Challenges of solar IPPs in India

Solar Energy in India

A pertinent question that has been raging in the field of renewable sector is: Is India’s 2022 solar target of 100 GW for real? It may be an ambitious number but definitely not unattainable. Solar fundamentals are so compelling in India that the sector is bound to grow gigantically with India likely to become one of the largest solar markets globally in the next 3 years. India is already well on its track to enter the top five solar markets globally. By changing RPO (Renewable Purchase Obligation) targets (solar specific) for the year 2022 to 10.5% from 3% of all consumption of power in India which is yet to be ratified as per the Electricity Act of 2003 provisions,  India has plans to raise its solar capacity to 100 GW by 2021 from 20 GW in 2020. The 100 GW target has been divided in a 60-40 ratio between utility scale and rooftop and small projects respectively.

Both state and central governments have released several policies and schemes for accelerating the development of solar projects. The Centre has taken the lead with the National Solar Mission (15 GW worth of projects by the year 2019) and other initiatives like the policy related to solar parks and an interest rate subvention scheme. Many states, such as Andhra Pradesh (5 GW), Telangana (5 GW), Maharashtra (7.5 GW), Tamil Nadu (3 GW) and Karnataka (2 GW) have followed with massive targets. There will be several challenges in the way of accomplishing these plans, including land acquisition, project financing and transmission woes. However, the biggest hurdle will center on the enforcement of RPOs and the poor bankability of India’s DISCOMs or distribution companies. Since electricity is a recurring topic of discussion, i.e., the center and the states both legislate on it, the states have the option to not take into account the central government directives.

Growth of rooftop solar power generation majorly depends on its financial competitiveness vis-a-vis grid power. The government has of late announced encouraging financing initiatives to improving availability and cost of debt financing to go along with wide ranging net-metering policies. But experts are of the belief that these measures may not be anywhere near sufficient to reach the rooftop solar target of 40 GW. However, keeping this in mind, the overall outlook for solar energy in India is immensely positive and it is further complemented by powerful underlying fundamentals such as the increasing cost of conventional power, environment based concerns, lowered costs of solar power overall, huge irradiation, a high power deficit and the ability of solar to quickly bring power generation capacity online. These factors coupled with several state and central government initiatives should contribute towards making India one of the largest solar markets in the world.