Indian government predicts an incredible 10859 MW of solar capacity installation in FY16, up from just 1000 MW in FY14

The Indian government has been extremely supportive about the solar energy sector making it a cornerstone of its climate change and energy policies. The government has been pushing hard to increase the rate of solar energy capacity in the country to improve energy security and improve access. It is also being done to improve India’s green credentials to the international community, which seems to be waking up to the dangers of global warming in the anticipation of the Paris COP 21 event which is going to happen in the next few months. India installed just 1 GW of solar energy last year, as the entire electricity industry was stuck in a morass of indebted utilities and policy paralysis. However, the last few months have seen hyperactivity, with state governments and the central power agencies SECI and NTPC floating tenders left and right. The Indian government has come out with a paper which shows the progress of the current solar activities in the country and gives projection about the solar power capacity that would be added over the next 2 fiscal years (FY 16 implies March 2015-March 2016). The government is projecting that more than 4 GW will be installed next year, which would increase to an incredible ~11 GW by FY16. This is an incredible 1000% jump in annual capacity additions in 2 years and will easily make India the world’s 4^th largest, if not the 3^rd largest market in the world. While the current tenders and government activity is to be lauded, there are some areas which need to be looked into.

The rooftop solar component looks extremely weak with only 1 GW out of the 9 GW to come from solar rooftop segment. Even this is not looking great as there have not been any proactive policies or activities in this regards till now. The state governments and regulators have not fully implemented net metering policies. Too much red tape and regulations are hindering the growth of this segment. There is hardly any movement in the rooftop segment.

Also while the current activity is being fueled by state tenders, there is no clarity about how the government will sustain the ~10 GW annual level without robust changes in policies and incentives. The government does not want to put too much subsidies into the solar power sector and is hoping that grid parity will allow solar power to flourish. However given that power is a regulated sector, free market principles will only come into play once the whole sector is unshackled. Given the pathetic state of the electricity industry in India with a multitude of factors and regulators, it looks unlikely that it will happen easily. Utilities are also going to start to push back once solar energy becomes a threat to them. Technical and commercial issues with regards to the increased penetration of solar power is also going to become a problem in the future which is not there. This will not only raise the costs of solar power integration into the grid, but also lead to technical problems which Indian grid operators are unprepared for. The Indian power grid is not the best in the world, recently facing the ignominy of being responsible for the biggest power brownout in the world.

Data from MNRE