Booming solar energy in India

• India is the third most attractive renewable energy market in the world and has a huge solar energy development potential.
• Currently, India produces less than 10% of the energy it could potentially generate using wind or solar resources, but the country aims to generate 75% of its electricity from renewable energy sources by 2050.
• Barriers to solar development include high local financing costs and local insurance premium as well as a lack of familiarization with the technology.

One initiative promoted by the Indian Government has been the development of solar parks. Solar parks are concentrated zones, dedicated only to the development of solar power projects. This step will encourage developers to set up more solar power projects in India. The Indian government plans to set up more than 25 solar parks in the next 5 years, each with an installed capacity of more than 500 MW.

A report from Desert Power India further reinforces the need for centralized support for large scale solar development. This report showed that for medium and small scale projects, a high amount of capital investment is required in setting up supporting infrastructure like transmission lines, development of the site and other necessary amenities. Large scale systems therefore offer economies of scale to overcome such cost impediments.

Even though India has ambitious plans to achieve their solar targets, the country still has to overcome many constraints faced by large solar developers for becoming a top solar power producing country. One alternative being explored for utility scale power plant is to use the water-surface area on canals, lakes or reservoir for large solar-power plants. These water bodies can also provide water to clean the solar panels and also help saving water from evaporation, which effectively addresses two infrastructure needs with a single solution.

It is estimated that by 2050, solar and wind technology will provide almost 50% of total electricity produced globally.

So far, India is producing less than 10% of the energy it could potentially generate using wind or solar resources. But capacity is expanding. According to Bloomberg’s New Energy Outlook 2018, falling costs make renewables increasingly competitive with fossil fuels, with new solar and wind now 20% cheaper than the average wholesale price for existing coal-fired power. The transition away from fossil fuels is supported by government targets as well as changing markets. India’s Central Electricity Authority has proposed the closure of nearly 50GW of coal-fired capacity by 2027.

The country’s plan to become one of the largest solar power markets in the world has received a massive boost as the latest estimates of its solar power potential show. The National Institute of Solar Energy in India has determined the country’s solar power potential capacity at about 750 GW. For this estimation, it is assumed that 3% of the available land which is neither fit for any agricultural purpose nor for residential purpose (i.e., it is “wasteland”) is used for future solar power projects.

According to the National Remote Sensing Centre, there are around 47Mn hectares of wasteland available in India. Another benefit of constructing a utility scale power plant in India is, that the effect of external costs (e.g., pollution, installation time, water consumption, fuel supply risk) is minimized compared to conventional power sources.

Four broad barriers to solar development in India have been identified:

1. A general lack of R&D and modern manufacturing facilities for setting up a large scale solar power plant has been identified. India has tried, over the last few years to overcome these bottlenecks but other problems such as lack of local awareness and familiarity among financiers (which can hinder financial support), a lack of long term policy clarity and poor product quality have been identified as potentially undermining the effort. Facilities in India have not reached the production capacity of other states such as Germany or China. Hence, India depends on foreign suppliers and foreign solar market to meet the solar PV requirements.
2. Solar projects require a high investment at the beginning and have longer payback periods, largely due to the high cost of debt identified in India for such projects. This issue raises the cost of renewable energy in India by more than 25% compared to similar projects financed in Europe or the USA.
3. Transparency and accountability are also barriers to overcome. In 2018, India was ranked 78th in the Transparency International's Corruption Perceptions Index. As stated in an article from Renewable and Sustainable Energy Reviews, about 28% of developers said that they were forced directly or indirectly to pay bribe during the process. The article also states that 70% of the solar power developers think that it's difficult to do business in India as compared to many other countries and they will give less priority for investment in India. According to them 60% of the total duration of the solar project is used in taking approvals, grants, inspection, and land acquisition. As reported by the World Bank, India ranked 130^th in ease of doing business index among 185 countries. Thus, there is a very big scope of improvement in order to provide a conducive environment for large scale solar power developers.
4. Various infrastructure-related issues can arise in the Indian context. The land acquisition process in India is very complex and therefore it can take considerable time to acquire the land needed for a project. In many cases, the allotted land might not be very well connected with roads or railways and therefore transportation of solar PV panels is very difficult. Panels have reportedly been broken in transportation, or suffered delays and damage from exposure to the natural elements.

Transmission and distribution losses are another major infrastructural barrier for a centralized large-scale solar utility sector. However, such limitations also apply to large scale centralized generation from traditional sources. This “barrier” might in fact serve as an incentive for small scale solar proliferation.

Solar energy is still considered an emerging technology in the Indian context and there are some barriers for insurance providers in particular to overcome. When it comes to barriers in terms of insurance business, a report from the National Renewable Energy Laboratory (NREL) shows the main challenges insurers have to overcome to successfully gain stakes in the renewable energy industry. The report highlights the follows:

“The fledgling nature of the renewable energy industry makes obtaining affordable insurance challenging. These challenges include insurers’ unfamiliarity with PV technologies, a lack of historical loss data (i.e., insurance claims), and limited test data for the long-term viability of PV products under real-life conditions. The lack of information and insight about the solar PV industry contributes to perceived risk associated with the technology and installation techniques among insurance underwriters and brokers, which leads to higher premiums than would likely prevail in a more mature market.”

Various large projects have been proposed in India in the past few years. In 2010 India launched the Jawaharlal Nehru National Solar Mission (JNNSM) with the objective of achieving grid parity by the year 2022.

The government set a target of 97 GW of solar generation to be deployed. The target capacity will principally comprise 40 GW of Rooftop and 57 GW through Large and Medium Scale Projects. With this target, India will become one of the largest green energy producers in the world, surpassing several developed countries.”

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