India’s Solar Journey: 5 Speed Breakers on the Journey to 100 GW and Beyond

India has enormous solar potential due to its geographical conditions. The country’s total solar energy capacity recently surpassed 85 Gigawatts (GW), which is about 11 percent of its total solar potential of 748 GW, as assessed by the National Institute of Solar Energy (NISE). Ironically, the country had set a target of 100 GW of solar installations by 2022. Nearly two years behind schedule, India has yet to achieve even 90 percent of this goal in 2024. While it is safe to say the target may be achieved early next year, it is less likely to be reached by the end of the current financial year 2024-25, which concludes in March 2025.

What went wrong? Here we explore the five reasons that have delayed India’s 100 GW target so far.

#1 Covid19

The COVID-19 pandemic and the resulting lockdowns impacted growth of nearly every industry, both in India and globally, from 2020 through the end of 2022. The solar industry in India had been particularly affected. Heavily reliant on Chinese imports, India’s solar sector faced significant challenges during the pandemic, with supply chain disruptions among other constraints severely hampering its growth. Price volatility hurt quite few global EPCs, and Indian EPCs were no exception.

Some of the biggest government led initiatives, like the PMKUSUM scheme in 2019 by the Government of India with its 32 GW target stumbled due to Covid, among other factors. Among its three components, component A aimed to add 10,000 MW of solar capacity through the installation of small solar power plants. Component B targeted the installation of 1.4 million stand-alone solar pumps in off-grid areas, while Component C aimed to solarize 3.5 million grid-connected agriculture pumps. By the end of December 2022, a total of 4,766 MW was sanctioned, with just over 141 MW installed under Component A. Similarly, Component B saw no installations, and Component C only achieved a modest 20 MW installation.

But Covid was hardly the only factor delaying India’s solar aims. As we shall see, the issues were much more deeply rooted, and India would probably have missed targets even without Covid, when we consider how the government always exempted solar installation work from the lockdown related bans.

#2 Confusing Policies on Solar Imports

Frequent changes or uncertainties in policy frameworks can create challenges for investors, developers, and financiers, leading to reluctance in making long-term commitments. Solar import policies of recent times have caused confusions which adversely affected the pace of solar installations. This is also one of the reasons India’s journey to 100 GW got delayed.

Recent government orders on attempts to increase local sourcing of solar modules to support India’s renewables manufacturing ecosystem has been widely reported in the media as ‘import restrictions. This followed the Ministry of New and Renewable Energy’s (MNRE) March 29 order in 2024 to re-implement its 2021 notification of an ‘Approved List of Models and Manufacturers of Solar Photovoltaic Modules’ (ALMM list). However, this notification was kept idle until recently. The government had not provided an explicit reason for this suspension. Nonetheless, reports suggest it stemmed from concerns and demands of renewable power producers who had secured sale contracts with the government before these rules were implemented.

Furthermore, abrupt policy decisions, such as imposing safeguard duties, basic customs duties, and increasing goods and services tax rates, have contributed to the problem. Additionally, some government actions have been more punitive, including the unilateral cancellation of contracts, which were only restored after court intervention.

Many states have failed to take up solar adoption as envisaged, concentrating solar capacity in the top 5 states to over 80 per cent.

#3 Regulatory Issues

Regulatory issues have significantly hampered the seamless expansion of solar capacity in India. Delays in payments, lack of support from distribution companies (DISCOMs), and financing challenges make initial high project costs less attractive for developers. For example, delays in subsidy payments have severely impacted the rooftop solar sector across the country, with subsidies under the rooftop solar program in Rajasthan delayed for over six months. Notably, India missed its 100 GW target mostly due to missed rooftop solar target of 40 GW.

Additionally, land acquisition has been a complex and time-consuming process, fraught with challenges such as outdated ownership records, price discovery mechanisms, mutations, and end-use changes. Grid integration also poses a significant problem, as accommodating more renewable energy sources becomes increasingly difficult. System operators and regulators urge renewable energy generators to forecast their generation to minimize demand-supply imbalances, leading to an increase in penalties. However, this measure has not solved the issue. Since solar energy is only available during the day, increasing renewable energy consumption requires the development of storage facilities such as pumped hydro and battery energy storage solutions (BESS). The Central Electricity Authority has forecasted the need for 48 GW/236 GWh of BESS and 62 GW of pumped hydro by 2030.

#4 Solar Finance

Renewable finance remained a significant issue in solar growth in India. To achieve an installed renewable energy capacity of 1 TW, India needs an investment of USD 350-400 billion over the next ten years, implying a large base of lenders and equity investors. High upfront costs and perceived risks made financing solar projects challenging. Many DISCOMs, burdened by debt, struggle to pay for solar power, deterring investors. Access to affordable finance remains a significant barrier to large-scale solar deployment.

This is one reason why the establishment of the central government backed SECI was considered such a master stroke in fact, but as exemplified by the Andhra Pradesh fiasco where the government tried to renege on contracts, such issues need to be settled faster.

#5 Evolution of Ecosystem

India’s solar ambitions were on point when it targeted 100 GW capacity. However, the ecosystem needed to accelerate solar adoption took time to develop. Today, the solar ecosystem has matured for complete exploitation. Over the last five to six years, the country’s installed solar capacity has experienced a monumental transformation, increasing from 21,651 MW to 70,096 MW by 2023. However, a big challenge remains transmission, where Industry watchers are already flagging the lack of readiness to absorb planned solar capacities in key states like Rajasthan.

Solar developers have recently emerged as formidable players in the Indian market, and solar equipment manufacturers have also made significant strides. For instance, the PVEL list now features 10 Indian solar manufacturers for the first time. Previously, what was lacking was a comprehensive solar ecosystem. India’s solar module manufacturing capacity experienced a remarkable surge over the past two years, growing from approximately 10 GW in 2020-21 to over 50 GW now. This growth has facilitated backward integration, ensuring a reliable supply chain for domestic solar installations and promising accelerated growth in the near future.