India is fast moving towards a clean energy mix to support its consumer power requirements. It is the world’s third largest producer and fourth largest consumer of electricity in the world as of August 2018.
Going solar is a decision that has enormous importance in today’s world of climate change and uncertainty of rising energy costs. There are signals that significant investments and supportive stance from the government have started to pay off.
The falling costs of the renewables are making these alternative sources more viable to explore. In fact new solar and wind backed energy sources are now 20% cheaper than the average wholesale price for existing coal-fired power. The transition away from fossil fuels is supported by policy makers as well as changing markets.
How Solar has come up in a big way
For an economy that is still heavily dependent on coal for 60 percent of its energy mix, going solar is a huge step. The policy makers have supported the initiative in a big way. Under Prime Minister Narendra Modi’s energy agenda, an ambitious target has been set for renewables, with an aim to increase renewable capacity on the grid from around 57GW in May 2017 to 175GW by the end of 2022. Approximately 100GW of that capacity is expected to come from solar photo voltaics (PV).
India has already achieved 23 GW of solar installations with another 40 GW of solar power being at different stages of bidding and installation. The transition of the energy landscape in India is inevitable with the share of renewable energy going up rapidly. India has already overtaken US to become the third largest solar power market in the world and is expected to grow exponentially in the years to come.
Solar investments fuel market growth
The potential for solar energy capacity in India is immense. The majority of the country’s landmass is optimally located such as to receive peak solar radiations. The World Bank has in fact termed India as having the best conditions to tap into solar energy and utilize this potential.
Significant financing from commercial and multinational investment banks is helping to drive growth. In 2017, the European Investment Bank (EIB) announced a partnership with India’s YES Bank, with each partner setting aside $200m in loans to help finance solar and wind projects in the country. This comes after the EIB, in the same year, released a $214m loan extension to the State Bank of India to support five key grid-scale solar energy projects that are due for completion by 2020.
The World Bank too has committed to providing $1bn in lending across FY17 which is its highest level of support to any country for solar energy. It is also supporting the International Solar Alliance, formed after Paris Climate Conference in 2015. This could be a key facilitator for finance for Indian Solar domain in the years to come.
According to data released by the Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflows in the Indian non-conventional energy sector between April 2000 and December 2018 stood at US$ 7.48 billion. This is driving strong growth in large-scale solar parks such that the government has decided to double the solar park capacity.
Creation of jobs
Solar deployment, operation and maintenance creates recurring additional jobs in the sector. With domestic and foreign investments flowing in the sector, there is a potential for parallel expansion in the job market.
For example, to set up a wind industry, one would need to look for specialists for manufacturing, project experts, installations, maintenance, construction, turbine installation, transportation and logistics. The local governments will have to build factories for support function which will in turn need workforce.
The main reason for such growth are the economic indicators. Businesses have realized that sustainable development is key to success, long-term performance, and investment. Besides that, the prices on solar and wind products have dropped—making it more affordable.
Nurturing the Indian Solar sector domain is crucial for shaping the future of renewable energy in a big way and also control solar development costs at a time when domestic manufacturers are struggling to compete with Chinese firms, both technically and economically.
In the coming years, building the domestic capacity and improving technologies will be a defining issue for solar industry in India. This could be said in particular for small scale roof-top solar panels which are price-sensitive.
With a wealth of emerging solar technologies and new projects, India remains a prime location for an industry that could well catapult it into achieving its international climate change goal as well.