2023’s Promise for Solar. Will India Rise To The Challenge?

Early into 2023, the ground is set for a momentous shift for solar. But first, the numbers. In the Jan-Dec period, figures from India’s Central Electricity Authority show that the country added 13956 MW of solar capacity, of which just over 11 GW was utility scale solar. This is by far the best ever performance on capacity additions, ever. Of course, a lot of these are catch up installations, delayed due to the pandemic disruptions. For added context, of the 16,022 MW of total power capacity added during the year, Solar accounted for 87% of the additions, cementing its role as the pre-eminent renewable energy choice for India. Finally, out of total renewable capacity of 120,900 MW (excluding large Hydro), solar today accounts for over 50%, at 63302 MW.

Those are the good numbers. On the flipside, the country needed to add much more, to reach its stated target of 175 GW of renewable energy by this year. Taking even the financial year ending March 2023 into consideration, that figure of 121 GW above is unlikely to advance much, with even 125 GW a small possibility. That will mean a significant 28% shortfall for the 2022 targets. The culprit? Solar largely, as solar will account for the lion’s share of the missing 50 GW by March 2023. With only 63 GW achieved out of a targeted 100 GW, the 37 GW shortfall in solar, and the reasons thereon, are well known, but more importantly, we finally seem to be moving to tackle those too.

Consider how rooftop solar especially painted a dismal picture with just 7.2 GW of rooftop capacity installed as on November 18, 2022. This includes both residential and commercial sectors, and keeping in mind the target of 40 GW from this sector, it is obvious where the issue lies. Reflecting the delays, the timeline for India’s Rooftop Solar (RTS) programme has been recently extended by four years because of slow progress. The original timeline of 2022 was pushed to a later date of March 2026, with no extension and now aims at achieving its target of 40000 MW (40 GW) rooftop solar (RTS) capacity addition by March 2026. Interestingly, there is no increase in the budgetary allocation.

But even the record installation numbers from 2021 have not really left anyone pleased, as these numbers reflect a lot of pending projects from the previous two years that were commissioned during the year. More alarmingly,  the numbers do not reflect a distinct slowdown in new capacity additions since the second half of the year, a slowdown that continues till December, when only 1336 MW could be added. Those numbers bely any hopes of a quick turnaround that is needed to meet annual targets of 26 GW and above that are needed to meet the country’s 2030 target of 280 GW.

The challenges are many, as we found out when we spoke to a cross section of industry.

Deepak Pandey, CEO at Invergy, a solar inverter and storage firm, sheds light on why 2022 wasn’t such a good year for solar, “Comparing with last year, the rise in BCD on module imports, rising module crisis on the global market continued to create project delays.” It may be recalled that 40% basic customs duty on modules and 25% on solar cells was imposed in April 2022 to support domestic manufacturing, an objective it seems to be meeting considering the tripling of domestic capacity expected soon, it has created a short term crisis of modules at competitive prices.

Bharat Bhut, Co-Founder & Director of Goldi Solar avers that “large utility scale projects that were won  at prices under Rs 2.30/kWh will be at risk at current prices”. Bhut adds that with a sharp drop in process in the past 3 weeks,  he remains hopeful of a strong rebound in the Jan-March quarter and post that.  A key expectation from 2023 is from the Commercial and Industrial sector (C&I) sector.

The sector is largely expected to pick a significant part of the slack from the utility scale projects that grapple with pricing and viability challenges.

Vineet Mittal, Director & Co-Founder, Navitas Solar, is hopeful that 2023 would spell out a better story, “The main reason (for underperformance of C&I) can be lack of transparency in policies and price uncertainty. However, with the launch of certain policies, the market has settled down now and everyone got more clarity about the future.

In 2023, we certainly believe the trend will reverse again.”

Ishan Chaturvedi, Co-Founder & Director, Vareyn Solar adds that “There are multiple reasons for slowing down of new solar capacities addition by end of 2022, especially in the C&I Segment or up-till 5MW.Frequent regulation changes, the addition of anti-dumping duties and fear of covid coming back.”

Namit Aneja, Key Accounts Leader-North, East India, Nepal & Sri Lanka For Sungrow, the global leader in solar inverters now adds that, “Surge in demand in regions like US and Europe is also not helping the cause of Indian solar industry because most of the capacities being utilised in those regions with manufacturers giving priority to them considering the price advantage.”

However, everyone agrees that heading into 2023, the introduction of the Green Energy Open Access Rules is one policy that has the potential to make a favourable impact this year. The rules allow any consumer with a connected load of 100 kW or above to get renewable energy through open access from any renewable energy generating plant set up by himself; or by any developer. The open access has to be granted within 15 days. The application for open access can be made on https://greenopenaccess.in/ for processing of applications related to green energy open access by the stakeholders including open access participants, traders, Power Exchanges, National / Regional / State Load Despatch Centres, Central/State transmission utilities. The catch? States need to notify their own compliance and local rules and deviations, which most have not done yet. The good news is that leading industrial states like Karnataka, Maharashtra, Tamil Nadu have made the right moves, and backward states like Uttar Pradesh have also come out with their policy, which should encourage uptake going ahead.

“Open Access has yet to open up in many states, the major states which have been doing well in solar have seen a saturation in the requirement as many big players have already done the needful for themselves,” points out Ishan Chaturvedi. “The Next big step in openaccess is for the commercial segment, I.e. 0.5MW – 3MW of clients who arecurrently stuck somewhere in the middle as they don’t have the space for arooftop installation nor do they have a favorable investment environment. I feel it would be correct to bet on the expansion of the C&I Segment in the coming time,” sums up Chaturvedi.

Smaller but significant states like Delhi have also put out draft solar policies that seem very favorable finally, and post formal notification, these should also lead to a strong uptake in both residential and commercial segments in these regions.

 Aneja reminds us that “ the potential in C& I segment is huge as if we see the power consumption in C&I segment is approx. 45-50% of total power consumption and uses of RE power is still <5% of C&I requirement. Govt handholding and long-term consistent policies can help the segment to grow fast specifically for solar deployment”.

Green Hydrogen- Early Days Yet

The new rules in Green Open Access also provide an impetus to Green Hydrogen and Green Ammonia as it eliminates any additional charges, such as cross-subsidy surcharges along with any other surcharges, thereby paving the way for more and more green hydrogen projects. In another policy reform aimed at Green Hydrogen adoption, The government’s Green Hydrogen Mission for India has got a shot in the arm with the formal approval of Rs 17,490 crore for the same by the Union cabinet.  The allocation is expected to be used for a special PLI (Performance Linked Incentive) scheme for manufacturing a base for electrolysers and other related equipment for green hydrogen manufacturing in India.

But the impact of these moves on Green Hydrogen, while positive in the ling term for solar energy that is expected to play a key role in providing the renewable energy needed for it, is unlikely to make any impact just yet.   Industry players expect significant investments into solar for green hydrogen production only post 2025. The high cost of production for green hydrogen is the key reason. As of now, green hydrogen production prices vary  between ₹320 and ₹330 per kg in the country. However, a KPMG report predicts that by 2030, it would fall to ₹160-170 per kg. Further, domestic  electrolyser manufacturing will help to bring prices further down. If all goes well, solar capacity created to serve the green hydrogen targets of 5 million tonnes per annum by 2030 would be anywhere between 65 GW to 115 GW, depending on the process.

With some of the most competitive levelized cost of electricity (LCOE) for solar and wind in the world while remaining a net importer of natural gas, the potential for green hydrogen in India is a high indeed. The  waiver on inter-state transmission system charges on pumped storage hydro projects commissioned till 30 June, 2025 will also support faster solar growth, with close to 15 GW of pumped storage projects already announced so far.

2023: Needed- A Policy Thrust

2022 was clearly the year of (draft) policies and regulations. The new rules pertaining to Green Open Access finally saw the light of the day. The second tranche of the PLI scheme was also approved. Even as the Electricity Emendment Bill continues to go through procedures, the national rooftop portal was also launched to streamline applications. Several States, such as Uttar Pradesh, Delhi and Madhya Pradesh, Odisha announced their ambitious policies. There were major announcements on strengthening renewable transmission projects and supporting system including infrastructure. And of course, outside of solar, the monumental National Repowering Policy for Wind Power Projects – 2022 also came into being. Unodubtedly, A slew of policies have been introduced, but their implementation is a major question, and has been leading to project delays.

Speaking of the Electricity Amendment Bill, for instance, several questions about the subject of power subsidies, and role of union and state government still loom large over it.  If there could be a poster child for irregularities in policies- state-wise and procedure-wise (application), it is the rooftop policy despite the introduction of which, the uptake of rooftop in solar in most states outside of Gujarat (which has digitalised and simplified the process) has been slow. Besides, the policy does nothing to stem  the challenge of high prices of installation. It doesn’t help that the policy has been seeing regular fluctuations, causing confusions and delays.

Critical issues like the enforcement of Renewable Purchase Obligations (RPOs) on states await the passage of this bill.  The policy on net-metering is another one that has been far from stable. Within its ambit, The net metering limitations, such as exclusion of rooftop solar systems that exceed 10 kilowatts (kW) is an example of fluctuating policy norms that end up stalling projects, large scale projects in this case. It isn’t a surprise

then when Vineet Mittal remarks, “Our expectations from the government, policy makers and the regulators are that they should fast track the implementation of policies. Moreover, solar policies are frequently changing, therefore we expect that the stability of the policies should be maintained. These two big changes can surely move the needle for the sector as a whole.”

Bharat Bhut also laments the slow progress at state level when it comes to open access policies, besides simplifying rooftop solar adoption at residential level. “ it’s really up to the states now to ensure faster progress, and we can only be hopeful that better awareness and experience with lower solar costs will drive them in that direction”, he adds.

Ishan Chaturvedi opines, “The big changes we expect this year would be Virtual Net-Metering & relaxations on approvals on Utility Scale Plants or Solar Parks and ALMM on Solar Inverters.”. That’s a high ask, considering the many lobbying against such a move.

Some of the major challenges confronting developers when it comes to establishing solar parks are acquisition of clear land; incongruency  in timelines between solar projects and power evacuation infrastructure; environmental issues such as the Great Indian Bustard (GIB) issue in Rajasthan and Gujarat that has apparently held up almost 8 GW of projects. The numbers speak for themselves: pertaining to the Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects’, a total 57 solar parks of cumulative capacity 39,285 MW were approved until November-end. But in December 2022, only under 11,000 MW were commissioned for solar parks.

Charting 2023 Goals Solar firms reveal their plans for 2023… “Navitas Solar hopes to clock 250 Cr of revenue in FY23. We have already purchased land for new expansion plan and we hope to clear all the formalities this year and start working on the construction. At Navitas Solar, we have already started working on sectors like large-scale supply, dealer financing, end user financing, carbon market, agrivoltaics, solar parks and retail EPC segments up to 10 MW single projects and we’ll deep dive in all of them.” -Vineet Mittal, Director & Co-Founder, Navitas Solar “The current market has a big footprint of existing customers who are looking for companies with good O&M Portfolio and standardised practices. Vareyn Solar having an experience of handling 76MW+ C&I Segment clients is very soon going to announce a holistic installation & maintenance model which will include replacement of broken and damaged solar PV panels, discom billing support, consumption & generation analysis monthly, and much more at a convenient rate.” -Ishan Chaturvedi, Co-Founder & Director, Vareyn Solar “Servotech’s strategy is centred on identifying regional variances in energy use and demand for energy by location. This transparency enables us to match renewable energy plans with carbon reduction objectives. Prioritising markets and renewable energy sources from top to bottom will enable successful strategy implementation.” -Raman Bhatia, Founder & Managing Director, Servotech Power Systems Ltd “We plan to push hard on expansion, across more states, as well as larger projects for corporate clients. Even our capacity expansion plans to 6 GW are likely to be see an acceleration, as we believe the market will be ready for it very soon. So expect a major announcement soon”. -Bharat Bhut, Co-Founder & Director of Goldi Solar “Cost is always a concern, and trying to have better deals with regard to the finances will be our goal in 2023.” -Suthagar Santhanam, VP Projects, Amplus Solar “This year market will see lots of installations with newly launched “1+X” modular design Sungrow inverter and 295 KW rating inverter. Both the products are launched considering optimum block sizes like 8.8MW or 8.85MW with advantages of multiple MPPT and easier O&M. We intend to make our service support team stronger and better than the rest in the industry.” – Namit Aneja, Key Accounts Leader-North, East India, Nepal & Sri Lanka For Sungrow

Technology Trends

Progress has finally come, and India looks set to catch up with the rest of the world with the phase out of polycrystalline modules, except for specific segments where pricing and domestic sourcing are key. While not good news for the many smaller manufacturers here, it is an inevitable shift for the sector as a whole. Going beyond poly, there is a notable shift from p-type panels to n-type panels, which is a kind of wafer that has a degradation of less than 0.4 per cent annually. This will enable to spread of  700 W panels. Other trends like use of bifacial panels for utility scale projects, or the experimenting with multiple storage technologies to find a good fit with the Indian market will also take place, say our respondents.

Solar O&M is also set to make a jump into more use of waterless cleaning, drones, and more evolved technologies to track and optimise plant usage. 2022 saw a larger number of O&M tenders for solar plants being floated. BHEL, SJVN, WBSEDCL, Coal India, for instance floated tenders for the O&M of solar power plants. A drop in prices of O&M services has contributed to its popularity. Of course, the largest Indian developers like Adani Green Energy, Renew Power and more continue to do their own O&M, in a departure from the trend in many other markets.

Talking about inverters, Aneja adds that ”I can proudly say that Sungrow has always been world leader in launching new technologies be it 2.5MW containerized solution, 3.125MW inverter rating, highest rating string inverter of 350KW and recently launched “1+X” central inverter which not only helps easier O&M but also provides multiple MPPT function to maximise energy generation. All new inverter models are compatible with higher rating modules/ bifacials modules as per the industry requirement and future trend.”

Invergy’s Pandey expects 500 kW inverters to shine in 2023 , even as Hybrid inverter prices, at the same time, will slide, in his opinion. BIPV (Building Integrated Phot Voltaic) is another technological innovation he says is likely to rule 2023 and 2022 only affirms this.

 As per a report, “States like Rajasthan, Jammu & Kashmir, Maharashtra and Madhya Pradesh constitute 50% of the total PV potential in India. However, among the states, only Punjab, Karnataka, and Tamil Nadu have utilised more than 20% of their PV potential. The remaining states have not been able to make use of a majority of their PV potential, which presents a significant opportunity for growth in the renewable energy sector.”

Vineet Mittal believes Poly modules are still the best choice for residential customers in terms of cost. “Once, residential rooftop installers start to prefer Mono modules, then we can say that poly modules will be phased out soon.”

Raman Bhatia, Founder & Managing Director, Servotech Power Systems Ltd, brings a new perspective to the table as he says, “The biggest technological evolution I expect to see is the optimization and proliferation of concentrated PV cells. With the aid of an optical device, a significant portion of sunlight is focused onto the solar cell in concentrating photovoltaics (CPV). This method uses high-efficiency but pricey multi-junction cells to concentrate sunlight onto a small area, requiring less photovoltaic material to collect the same sunlight than non-concentrating PV” and goes on to conclude that, “Once CPV becomes more universalised, manufacturers and users will have a world of solar benefits at their end.”

And then there is the vexed issue of discoms. Aneja puts it well when he stresses that “ DISCOMS are the back bone for maintaining cash flow in the power generation market as well as help to boost the confidence of investor, developers, so more investment can be directed towards RE development. As of now, it is a well known fact that financial health of many DISCOMS is not in good shape. To improve the same, we have seen that Govt of India has come out with some schemes to improve the DISCOMS financial health like UDAY, power for all, and provisions to tackle the power theft more efficient way, certainly these efforts will pay off and hoping for best in coming time.

Others also concur, stressing on the need to incentivise and discipline discoms in equal measure, as they will continue to matter tremendously to progress on large targets

Conclusion

To sum it up, 2022 was a mixed bag of hits and misses, further setting the tone for 2023. But one thing is sure- the trajectory of goals achieved last year need to be continued this year. Primarily, however, most issues need to be looked into at policy-level, execution-level and project-level if capacity is to be enhanced. To fix the shortcoming, all eyes are firmly fixed on the upcoming Budget that the industry hopes will resolve challenges confronting it.

Industry leaders such as Srivatsan Iyer, Global CEO , Hero Future Energies and Sharad Pungalia, CEO and MD, Amplus Solar unanimously make a case for policy stability to encourage investments, higher capital allocation towards grid stability (which continues to be one issue that all players involved grapple with), make the residential sector more lucrative while providing special concessions on green hydrogen.

Surendra Kumar Gupta, CFO, Amp Energy India, suggests, “The Government must, till the time there is a mismatch between domestic demand vs supply of modules and PLI based manufacturing capacities become operational, consider project import route for all projects in renewable industry to be re-allowed with 5% duty, remove BCD restrictions on import of modules for next 12-18 months to help improve availability of high-quality modules at competitive prices. As PLI scheme is to support domestic renewable industry, export of cell/modules should be completely restricted. The Government should support renewable industry by bringing down interest rates for project financing to 3-5 %, in line with international levels.”

How many of these hopes will be met favourably? February 1 will be an early signal.