5 Ways India Defies Global Rules For Solar Success

At every large renewable energy event today India’s solar success is invariably taken as a given. Be it capacity additions (eventually), or manufacturing prowess (soon, we are told) industry and government in particular has been at pains to stress that it’s all practically ordained.

We believe that despite the impressive progress India has made in its solar journey, the best part is not the distance it has travelled, but how even this has been achieved despite the odds. That might sound strange considering the obvious advantages the country offers for a thriving solar ecosystem. A relatively open market, solar irradiance that is 40% higher than say Germany, the leading backer of  solar in Europe, a large workforce, central government backing, a strong entrepreneurial culture… the list is long. But when we look at the many factors, all man made, that have somehow worked to trip up India’s solar journey, we realise just how much tougher it has been for players to realise that potential. So just what are the challenges India has overcome, or more accurately, still needs to overcome, to realise its full potential in renewable energy? Let’s start.

1. Cheap grid power and solar.

This might sound counter intuitive to many who imagine they pay through their nose for power in India, but a key reason for the failure of rooftop residential solar to take off is actually low cost power, or even free power in many regions. While more targeted subsidies are finally making themselves felt, the fact remains that a culture of wide ranging subsidised power for households and sectors like farming has made solar penetration very difficult in these categories. Remember, India’s 100 GW target for 2022 has 40 GW of rooftop solar within it, a number that was missed by so wide a margin that it was almost completely responsible for missing the target comprehensively.

Ironically, the commercial and industrial sector (C&I), which has been charged with extra costs and ‘surcharges’ to pay for the other subsidies, has also not found it easy to opt for solar. From arcane regulations on open access, to discom resistance, to a volatile market, it is only now that the C&I segment is finally hitting its straps. The good news? Between these two, depending on how well government policies and incentives play out, we could be seeing close to 10-11 GW of capacity additions each year now, almost as much as all additions including utility in 2022.

2. Small manufacturers survive against all odds

Thanks to capital scarcity, and a traditional focus on small industrial units, India remains one of the few larger markets that continues to support many small scale solar manufacturing firms. From 30 MW to 200 MW, this category of manufacturers have survived the many ups and downs of the sector so far. Even as similar sized players in Europe, China and other regions have packed up a long time back. Now, with the renewed focus on manufacturing at scale and higher efficiency modules, many of these manufacturers have read the writing on the wall, and rushed to expand capacities with more modern inputs. Many others however, remain confident on their ability to tap into niches to sustain operations for some more time. Time will tell if they continue to defy a global trend towards a few large players controlling the market.

3. Only Indian owned manufacturing

The Chinese juggernaut in solar is not limited to make in China. Across Europe, the US and many other regions, Chinese firms have a strong presence in manufacturing where it suits them. In India however, the foreign presence is limited to solar inverters mostly, with the modules sector almost wholly driven by local players. The few exceptions like First Solar have only entered the market recently because they brought in a new technology or more upstream investments under the governments PLI scheme.

Importantly, even as India hopes to be a strong number 2 to China on the world stage, the country has done little so far in terms of investing in the kind of R&D and innovation that other manufacturing countries did, or have done, as seen in China’s case. Leaving a huge question mark over the sustainability of our long term plans without this major change.

4. Utility dominates

Due to reason number 1 above, India is a top 5 global markets that stands out for the dominance of utility scale solar. Utility scale trumps rooftop comprehensively by a factor of 6:1. When you consider how markets like China, the US, Australia and now Europe and even Japan and Vietnam have evolved, with anything between 20 to even 70% share of rooftop solar, that is a real anomaly. In Australia for instance, the highest solar penetration in the residential sector means that the grid gets its highest renewable supply from the thousands of residential solar plants. India’s utility scale approach might see some tempering in the near future however, with the million households scheme from the government, and a resurgent C&I segment finally set to make a mark. Most developed markets tried solar at residential or smaller scale before betting big on utility scale. In India, we chose a different path.

5. Optimism despite missing all targets since 2014.

Finally, if you attend any solar industry trade show in India, you will be stuck by the optimism around the future of solar here, despite the many ‘disappointments’, or underwhelming performance many insiders call the story so far. Tripped up regularly by policy changes that is led by a desire to build up generating capacity, a strong domestic manufacturing ecosystem, and finally, all this at the lowest rate worldwide, industry and government have frequently been at odds. Consider how the country has steadfastly refused to commit to coal phase down, or how thermal power dominates the grid , despite the massive ramp up in capacity. That there is optimism still is mainly due to a situation where many believe there is no other option but to hope for the best. Hardly the best description of optimism.

Electricity being on the concurrent list of the constitution also means a plethora of different regulations across states, with different vested interests to manage. Much has been done to try and simplify this, but much remains to be done.

Much is made of India’s ambitious targets, like share of renewable capacity by 2030 (50%), net zero by 2070, the PM Surya Ghar Muft Bijli scheme that aims to deliver upto 3 kW solar systems across 10 million homes (by 2026), or even the PMKUSUM scheme targeting farming sector with a target of 32 GW. The sobering reality is that most of the previous targets remain targets well after their launch dates, so you have to wonder what needs to be done to change the trend. However, sheer size of addressable market and the money that has been put behind these will ensure that some of that optimism will not look as misplaced as it might seem.