Solar Energy In India: A Bright Future

Being the fastest-growing major economy in the world, according to the World Bank, India has a huge potential in the solar energy sector. With its abundant sunlight, favourable government policies, and growing demand for clean energy, India surpassed Japan to become the third-largest solar power generator in 2023, according to data computed by the global energy think tank Ember.

This pace of power generation in the country is poised for further growth. In its "Renewables 2024" report, the International Energy Agency (IEA) highlighted that new solar capacity added between now and 2030 will account for 80% of the growth in renewable power globally by the end of this decade. 

In this article, we'll delve into the current state of the solar energy sector in India, the challenges, and the promising future.

India's Solar Energy Sector: Current Scenario

With a population exceeding 1.4 billion and increasing industrial activity, India's energy needs are soaring. This resource is particularly well-suited to regions in the western and southern parts of the country, such as Rajasthan, Gujarat, and Tamil Nadu, which experience high solar insolation levels.

When Prime Minister Manmohan Singh launched the Jawaharlal Nehru National Solar Mission (JNNSM) in 2010, aiming to deploy 20,000 MW of solar power by 2022, the solar power capacity was quite low, a few hundred megawatts (MW). Now, as of September 30, 2024, India's installed capacity for solar power is 90.76 GW, according to Ministry of New and Renewable Energy data. 

Rajasthan is at the highest, with 24,224.15 MW, while Lakshadweep, with just 4.97 MW, has the lowest.

Drivers of Growth

Several factors contribute to India's solar energy success:

Government Support: The Indian government has set ambitious targets, offering incentives, subsidies, and tax breaks to encourage solar adoption. The most significant initiative is the National Solar Mission, which aims to achieve 100 GW of solar capacity by 2022, a goal that has since been revised to 280 GW by 2030, with the ultimate aim of achieving net zero emissions by 2070.

Declining Costs: Solar tariffs have dropped significantly, making solar energy more competitive with fossil fuels. According to a report by JMK Research, current tariffs (in FY24) in the Indian solar sector (hovering at Rs 2.50-Rs 2.87/kWh) have stabilised at rates about 20-30% below the cost of existing thermal power in India and up to half the price of new coal-fired power.

Energy Demand: India's growing economy and population drive are increasing energy demands, which solar energy can help meet. According to government projections, the country's peak power demand is expected to reach over 360 GW by 2026-27. As mentioned above, solar energy is becoming more cost-effective and can help stabilise electricity costs during peak demand.

Environmental Concerns: India is a signatory to the Paris Agreement, which calls for global efforts to limit the temperature rise to below 2°C. In line with this, the country pledged to generate 40% of its electricity from non-fossil fuel sources by 2030. Solar energy will play a crucial role in meeting these climate goals.

Bottlenecks in Solar Energy Growth 

There are also some challenges ahead for the solar energy sector in India. 

Despite the progress, the problem of acquiring large tracts of land for solar parks remains a significant hurdle. Additionally, upgrading the grid to handle solar power's intermittent nature is essential, so infrastructure needs a boost for energy utilisation. 

Also, securing long-term financing remains a challenge for many solar developers. Banks and financial institutions are still cautious about lending to renewable energy projects due to the perceived risks, such as payment delays from distribution companies, and fluctuations in the cost of technology. Higher upfront costs and financing risks also deter some investors.

However, there are more positives than negatives in this sector for the country. The rise of auctions initiated by the government and the introduction of a new support scheme for rooftop solar power are some instances that will drive the sector towards better adoption by households and businesses.

Solar Energy Sector: Trending Stocks

Many companies focused on the vision of renewable energy growth in India are relying heavily on Solar energy. The Indian government has introduced several schemes like the Production Linked Incentive (PLI), Solar Park Scheme to boost solar power development, and domestic manufacturing. 

This rapid development in the solar energy market is also worth considering from an investment point of view.

In Conclusion

India's potential to harness solar energy is vast, and it is well on its way to becoming a global leader in solar power generation. Government policies, private sector involvement, technological innovations, and a growing awareness of renewable energy's environmental and economic benefits drive this transformation. However, overcoming financial, logistical, and infrastructural challenges will be critical to realising the full potential of solar energy.

Disclaimer: The information provided in this article is for informational purposes only and is not intended as financial, investment, or professional advice. Readers are encouraged to seek independent advice before acting on any information contained in this article. Smallcase Technologies Private Limited disclaims any responsibility for actions taken based on the content of this publication.