India is running one of the largest and most ambitious renewable capacity expansion programs in the world. In 2019 at UN Climate Summit, India announced that it will be more than doubling its renewable energy target from 175GW to 450GW by 2022. Solar Energy in India has Giant Opportunities.
The Indian government had an initial target of 20 GW solar capacity for 2022, which was achieved four years ahead of schedule. The installed solar capacity in September 2020 was 36 GW and India has an ambitious target to achieve 450 GW of renewable energy capacity by 2030. Solar and wind energy have the lowest cost of power for new capacity.
Renewables are already growing faster than conventional power sources. There have also been recent tenders for procurement of round-the-clock renewable power that have yielded low tariffs. This is all very exciting and bodes well for an accelerated energy transition in India. The pandemic has created a quickly growing awareness of sustainable thinking, leading for instance in growth in roof-top solar installations, commercial, industrial and residential.
In India, the main drivers for many companies to procure renewable power are rising electricity tariffs for commercial and industrial consumers, falling prices for solar photovoltaic (PV) technology and corporate sustainability goals. Tariffs for solar electricity have become as low as USD 0.02. The total installed renewable capacity in India is expected to be 55% of the total capacity by 2030, whilst in 2020 it was 38%.
The Indian Government has a clear focus on developing the renewable energy market.
Jawaharlal Nehru National Solar Mission (JNNSM), Government of India’ initiative, approved in 2010, is one of the eight key National Mission’s which comprise India’s National Action Plan on Climate Change (NAPCC). The key objective is to establish India as a global leader in solar energy.
Installed renewal power capacity in India as of September 2020
- Wind Power: 38.12 GW (42.7%)
- Solar Power: 36.05 GW (40.4%)
- Biomass Power: 10.14 GW (11.4%)
- Small Hydro Power: 4.73 GW (5.3%)
- Waste-to-Power: 0.16 GW (0.2%)
Solar energy in India has gigantic opportunities. To take advantage of these opportunities one needs to understand the key segments in this field. The Indian solar energy market is divided into four main market segments
Utility Scale Market
Utility Scale Market is the biggest in India. Utility scale solar projects sell the power they generate to power distribution companies. These are typically large projects ranging from 50 – 500 MW, developed by private sector but allocated through a public bidding process. The contracts are mostly for 25 years with a fixed tariff. The energy is ultimately sold to state level distributors/discoms, who bundle renewable energy with other sources and supply to end customers.
Key private sector developers active in India’s utility scale market are Adani Green, Acme Solar, Renew Power, Softbank Energy, Azure Power, Tata Power, Avaada, Greenko, Engie and Ayaana. Whereas NTPC and NLC are key public sector companies.
Corporate Procurement through Open Access
These projects are typically 1-50 MW in size, 10-15 year contracts set up by private developers Businesses can invest in projects themselves (“captive generation”) or sign bilateral Power Purchase Agreements (PPA).
Roof-Top Solar Market
India’s rooftop solar market is divided into residential, commercial, and industrial. Commercial and industrial consumers in India have a higher power tariff when buying from Discoms, making rooftop solar projects lucrative.
Policy driven Solar Power Procurement
To increase farmer incomes the government has recently initiated the “Kusum” policy for agricultural sector, in which farmers power their water pumps using solar power or use their non-productive land to generate power and sell it to the government..
The solar energy business is growing fast. In 2020 the pandemic had a negative impact on total installations, due to lockdowns and advancement of installation deadlines, however, the rate for installations has recovered since, particularly for rooftop solar has also been observed in recent months, due to heightened awareness for sustainability.
India’s solar installations have been driven by utility scale solar, with over 35 GW of installations to date. Rooftop solar power accounts for 4 GW, predominantly led by industrial and commercial installations. In addition to its large-scale grid-connected solar photovoltaic (PV) initiative, India is developing off-grid solar power for local energy needs and has recently started a scheme that harnesses solar energy to enhance farmer incomes.
The Indian government is keen to localise value chains, and has imposed import duty structure on solar panels, inverters and similar especially from China. Yet, most solar panels and inverters are still imported. These trade barriers have recently been increased with a hope to attract manufacturing investments.
Despite major efforts to push renewables energies, India is still largely dependent on fossil energy sources. According to a recent Ernst & Young report, the renewables sector has primarily been developed by the private sector. Government’s initiatives should also be acknowledged.
Market Insider’s Tips for Foreign Companies
In our discussion with Mr Jasmeet Khurana of World Business Council for Sustainable Development (WBCSD), India (https://www.wbcsd.org) it became clear that while the solar market is competitive, many international companies have been successful in India.
The key success factors for entrants are innovative technology and lower cost of capital, local team and ability to adapt in the market. However, international businesses need to build local operational competence which can also be gained by establishing Indian operations and teams or through partnerships.
Innovation capability is going to be increasingly important in India’s energy transition journey. Battery storage technology, for example, is a new market with huge demand. Similarly, data monitoring of power plants, AI driven plant optimisation are crucial. Innovative add-on services, based on new technologies such as AI, machine learning, internet of things, etc. will play an increasingly greater role in India’s power sector.
Key Take Aways
- Specialised global SMEs with niche technology expertise will find an important growth market.
- The solar market is growing fastest among the renewables and there are programmes and incentives in the sector to encourage investment.
- It is mandatory to understand and adapt in the ground realities, in which local partnerships and teams will play a key role.
- India is one hand an early adaptor of state-of-the-art technologies, but on the other hand India still suffers from scarcity of reliable electricity supply for many consumers
- The ecosystem has improved a lot, providing also access to incentives and public sector support
- Solar energy in India has gigantic opportunities, contact our experts to find out how you can capitalise on these.