Challenges in Solar Manufacturing in India

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India’s peak power demand is expected to rise from current demand 153 GW to about 690 GW by 2035-36. And since, half of the country’s CO2 emissions come from the power sector (805.4 million tonnes in 2016), quick energy transition is not just an option anymore, it is a necessity. Solar shows a way out of this dilemma. Calculations reveal that using just 0.50 percent of its land, India can generate 1,000 GW of solar energy. Plus, India has considerable space in desert areas that can be used for generating energy. Government has also understood that for a country with GDP growing at about 8 percent, going solar is not one of the many options but the only viable one to bridge the ‘gap’ between supply and demand.

To harness India’s solar potential, the central government and state governments have taken several measures such as lining up large tenders, improving infrastructure, and creating demand for domestic manufacturers. And the efforts have sprung incredible results and opportunities. Government backed policies and financial aids have helped in doubling India’s solar capacities in recent years. From around 5 GW capacity in 2015, Indian solar sector successfully installed 10 GW in August 2017. Besides the utility scale installations, rooftop segment has also shown great growth surpassing the 1 GW mark, achieving 113 per cent growth rate in the last 12 months. Subsidies and rebates on capital expenditures, tax-free grants, additional one-time allowance, and acceptance to foreign investments have helped domestic manufacturing to flourish in India. Policies on- ‘Solar Park’ development, easy financing, net metering, viability gap funding, mandating solar installation in Government buildings, offering long tenure loans, and initiatives like International Solar Alliance have supported Indian solar sector to become the 3rd largest solar market in the world (overtaking Japan’s position). However, to achieve the set targets, India needs to add approximately 15 GW capacity each year for the next 5-6 years, which is more than 3 times the capacity it has added in 2016.

Challenges:

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  • Stabilizing flexible financing, incentives, and tax exemption benefits to domestic manufacturing industry
  • Reducing net metering implementation time frame to boost the solar implementation projects.
  • Avoiding importing solar modules (India spent $1.3 billion in 2015-16 in imports)
  • Creating demand for domestic solar modules
  • Extending the existing RPOs to captive consumers
  • Implementing and monitoring use of feed-in-tariff processes
  • Checking if the mandated industries/utilities are using or installing solar solutions or not
  • Increasing awareness of solar technologies
  • Bringing quality guidelines and establishing module assessment labs (currently India has 5 MNRE accredited labs) to ensure energy sustainability
  • Delay in Awarding Contracts [out of 12 GW of bids conducted in the FY 2016-17 so far, only 4 GW has been awarded. Additionally, out of the 2.5 GW DCR category projects (within 12 GW), only 0.850 GW has been awarded].
  • Delay in new manufacturing policy implementation
  • The huge discount in tariffs
  • Developing an easy certification process to establish high growth rate
  • Solar skill development – to harness solar potential by increasing domestic capacity and awareness.

There are also challenges like- delays in land acquisition, lack of uniform policy and implementation issues, low investment in R&D, and many more that need to be addressed.

Opportunities Exist

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Government support, increasing investor interest, raising energy demand, and global acceptance towards solar energy, are opportunities for Indian solar sector to grow. And, needless to say, financial support in guise of multi-billion dollar commitments, achieved through combined efforts of Government and private solar companies are creating great opportunity for Indian solar industry. With more than $37 billion investment commitments, Indian solar manufacturing industry will obviously increase, but to make ‘100 GW energy generation capacity by 2022’ a reality, domestic capacity enhancement is crucial. Government is offering capital subsidies to manufacturing plants in Special Economic Zone (SEZs) and outside SEZs, and bringing quotas to increase demand for domestic manufacturers.

The shift towards solar sector can help India scale great heights, claiming a large portion in the global energy sector, but to reach these opportunities, the country needs to boost its efforts.

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