Tapping Every Ray of the Sun

Key Highlights

• India requires an investment of USD 140-160 billion to achieve the target of installing 100 GW of solar power by 2021-2022.
• In order to meet the target, a high compounded annual growth rate (CAGR) in solar capacity addition of 62.2 per cent would be required between 2014 and 2021-2022.

Challenges to be addressed to scale Up to 100 GW by 2022

• High Upfront Cost

• The annual global manufacturing capacity of 50 GW could support India’s solar PV expansion plans until 2017-18 but would require a ramp up in the subsequent years.
• Solar imports worth USD 35.7 billion would be needed to install 100 GW by 2021-2022.
• Cost of finance is a major hindrance for utility-scale and non-residential rooftop solar projects. Easy access to finance is a hindrance for residential rooftop and rural decentralised projects.
• For utility-scale projects (> 10 MW size), the cost of connection with the nearest transmission line is at least 2.5 per cent of the overall project cost.

• Uncertainty of adequate revenue generation

• High levelised cost of electricity (LCOE) of solar in comparison to conventional fuels mean low demand for solar energy.
• The gap between LCOE and available tariffs can be filled through incentives such as preferential feed-in-tariffs (FiTs), generation-based incentives (GBI) or tariff rebates, each relevant for different types of solar installations.
• Exempting solar producers from charges such as wheeling and banking charges and cross-subsidy surcharges could increase the expected returns on investment.

• Lack of ease of doing business

• Investors cite lack of information about projects commissioned, power generation and irradiance as sources of rising risk perception.
• Lack of availability of skilled manpower also poses operational challenges as it directly impinges on project implementation and scale-up.

Key Recommendations

• Provide incentives as a combination of accelerated depreciation and generation-based incentives.
• Announce net metering policies and provision of a FiT for residential rooftop PV installations.
• Introduce differential subsidy for different sizes of solar pumps to give higher support to small and marginal farmers.
• Lease government land at concessional rates for project lifetime or 25 years, whichever is less (example Rajasthan).
• Build an evacuation infrastructure using the National Clean Energy Fund (NCEF). In addition, expedite the implementation of the Green Corridor project with a single window clearance facility, if necessary.
• Establish a Green Bank in order to provide low-cost loans with long term tenure, which can be initially capitalised by the NCEF. Also, include renewable energy within the priority sector lending.
• Establish single window clearance facility with time bound clearances (e.g., in Rajasthan).
• Design and institute a nationwide training program for solar technologies under the National Skill Development Council (NSDC). The per capita cost of training is approximately INR 9000.
• Design and institute a nationwide training program for solar technologies under the National Skill Development Council (NSDC). The per capita cost of training is approximately INR 9000.