Opportunities and challenges in the Solar Industry

Many regions in India are blessed with abundant sunlight for more than 200 days of the year – a luxury that most countries in the world are able to enjoy for much lesser number of days. This is due to India’s prominent location near the Equator which makes it possible for the country to receive about 3,000 hours of sunshine annually. 3,000 hours of sunshine translates into nearly 5,000 trillion kWh of energy!  Despite India receiving an abundance of sunlight, the potential of this energy was not tapped into for a very long time. The shift came about when the concerned authorities looked at the demand for electricity across India and the shortfalls from conventional sources. Policies to ensure optimum utilization of this natural resource were put into place and it has been on onward journey ever since. To give context to the energy shortfall – the demand supply gap of electricity is around 12% of the overall energy demand. 

In fact India is actively working towards becoming the largest producer of solar energy in the world. The Jawaharlal Nehru National Solar Mission was launched in 2009, to be executed in 3 phases. This solar mission was the first of many and helped set the tone for India’s efforts in being a solar superpower. India is also aiming to achieve grid parity. Grid parity, for the uninitiated, is when electricity that is generated from alternative sources of energy cost approximately the same as conventional sources. Hence, renewable energy sources will be able to generate electricity at similar costs as thermal power. Renewable energy sources contribute a mere 7.7% of the total installed power capacity (167,077 MW) in India. And among all these renewable energy sources, wind power is the dominant source while solar energy makes up for less than 0.1% of the total capacity. 

Growth attribution:

Rising energy needs, falling costs, persistent energy deficit, government’s heavy subsides, preference for eco-friendly technology are some of the reasons for the demand for solar energy. On the other hand, challenges that the solar sector faces are in the form of: high manufacturing costs, diverse supply across states, need for increase in government cooperation, inefficient financing infrastructure, lack of consumer awareness and an overall lack of uniform standards. 

India scores an advantage over other nations when it comes to nurturing the growth of renewable energy as a whole, because of the following parameters:

High Demand:

A growth in the economy will result into an increased demand for electricity with most of the demand likely touted to come from real estate and transport sectors. Indian electricity consumption is expected to reach 15,280 TWh in the year 2040. In sharp contrast, the electricity consumption in the year 2012 was just 4,926 TWh. Power generation from solar and wind projects will become more cost effective to make it to the list of preferred renewable energy  sources by many. 

Increasing Investments: 

By the year 2028, India can expect an investment to the tune of US $500 billion to help the growth of the renewable sector. 

Nurturing policies:

Governments are revamping existing policies to make it an encouraging environment for the renewable energy industry to flourish. With a task of establishing renewable energy capacity of 500GW by the year 2030, the policies are drafted to accommodate this mammoth goal. 

Despite all that is working in the favour of the renewable energy sector, there are several challenges that the solar energy sector is facing in particular. 

  • High manufacturing costs: Due to the high cost of solar power generation, a lot of the premium equipment used in a solar power plant had to be imported. The high module prices, along with other teething problems such as central and state policies and land issues contributed to the slow growth of the solar industry. It was from the year 2014 that there was a noticeable growth in the solar industry, thanks to the reducing cost of equipment owing to equipment used by Indian manufacturers. However, trying to compete with China’s strong manufacturing base still poses a huge challenge. 
  • Waste management: Any growing industry will produce waste and solar is no exception. Even though solar modules and other equipment have a life of about 25 odd years, the modules do get damaged and need to be disposed of. This contributes to the solar waste in the country. Currently, India does not have a solar waste disposal policy and needs one on the lines of e-waste, where the guidelines are set for proper disposal or recycling of waste generated by the solar industry. 
  • Land availability: One of the biggest challenges in the solar sector is the availability of land. Solar PV plants require a large amount of contiguous land to set up. This is particularly challenging in a country like India, given the land ownership issues, local politics and terrains.

Financing mechanism: In order to give a much needed push to a growing industry, there needs to be a well thought out set of mechanisms that can generate the required cash flow to sustain itself. One such mechanism are the green bonds and green climate fund that were set up in India and have already seen transactions worth $ 10.3 billion (2019). More such bonds are needed to ensure that the industry reaches a financially viable position.