PROJECT | Staff Reporter, India

Sluggish solar installation threatens India's 175GW renewable energy target

It has only installed 10% of its 40GW rooftop solar target.

Whilst rooftop solar is the fastest growing renewable energy sub-sector in India, installations must rapidly accelerate if the nation is to meet its ambitious renewable energy target of 175GW by 2022, according to a new briefing by the Institute for Energy Economics and Financial Analysis (IEEFA).

Data showed that India has installed a total of 28GW of solar capacity, representing a fourfold increase in less than three years. That said, India has only achieved 10% of its 40GW rooftop solar target, IEEFA’s energy analyst Vibhuti Garg noted.

“This is well below the run-rate anticipated by government,” he said. “To achieve the 2022 target, India will have to greatly accelerate the pace of new solar rooftop installations.”

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IEEFA estimates that for the next three years, solar rooftop installs will grow at a compound annual growth rate (CAGR) of 50%, suggesting a cumulative 13GW of installed capacity by FY2021/2022.

According to Tim Buckley, IEEFA’s director of energy finance studies, there are further steps the government can take to increase installations by clarifying policies and unveiling financial subsidies to incentivise market activity, providing support for domestic manufacturing and simplifying the net metering application process .

“There has been significant investment in preparing the regulatory framework, upskilling the workforce for small scale deployments, and in educating the market,” Buckley said. “However, regulatory uncertainty is slowing the pace of rooftop solar installations.”

IEEFA also noted that shifting subsidies away from imported fossil fuels and reallocating to assist the capital cost of rooftop solar deployments could be a potential way to fund the energy transition for marginalised households.

“At the moment around 70% of the market growth in the solar rooftop market is driven by commercial and industrial consumers enjoying high tariffs,” Garg revealed, adding that residential consumers and state governments are lagging behind. However, he is hopeful that the government’s 20-40% financial subsidy for new residential rooftop solar installations could accelerate the pace at the local level.

According to Garg, solar is cheaper than commercial and industrial grid tariffs in all major states in India, with average tariffs between $0.086 and $0.16 (INR6-11)/kWh. The payback period is also down to three to four years for commercial and industrial customers, which will further reduce as equipment costs fall, coupled with the rise in retail tariffs.

“This means these consumers can, over time, enjoy a financial gain when they shift to rooftop solar plus battery storage,” Garg explained.

Also read: 750MW of India solar PV projects to be tendered by SECI

The accelerated depreciation benefit allowing investors to claim 40% asset depreciation (reduced from 80% in 2016) in the first year of installation is an additional factor driving the commercial and industrial market.

“The states must continue to provide concessional exemptions including wheeling charges, the cross-subsidy surcharge and additional surcharges to ensure acceleration of installation across the country,” Garg noted.

“India’s rooftop solar market holds huge growth potential and should be exploited to help meet the growing energy requirements of the population,” Buckley said. “It would make India a global leader in renewable energy installations.” 

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