Solar Power’s Triple Advantage

With each passing decade, the world has seen a steady decline in the cost of solar and wind etc. as depicted in the graph.

Source: Why did renewables become so cheap so fast? (Website: https://ourworldindata.org/cheap-renewables-growth)

Among these renewable sources, solar energy is poised to emerge as the predominant option for India, driven by three key factors.

Firstly, reducing cost of solar energy as seen in the graph.

Secondly, solar power offers scalability, accommodates diverse applications ranging from small-scale rooftop installations to large solar farms, and therefore allows for decentralized development. For a country of the size and population distribution as India, this is extremely helpful.

Thirdly, India benefits from abundant solar resources, particularly due to its geographic location in the torrid zone, ensuring consistent exposure to sunlight throughout the year. Unlike wind or hydro energy, which are reliant on specific conditions, solar energy can be harnessed with relative ease and consistency.

These combined advantages of affordability, scalability, and abundance, positions India favourably in the solar energy landscape, significantly reducing carbon footprint, ecological impact and promoting sustainable environment.

Government’s Sun-Powered Solutions

The development of solar power has been driven by ambitious government policies, including the pioneering Jawaharlal Nehru National Solar Missions. The policy support has continued. In addition to schemes like the Production Linked Scheme, aimed at increasing solar panel manufacturing capacities, and the Solar Park Scheme, which aims to establish 50 Solar Parks of 500 MW each, the Prime Minister has recently unveiled a transformative project under the Pradhan Mantri Suryodaya Yojana. This initiative targets equipping 10 million households nationwide with rooftop solar systems, particularly benefiting low and middle-income families while enhancing India’s energy independence.

Furthermore, the Ministry of New and Renewable Energy (MNRE) has updated guidelines for the Pradhan Mantri KUSUM (Kisan Urja Suraksha Evam Utthaan Mahabhiyan) Program, aiming to empower farmers to adopt renewable energy. Similarly, the PM Surya Ghar Muft Bijli Yojana provides for households receiving free electricity via residential rooftop solar installations, benefiting up to 10 million households with a monthly allowance of 300 units of electricity. With an investment surpassing Rs. 750 billion, the initiative will provide substantial subsidies directly to individuals. This ambitious program is anticipated to not only improve household incomes and reduce electricity expenses, but also generate employment opportunities, by generating significant demand for solar modules, panels, inverters and polysilicon.

India’s Strategic Edge and Future

India has long grappled with inflation triggered by volatile oil prices from the Middle East. To curb this dependence, a pivotal move has been the launch of the International Solar Alliance (ISA) in 2015 aimed at fostering clean and affordable solar energy. This alliance, comprising 100countries, positions India as a leading global supplier of solar energy.

As we approach mid-2024, the solar industry’s focus sharpens on cost reduction, enhanced energy storage, and grid advancements. However, beyond per-unit costs, factors like storage, maintenance and depreciation expenses are crucial. The evaluation of solar energy’s overall cost-effectiveness hinges on the levelized cost of energy (LCOE) across its lifecycle. As seen on the map below, India boasts the lowest LCOE, offering a significant economic edge over other global powers by delivering solar energy at 2-4 times lower than the global average.

Source: Global Photovoltaic Power Potential by Country (Website- https://globalsolaratlas.info/global-pv-potential-study)

Through the ISA, with all countries with high solar capacity potential coming together, India illustrates key potential to be a dominant shareholder in the renewable energy space. The ISA’s ‘one sun, one earth, one grid’ initiative aims at interconnecting energy across borders via a unified electricity grid. This initiative, starting with linking India’s grid to regions like the Middle East, Southeast Asia, Africa and other countries subsequently, paves the way for a vast renewable energy network accessible to all nations, day and night.

By 2025, India, through the ISA, commits to providing USD 2 billion in concessional financing, with the EXIM Bank offering low-interest credit lines to partner countries. However, a caveat for this funding is that the projects must primarily engage Indian companies and utilize Indian goods and services, presenting a significant opportunity for Indian solar firms to capitalize on the global solar wave. Efficiently seizing this opportunity could lead India towards energy independence. By optimizing resource sharing and leveraging solar entrepreneurship, India stands to insulate its economy from geopolitical shocks, safeguard forex reserves during turbulent times, and gain significant influence by aiding ISA member countries.

India is actively pursuing economies of scale in solar energy production, aiming to enhance affordability and accessibility, attract investments, and create an enabling environment for solar power development. As the country progresses towards its ambitious solar targets, the investment opportunities are not just plentiful, they serve as a gateway to participating in India’s solar success story. With a robust policy framework and steadfast government support, investors can today confidently navigate the solar landscape. India’s solar odyssey isn’t merely about expansion, it is an invitation for investors and stakeholders to collaborate in crafting a brighter, cleaner future, catapulting India towards becoming a global superpower.

This article was originally published in The Economic times on 21 May 2024 Co-written by: Deepto Roy, Partner; Aakaansha Arya, Associate. Click here for original article

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