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Steps required for accelerated market growth in the solar industry in India

The Indian solar market has taken a significant leap in 2012, but the market has slowed down in 2013. This article lists measures that could rekindle fast growth in the Indian solar industry. For an overview, download our latest India Solar Handbook [download here].

  • Growth in the Indian solar sector has slowed down in 2013
  • The main reason for the slowdown is uncertainties and delays around policies. The new government wants to now push the solar market
  • Conducive regulatory mechanism for decentralized generation, stricter Renewable Purchase Obligation (RPO) enforcement, re-adjustment of the Renewable Energy Certificate (REC) mechanism, easier access to finance and non-imposition of anti-dumping duties (ADD) are key steps for accelerated market growth

Annual solar capacity additions in India (2011 to 2013; MW)[1]

India Solar Handbook- Blog #4- accelerated growth of solar

The Indian solar market has ignited the imagination of the industry. There is vast energy demand, sufficient space, over 300 days of sunshine and one of the highest irradiation levels in the world. New capacity addition has taken a huge leap in 2012 with 420% growth. However, the market has witnessed a slump of 7% in 2013. With uncertainties surrounding RPO, REC and ADD, a further slowdown is possible. On the other hand, the new Bharatiya Janata Party (BJP) government under Narendra Modi has signaled that solar is high on its agenda. The following steps could accelerate growth.

Conducive regulatory mechanism for decentralized generation

Various grid related charges for small solar plants, that do not use the medium grid, should be reduced. Reduction in open access charges, cross-subsidy surcharge, transmission charges, transmission losses, wheeling charges and wheeling losses will encourage small entrepreneurs to set up micro grids. This will enable energy access for people based in areas not connected to the grid or with an unreliable grid.

Stricter RPO enforcement

States have to put in place a stringent penalty structure for not meeting RPO targets, wherein the penalty is higher than the forbearance price of solar RECs. Additionally, incentives can be provided directly to obligated entities to help them meet their RPOs (as practiced in the UK or Australia).

Re-adjustment of the REC mechanism

The primary reason for the slump in REC-based projects is the lack of RPO enforcement and the uncertainty surrounding the price of the RECs beyond 2017. Various proposals have been floated for reviving the mechanism. They include letting the price range freely or creating “vintage” RECs to account for the fact that the falling cost of renewables are under consideration.

Provision of better performance data

Arranging low cost financing is a challenge for solar projects due to a lack of detailed performance information. Though the situation is improving, a validation from a reputed source will increase the chances of obtaining non-recourse infrastructure finance or easy consumer finance options.

Non-imposition of ADD recommendation

The antidumping duties proposed by the Ministry of Commerce must not be imposed on the nascent Indian market. If imposed, they will increase the solar module prices to levels of 2011. Several projects for which PPAs have been signed will become unviable. For sustained growth of the market, the levelized cost of solar energy must be reduced, not increased.

 


[1] BRIDGE TO INDIA project database

Mudit Jain is a consultant at BRIDGE TO INDIA.

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