energy Mix report, the country’s electricity demand would be 817 GW in 2029-30, with 450 GW coming from renewable energy sources of which solar would contribute 280 GW i.e. over 60%. To reach this solar energy target, an average of 25 GW needs to be installed every year. We need to build enough manufacturing capacity back home to be ready on the supply side. Presently, the annual domestic manufacturing capacity of solar inverters stands at 5 GW, while for solar cells and modules it is 3 GW and 10-15 GW, respectively. We need to scale up our manufacturing capacities keeping the RE target in view.

India’s solar business is now largely dependent on solar equipment imports. According to the Ministry of New and Renewable Energy (MNRE), India imported $2.5 billion worth of solar wafers, cells, modules, and inverters in 2019-20. However, interruptions caused in international trade due to COVID-19, particularly on imports of solar modules and solar cells, hampered India’s solar capacity expansion. To meet its RE aspirations and address it’s increasing power requirements, we need to shift our reliance on imports and boost domestic production through policy measures.

Following are the significant roadblocks in achieving India’s solar energy goals:

  • The country lacks manufacturing for polysilicon, ingots, and wafers, which are the crucial phases of the solar photovoltaic (PV) manufacturing chain and are both capital and energy-intensive. Furthermore, inadequate integrated set-up, latest technology, and economies of scale, high cost of land and electricity, limited capacity utilisation, high finance costs, and a shortage of skilled manpower result in increased manufacturing costs.
  • The main challenge impeding the achievement of the solar target in India is policy uncertainty. Discoms in many locations discourage net-metering and power banking because they fear losing their high-paying customers. The current solar legislation differs by state, and the process of buying power between states is inefficient, creating a barrier for consumers. Changes in policy create confusion among all parties and generate needless delays. To address such challenges, a pro-consumer, lean, and consistent solar strategy is necessary, one that promotes investment while minimising the complexity of laws.
  • When looking at the financing situation in India, loans for fossil-fuel powered vehicles are easily and quickly accessible, whereas securing a loan for a solar project is difficult even when the technology is visibly more efficient, reliable, and sustainable in the longer run.
  • When compared to other nations, solar tariffs in India are extremely low, making them unsustainable for developers and could potentially lead to compromised quality of the solar system. As a result, companies have to manage viability concerns in terms of profits and tariffs.
  • There is a scarcity of qualified Engineering Procurement and Construction (EPCs) personnel. Youth training and upskilling are essential to fulfil the demands of an ever-rising RE industry.

Addressing the roadblocks:

To begin with, it is important to build a strong grid infrastructure. This could be accomplished through financial incentives and technological advancements. Promoting and supporting solar cells, modules, and other hardware manufacturing units, modernising grid networks, incentivizing R&D efforts, and other infrastructure-related measures should also be considered.

In addition to this, international and domestic investors are putting their money into large-scale RE projects. For these reasons giving tax holidays, and other benefits to RE investors is crucial. These utility-scale renewable energy projects have seen the lowest tariffs and are critical to our energy transformation.Through strong financial measures such as green bonds, clean energy funds, and institutional loans, the Indian solar energy sector will wisely invest in efficient and evolving solar technology.

Another pertinent point is the huge subsidies presently granted to fossil fuels should be transferred to renewable energy. In 2019, the RE subsidy was only 12% of the subsidies given to coal and oil.

Furthermore, it is also necessary to train and upskill the youth in order to fulfil the demands of a flourishing RE industry. A key role would be played by expanding the MNRE’s Surya Mitra training programme and delivering certification through empanelled institutions.

In conclusion, for more organic growth of the renewable sector, the RE targets should be enforced through the State Governments. This would be more widely accepted, and dealing with local and political issues would be easier. India, being a tropical nation, solar energy is the easiest to harness among the renewable energy sources. Thus, the solar sector will become an indispensable and essential component of the Indian economy in the upcoming future and will meet our energy requirements.

(The author is Director and CFO, Oorjan Cleantech Private Limited. Views expressed are personal and not necessarily that of Financial Express Online)

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