The answer is yes. India is a very good market for solar. In fact, going by its vast population, high irradiation, the growing energy demand and power deficit, limited access to fossil fuels and the large number of un-electrified villages, it should be one of the best markets. However, it is also a difficult market. For an overview, download our latest India Solar Handbook (download here).
- Look to the solar market beyond government policies
- The IEA predicts India to be a largest solar market in the long term
- But even today, there is growth and a professional eco-system
This is the bad news: Regulations and policies are often confusing, non-transparent or unreliable. Competition is fierce and sometimes irrational. Most customers are highly price sensitive – often at the expense of a minimum of quality. Financing solar plants is challenging, as banks are still reluctant to provide non-recourse or consumer loans. Legal risks around PPAs are difficult to manage in a country where court cases drag on for years. In addition, many international investors have been unsettled by the fluctuations of the Indian Rupee.
In 2010 and 2011, when the National Solar Mission was announced and the European markets dipped, India was viewed with great enthusiasm by the Indian and international solar community. This enthusiasm has waned over the following years, often leading to disappointment. Other markets, such as Japan, Chile, the US or China have taken the limelight. In the meantime, however, India has built its case: it has achieved a base of 2.5 GW of solar PV, evolved its policies and created a solar ecosystem of installers, manufacturers, developers, financiers and researchers. Yet, for a country of India’s size and promise, this can only be a first step.
And this is the good news: India is a “new” solar market. One, where the certainties of government support are exchanged for a fundamentally sound, but more complex commercial proposition. This new market place is in flux and not yet fully developed. There are still government incentives, such as capital subsidies or renewable purchase obligations. And they sway the market in their direction. At the same time, solar is beginning to play a role independently from them, by replacing expensive diesel or grid power. The task for all market participants is to focus on the end consumers and to develop business models that create value for them. This will unlock a vast long-term opportunity.
Projected year-on-year solar PV capacity additions in India, China and the US till 2035 (GW)
We have made this point many times before: India is a strategic market. The question is: when will the bright solar future arrive in the present? Our view is that it might still take another two years or so, before we will see a hockey stick uptake in solar demand. Until then, there will still be steady growth of around 1 GW per year. The result of the elections that were just held, will certainly help. The new Prime Minster Narendra Modi has a very robust mandate and the political will to reform the Indian power sector, to bring more solar power to the people and make the country less dependent on fossil fuel imports. This is a good time to engage with the Indian market.
Tobias Engelmeier is the Director and Founder at BRIDGE TO INDIA.