The Indian government’s goal of installing 100 GW of solar by the year 2022 is becoming tougher by the day, especially after the outbreak of the coronavirus pandemic. The country has about 37 GW of installed solar capacity as of March 31, 2020, while another 63 GW needs to be added in the next 30 months to achieve the target.
In 2015, the NDA administration announced the ambitious target of 175 GW of renewable energy by the year 2022, and this included 100 GW of solar. Out of the 100 GW of solar power, 40 GW is expected to come from the rooftop solar sector.
According to Mercom India Research, of the 100 GW solar target, about 37 GW is already operational, and another 37 GW of large-scale solar is under various stages of construction. About 39 GW of large-scale solar projects have been tendered and are pending auction.
While the government is trying to foster the growth of solar energy in the country, there are still many impediments preventing it. Some of the factors that are slowing the broader adoption of the solar sector are land acquisition, evacuation infrastructure, lack of consistent state policies, availability of financing, and the lack of intent on the part of the distribution companies (DISCOMs) to procure solar power.
Speaking on the challenges being faced by the Indian solar industry, Sanjay Varghese, Executive Vice President, Solar Business at ReNew Power, said, “The legacy issues include the worrisome financial position of the DISCOMs, which continue making losses. The poor financial health of DISCOMs has led to a large outstanding amount for generators, impacting their credit position. Other issues include delays in the release of compensation under the ‘Change in Law’ for safeguard duty and GST (Goods and Services Tax), and a lack of clarity on the basic customs duty (BCD), which was announced in the Union Budget. The GST refunds and compensation under ‘Change in Law’ alone can finance a few GWs of capacity addition.”
The government’s stimulus package of ₹900 billion (~$12.03 billion) to the DISCOMs to clear dues to the power generators could act as a major game-changer.
175 GW renewable energy target by 2022
The government’s target includes 5 GW for small hydro, 10 GW for biomass, 60 GW for wind, 40 GW for rooftop solar, and 60 GW for utility-scale solar. Out of the total, 89.05 GW capacity has been achieved as of March 31, 2020, and the remaining 85.95 GW needs to be achieved in the next 30 months. Utility-scale solar installations stood at 32 GW as of March 31, 2020, and another 28 GW needs to be installed in the remaining period. The rooftop solar segment is still lagging with total installations of 4.6 GW by the end of March 2020, which is way off the target of 40 GW by 2022. Wind has total installations of 37.7 GW as of March 2020, which means another 22 GW needs to be added in the remaining three years. Small hydro and biomass installations are on par with the target of 5 GW and 10 GW by 2022.
2019 was expected to bring gains for the solar sector but failed to live up to the expectations. Installations of 7.3 GW for the year turned out to be a disappointment. A slowing economy and the liquidity crisis played its part in the decline in installations by nearly 2 GW for the year. 2017 saw the most installations with more than 9 GW. Since then, solar installations have declined for two years in a row.
With the pandemic affecting the markets in India and globally, Mercom has projected that installations will decline again with approximately 5 GW in 2020.
Speaking to Mercom, an executive from UR Energy (India) Private Limited, said, “The virus has disrupted transport and the domestic production. Due to this, many projects have come to a halt. Currently, we are facing labor shortages for projects which are under construction phase, and there are also pending bills to make payments to manufactures. We do not see any recovery currently. The renewable industry requires an economic package and positive measures. We expect this industry to be normal in another 5-6 months.”
Commenting on the long-term impact of the COVID-19 pandemic on the Indian solar market, ReNew’s Sanjay Varghese added, “COVID-19 pandemic is having an unprecedented impact on the Indian economy and makes it a challenging task to achieve India’s ambitious renewable energy targets. The mobilization of workers and the movement of material and equipment from one part of the country to another remains a challenge. This, coupled with falling demand for power (due to the lockdown), which is affecting the financial health of power producers as well as off-takers, will lead to a delay of up to six months for new projects and the ones under construction. Also, we are staring at the possibility of a sharp fall in economic growth, which implies that for a sustained period, the electricity demand could stay low.”
The lack of rooftop solar installations, which is currently at 4.6 GW, is the primary reason for solar to fall behind in its quest to reach 100 GW by 2022. The market declined 33% in 2019, and 2020 is forecasted to be another tough year considering the difficulties posed by the COVID-19 pandemic.
Lack of clarity in policies at the state level and the reluctance by DISCOMs to support rooftop solar and net metering because of revenue losses are the main reasons for this disparity. Financing has always been a challenge when it comes to rooftop projects, especially after the NBFC (Non-Banking Financing Companies) crisis.
“While the central government has been pushing hard to achieve the 100 GW target, most states and DISCOMs have not shown strong commitment or urgency to meet RPO goals and reach 100 GW by 2022. Unless the central government and states make a coordinated effort, the chances of meeting renewable energy goals are very slim,” said Raj Prabhu, CEO of Mercom Capital Group.
Mercom’s current projection points to approximately 65 GW of solar installations by 2022.
Rakesh is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU).