It has been a little over four years since the National Democratic Alliance (NDA) administration under the leadership of Prime Minister Narendra Modi took over and it is a good time to take a look at what has been achieved in this time period. The need for analysis assumes greater significance since there were extremely high expectations from the ruling government as Mr. Modi was perceived quite friendly to the solar industry, evident from his pro-solar policies implemented in Gujarat during his tenure as the state’s Chief Minister.
The United Progressive Alliance (UPA) administration had initially set a target to install 22 GW of solar by 2022. The target was small, and greater focus was laid on the ability to execute instead of a bold target to strive for. The target was understandable based on where the industry was in 2010 globally and where the component prices were. Nobody back then could have predicted how fast and how far the solar component price would fall in the coming year.
The NDA administration decided the goal was not challenging enough and increased it to 100 GW by 2022, an ambitious target by any means, considering it was set in 2014. This challenging goal became the basis for policy changes to achieve the target. Solar parks were introduced to make it easier to set up large-scale projects without the hassle of land procurement and transmission infrastructure. Initially, 20 GW of large-scale projects were targeted to be set up in these parks, and the capacity was later increased to 40 GW.
In terms of solar installations in the country, 985 MW of solar was installed in 2014 as installations remained flat for three years in a row due to policy uncertainties and experimentation, and a lack of ambition. Mercom’s India Solar Project Tracker shows that of the 25 GW installed to date, about 3 GW of solar were added under the UPA administration and approximately 22 GW of solar has been installed since the NDA administration took over. This is a very significant growth over the past four years, but it could certainly have been better. Since last May, trade case issues, a decline in tender and auction activity due to DISCOMs seeking PPA renegotiations, the implementation of the GST, and several other issues have slowed the market down.
With an installation total of over 25 GW at the end of August 2018, India now ranks fifth in terms of cumulative installed solar capacity globally, falling behind only China, the U.S., Germany, and Japan.
Solar accounted for 25.9 billion units of electricity generated in FY 2017-18, up from just 3.35 billion units of electricity generated in 2014. The energy output from solar has increased by over 20 billion units during three financial years.
Cumulative solar installations accounted for ~7 percent of the total power capacity in India as of June 2018, compared to just about 1 percent in 2014, signifying a seven-fold increase.
The NDA government has realized that the subsidized electricity provided to the agricultural sector is another factor breaking the back of DISCOMs and has pushed for solar pumps and solar agricultural feeders to counter this. Since the start of the NDA government, the number of active solar pumps in India has had a tenfold rise, growing from just 11,000 active solar pumps in 2014 to 224,376 so far in 1H 2018.
The administration has also set an aggressive 40 GW target for rooftop solar. But the rooftop program has not yet taken off in the country in a big way yet. To date, only 2.5 GW of rooftop solar has been installed. To achieve the 40 GW target, the government must install more than 37 GW of rooftop solar in four years, quite a challenging task unless there is a drastic change in policy and support. Having said that, the increase in rooftop solar installations from mere 60 MW in 2014 to 2,500 MW is no small feat.
During the first quarter of 2017, for the first time, solar became the leading new power generation source in India. For an emerging market like India, this is a significant milestone. Solar is now cheaper than coal in many regions and the transition to solar energy generation could bring new coal plant additions to a virtual halt leading to enormous environmental benefits.
The pie chart depicting the shift in new power capacity additions by source is startling by the sheer magnitude of change. To clarify, this is not total generation by source just new generation. But it shows where the power markets and the government are headed, and it is clearly renewables. The NDA administration deserves credit for leading the transition of energy sources from fossil fuels to renewables.
But even as India sees a widespread increase in the adoption of renewable energy, a host of challenges remains for the NDA administration to tackle. For starters, the government has not been very successful when it comes to enforcing strict renewable purchase obligations (RPOs), even though new policies have been announced in this regard. Policy implementation and execution can also be improved. The constant delays and uncertainty created due to a lack of communication with stakeholders and other government agencies has stifled growth. More stakeholder involvement in policy making is a must to get it right the first time.
Overall, this administration deserves a solid B+ grade for the first four years based on the sheer numbers achieved. Much of the hard work lies ahead as the administration tries to meet its own goal of installing 100 GW of solar by 2022. About 75 GW of solar remains to be installed in 4.5 years, a tall task, but not impossible as long as the government continues to push hard.