India’s Solar Energy Sector: Opportunities, challenges, Way Forward

With a population of close to 1.4 billion and a fast-growing economy with enormous potential to grow, India’s energy mix in future years will be critical for the climate action targets of the world and India itself. India is already the third-largest energy-consuming economy after China and the United States. In this backdrop, India’s solar energy targets are discussed widely for its ambitious targets, the strategy to achieve it, and the gap between current status and required efforts. The debate came to the fore once again when the Prime Minister in recently Inaugurated a 750 MW solar project in Rewa district Madhya Pradesh.

This topic of “India’s Solar Energy Sector: Opportunities, challenges, Way Forward” is important from the perspective of the UPSC IAS Examination, which falls under General Studies Portion.

What are the types of energy sources?

There are two major categories of energy production: non-renewable and renewable.

• The non-renewable sources of energy are those which are available in limited quantities of supply. They take a longer time to replenish The examples are Coal, Oil, Natural gas, etc.
• The consumption of non-renewable energy has though helped the world grow exponentially in the last 2 centuries, it has also caused more damage than ever to the environment. The issues of pollution, global warming, and environmental degradation are the products of such uncontrolled consumption of non-renewables.
• Because of the emergence of such issues, there has been a larger focus on other forms of energy called renewable energy sources. Renewable energy is energy generated from those natural resources that are continuously replenished. The effects of renewable energy resource consumption are non-polluting and they cannot be exhausted. The examples are solar energy, wind energy, hydropower resources, geothermal energy, etc.

What is solar energy?

• Solar energy means harnessing of radiant light and heat from the Sun using different evolving technologies such as solar heating, solar thermal, Photovoltaics, etc.
• Solar energy is the cleanest and most abundantly available source of energy to the Earth.
• There are two ways in which solar energy is used to produce electricity: photovoltaics and Solar-thermal.

Photovoltaics

• Photovoltaics (PVs), also called solar cells, are electronic devices that convert sunlight directly into electricity. Invented in 1954 at Bell Telephone Laboratories in the USA, PVs are one of the fastest-growing renewable energy technologies.
• A PV cell made up of at least 2 semiconductor layers (positive and negative) is exposed to sunlight. Photons are reflected which are absorbed by the solar cell. When the threshold absorption limit is reached electrons are released from negative semiconductor material the flow of which constitutes electric energy.
• Solar PVs can be combined to provide electricity on a commercial scale, or arranged in smaller configurations for mini-grids or personal use.

Solar-Thermal Technology

• Solar-thermal energy also known as Concentrated Solar Power (CSP) uses mirrors to concentrate solar rays. These rays heat fluid, which creates steam to drive the turbine and generate electricity. CSP is used to generate electricity in large scale power plants.
• A CSP power plant uses mirrors to concentrated solar rays. These rays heat fluid, which creates steam to drive a turbine and generate electricity.
• The main advantage of the CSP plant is that it can be equipped with molten salts in which heat can be stored, allowing electricity to be generated after the sun has set.

What are the basic advantages of the solar energy sector over other forms?

• Solar energy is a natural and freely available source of energy.
• As mentioned earlier, the solar energy is the cleanest of all forms of energy resources as it results in near-zero pollution.
• In consumption, it doesn’t emit any greenhouse gases that cause global warming.
• One of the main advantages is that its peak availability period coincides with the peak consumption periode. 10 AM to 6 PM.
• Solar energy can reduce transmission and distribution losses associated with conventional electricity transmission lines.
• It has low maintenance As there are no moving parts there is no wear and tear. So even if initial costs are higher, the maintenance costs are relatively low for solar plants.
• Solar energy’s potential for decentralized production is huge through off-grid plants which are important for remotest areas where conventional energy lines cannot be economically laid. Hence it is important in filling the developmental disparities.
• The most important aspect in current times is that solar plants can be laid on barren and low agricultural productivity lands and doesn’t take up already pressurized agricultural and forest land.
• It has diverse applications ranging from water distillation to powering satellites.

What are the basic disadvantages of the solar energy production?

• The main disadvantage of solar energy is that it is dependent on seasons and weather and hence they cannot produce energy during bad weather conditions, in rainy seasons and at nights.
• The initial installation costs are very high as of now so they are not affordable to a large section of the population. The battery requirements, inverter, wiring, and installation takes up a large amount of cost.
• Solar energy storage is expensive and the storage technology is still evolving and the current storage scenario is costly.
• It is a space-intensive method of energy production. The more energy production you require, the more space you will need.
• Although solar energy production is strictly non-polluting, transportation and installation of solar systems are associated with GHG emissions.
• There is also an issue of toxic materials and hazardous products used during the PVs production that can indirectly affect the environment though in smaller amounts.
• Solar panels are very bulky and not easy to handle. This is specifically true for the high-efficiency, traditional silicon crystalline wafer solar modules.

Why solar energy has gained traction in Indian energy policy space?

The need for solar energy and its universalization can be understood from the following.

Demand

• As seen above, India recently became the third-largest energy consumption country. With the growth in every sector of the economy like infrastructure building, manufacturing, and service provision, the demand has still to hit its peak.
• According to BP energy outlook 2050, India’s fossil fuel import is expected to double by 2050

Development

• India is still a developing country. It has huge developmental needs: poverty reduction, human resource development, employment generation, industrial growth, etc.
• Energy is sine-qua-non if we are to meet the human capital demands and create opportunities for the development of the demographic dividend that we have.

Energy Security

• India’s energy mix comprises mainly of thermal power which required a large quantity of imported coal, gas, and diesel. This heavy import dependence is a threat to energy security for a high demand nation like India.
• Plus, the frequent geopolitics induced fluctuations in oil price makes our energy basket prone to external threats.
• In this scenario, India must look for opportunities to diversify its energy basket and be self-reliant for most of its energy demand. Solar power is a significant solution in this regard.

Climate change

• The excessive burning of fossil fuels is the main culprit of global warming and its severity. In the past 5 decades, the world community has agreed on the plan to reduce its energy dependence on fossil fuels and search for alternative clean energies.
• This has led to a search for non-polluting sources with low global warming potential. Solar energy can be the best possible solution among various alternatives.

Ambitious targets under UNFCC

• India’s INDCs declare that by 2030, we’ll reduce the emission intensity of our GDP by 33-35% below the 2005 level. Also, we commit to increase the share of non-fossil fuel-based electricity to 40% by 2030.
• These targets are ambitious given our current level of emissions and energy basket. Solar power, with sufficient impetus through technology and funding can play a decisive part in achieving these targets.

Multipurpose nature

• Solar energy has varied usage in diverse sectors from home appliances to the space sector. It can be used in the automobile industry, urban transport, electronic devices, and many more areas.

Abundance, spread, and security

• As far as earth is considered, the sun is an inexhaustible source of energy. There is no limit to which it can be used.
• The spread of solar energy is such that it is available the most to the least of the developed countries of the world in tropics. So, it is a blessing for the global south.
• Also, it is a secure source as against some other alternatives such as nuclear energy because of its threat intensity due to radioactive leakage.

Job creation Potential

• India which has seen the highest unemployment in the last 4-5 decades in the last few years needs to create a huge amount of jobs. 1 GW of solar manufacturing facility generates around 4000 jobs-direct and indirect.
• The solar energy sector in India can double the 95,000 strong employment by 2023, according to the International Renewable Energy Association (IRENA).
• Further, it can create a huge skilled workforce and jobs in various sectors such as installation, maintenance, production, and others.
• According to a report by IRNEA, a third of India’s 719,000 jobs in renewables until 2017-18 were women. Hence, the solar sector can increase female labor force participation in India if planned well.

What is India’s Solar energy status?

Potential

• With solar energy of about 5000 trillion kWh per year incidence, India has the potential to generate 35 MW/km2 using Solar PVs and solar thermal energy.
• The National Institute of Solar Energy (NISE) estimates the potential of solar power in India to be around 750 GW with Rajasthan, Jammu and Kashmir (before bifurcation), Maharashtra to be top states with the highest solar potential.
• India’s reservoirs with a cumulative surface area of 18000 square km have the potential to generate 280 GW of solar energy through floating solar PVs according to a report produced by The Energy and Resource Institute (TERI).
• Urban area provides huge potential for solar rooftop sector with cities like Bengaluru taking initiative to harness this potential already.

Current Status

• As of April 2020, India has an installed solar capacity of 35 GW which is very low when compared with the target of 100 GW by 2022.
• Still, the solar power capacity has increased by more than 11 times from 2.6 GW five years back.
• In 2019, India installed 7.3 GW of solar power across the country, establishing its position as the third-largest solar market in the world.
• India has the 5^th largest installed capacity of solar power in the world.
• The share of renewables in India’s total energy mix has increased to 26% according to the Central Electricity Authority this year (though mainly due to sluggish demand).

What are the government actions to accelerate solar energy generation?

Leadership

• Ministry of New and Renewable Energy (MNRE) is the nodal agency to take India’s renewable energy sector forward.
• Various institutions such as the National Institute of Solar Energy under MNRE for Research and development in the Solar sector, and the Indian Renewable Energy Development Agency (IRDEA) is a non-banking financial institution to provide loans for renewable energy projects have been found.
• National Institute of Solar Energy (NISE) and CSIR- Central Mechanical Engineering Research Institute (CMERI) recently signed an MoU as a strategic association to bolster the solar energy sector in the country.

Policy support

• The Ministry has issued Guidelines for Tariff Based Competitive Bidding Process for Procurement of Power from Grid Connected Solar & Wind Power Projects to provide a framework for procurement of solar & wind power through a transparent process of bidding including standardization of the process and defining of roles and responsibilities of various stakeholders.
• The National Wind-Solar Hybrid Policy has been released to provide a framework for the promotion of large grid-connected wind-solar PV hybrid systems for optimal and efficient utilization of wind and solar resources, transmission infrastructure, and land.
• Various other policy measures undertaken include declaration of trajectory of renewable purchase obligations (RPO), waiver of inter-state transmission system charges and losses, amending building by-laws for the provision of mandatory roof-top solar for new construction, raising tax-free solar bonds.

Actions

• To achieve a target of 100 GW by 2022 under the National Solar Mission, India has implemented many important schemes and projects in the solar sector.

Some of the schemes are:

Solar park scheme

• The MNRE has undertaken a scheme to develop Ultra Mega Renewable Energy power parks (UMREPPs) under the existing Solar Park scheme. The scheme provides land and transmission infrastructure for solar and solar-wind hybrid projects.
• The Rewa Solar project was one such UMREPP which is touted to be Asia’s biggest solar project.
• One of the World’s largest solar project has been commissioned in Kamuthi, Tamil Nadu. the 648 MW project is fully operational now powering 2,65000 homes.
• There are around 42 solar parks in different stages of development in India.

Viability Gap Funding schemes

• The VGF scheme for setting up grid-connected solar power is provided through the Solar Energy Corporation of India (SECI).

Canal bank/ Canal Top Scheme

• These are pilot-cum demonstration projects for the development of Grid-connected Solar PV plants on canal banks and canal tops.

KUSUM scheme

• The Krishi Urja Suraksha evam Utthan Mahabhiyan (PM-KUSUM) scheme was launched in 2019 to provide solar pumps to farmers along with an opportunity to generate solar energy on uncultivable/barren land. It has a target of 25,750 MW solar capacity by 2022.

Grid Connected Solar Rooftop Programs

• Phase-II of Grid Connected Rooftop solar program was approved with a target for achieving a cumulative capacity of 40000 MW from solar rooftop by 2022.
• The sustainable rooftop implementation of solar transfiguration of India (SRISTI) scheme has been launched to promote rooftop solar power projects in India.

Capacity building

• A Suryamitra program has been launched to prepare a qualified workforce in the solar energy sector.
• National Skill India Mission undertakes various skilling projects for youth to equip them with the required skills.

Import substitution and production thrust

• The Union government has imposed a safeguard duty on solar imports and is also planning to impose customs duty on solar imports.
• Ministry of New and Renewable Energy is planning to launch an interest subvention scheme for loans of cell and wafer manufactures which are basic building blocks of solar modules. This will help in domestic production and reduce import dependence.
• The Domestic content requirement category was included in the National Solar Mission in 2010 to create a healthy and robust domestic manufacturing base.

International efforts

International Solar Alliance

• India along with France launched the International Solar Alliance in Paris in 2015 to make use of a tropical country’s solar potential.
• This alliance has now become a global alliance that will support underdeveloped countries to go solar in its energy mix.

INDCs

• India’s INDCs to UNFCCC are representative of India’s commitment to a cleaner world. Commitments to reduce emissions and improve renewables in the energy mix heavily rely on solar energy progress.

What are the issues in the growth of the solar industry in India?

Despite the solar sector getting major policy support by the government and great enthusiasm by the private sector, some issues are stopping the required growth.

Lack of large domestic manufacturing base

• India has a very small domestic manufacturing The domestic cell manufacturing in 2019 was meagre 3.1 GW in 2019.
• Without a huge domestic manufacturing base, we cannot be world leaders in the solar energy sector.

Import Dependence

• India’s solar capacity is largely based on imported items. We are heavily dependent on China for PV cells, modules, and other associated products.
• The low-priced Chinese imports do not let Indian manufacturing to flourish. The dumping of low-cost equipment is a threat to the profitability of local manufacturers.

Domestic Content Requirement (DCR) issues

• Though India had added the DCR in its bid to improve the local manufacturing ecosystem, the WTO litigation and unsuccessful attempt to protect it is making the flowering of local manufacturing more difficult.

Land availability

• The High population density doesn’t allow more land to be given away for solar projects. As the upgradation of solar projects need more land, the land paucity is one big challenge.

Skilled Workforce

• Though the skilling of the workforce is included in the policy support measure for the solar sector, the skilling requirement for the sector is very high and India is not keeping up the pace.

Absence of proper finance mechanism

• As the rate of return (RoR) for the solar project is very low, the already pressurized banking sector is not enthusiastic enough in investing in solar capacity.

The cost-effectiveness of solar energy

• Though technological advancements have reduced the per kWh price of solar energy, it is still higher than the conventional electricity supply. It makes it difficult for the diffusion of solar equipment and makes it a less profitable business.
• The renewable power repurchase arrangement for DISCOMs are not fulfilled due to the already stressed conditions of DISCOMs itself. This situation renders most of the solar power go without purchase making production costly again.

Decline in power sector demand

• There is a decline in power demand in the last few years making the conventional coal-based power plants to run below their capacity. In this scenario, there will be lesser takers for renewables in the market.

Dearth of indigenous R&D

• Lack of indigenous R&D in the solar sector makes further development difficult as India has to be dependent on international cooperation for technology.

Solar energy and COVID-19

• The COVID-19 has affected all the sectors of the economy which includes solar energy sectors too.
• The ongoing solar projects have been halted and the developers are concerned about the cost escalations due to domestic lockdown and production cuts in China.
• As 80% of its requirement are covered through imports from China, the trade restrictions are hampering the imports making further development difficult.
• Almost 85% of the labor in solar projects are migrants, many of which have returned to their home states due to lockdowns. Hence the solar sector is looking at a massive labor shortage.
• The impact of COVID-19 on the supply chain has also been a cause for the rising demand for cancellation of Power purchase agreements apart from the fact that there are no new takers for new Power supply agreements and auctions.

Way forward

• As discussed above, solar energy is at a critical crossroads where policy measures could either make or break for a long period considering the global and national economic conditions. As NITI Aayog CEO said recently, India can become a global leader in solar PVs.
• What India needs today is a dedicated solar manufacturing strategy that addresses all the aspects of solar manufacturing ranging from land, tariff, import to skilling, and behavioural aspects.

Finance

• There is a need to improve investment in the solar supply chain within India. As the conventional finance mechanisms are reeling under pressure, measures like green bonds, solar bonds, UNFCCC finance mechanisms can be tried.
• The cost of capital is on the rise since the 2008 global economic crisis in India. Government budgetary provisions along with qualitative monetary policy push are necessary for the cash-starved solar sector.
• The foreign capital must be encouraged to invest in solar energy projects. proper taxation and tariff policies can encourage global renewable giants to come to India.

Policy

• Chinese success in the solar sector can be a guiding star for us. Chinese government support through subsidized land acquisition, raw material, and export emphasis can guide India’s Make in India to engage heavily in the solar energy sector.
• There should be fair tariff policies so that investments are not rendered profitless. The optimization of the price-profit duo is of critical importance for India with a huge population in lower middle income.
• The R&D and skilling of the manpower aspect must be given the most thrust to. If we are to have a robust domestic manufacturing, local R&D and skills are most important.
• The introduction of the National Renewable Energy Policy for the promotion of renewable energy and determine renewable purchase obligations is in line with the country’s carbon reduction commitments.

Demand-side approach

• The solar demand in India is still low due to its cost-effectiveness and only a few metro cities can heavily implement rooftop solar projects. In this scenario, the government with its ubiquitous presence, can be the largest consumer of solar energy through rooftop solar projects over government buildings.
• There can be tax incentives for solar energy use for manufacturing units such as MSMEs, the service sector, IT industries, etc.
• KUSUM is an important initiative which makes solar energy to penetrate the largest private sector in India. Such social sector penetration can be encouraged by making healthcare and education infrastructure throughout India to go for solar power consumption.

Hybrid energy model

• The solar-wind hybrid energy model is an emerging model that works on deficiencies of both the sectors and provides a more reliable source of power generation. Such innovative models can provide more cost-effective investment opportunities.

Solar Federalism

• Electricity is under concurrent list under the seventh schedule requiring both states and centre to have a policy say.
• State governments must be encouraged to invest in solar energy projects. As seen above, states with higher solar potential must be encouraged through capital grants and other measures to focus on solar energy.

International efforts

• International Solar Alliance represents India’s willingness to explore international cooperation and capacity augmentation in the solar energy sector.
• It provides necessary policy and finance mechanisms to encourage solar energy in the global energy mix.
• Apart from that, India must engage bilaterally to acquire solar technologies, finance, and research support from solar technology powerhouse countries.
• Also, India needs to form a basic understanding with countries like the USA to negate any WTO litigation against its policy measures like domestic content requirement, import-substitution, etc.

conclusion

As the PM declared in 2015 that we have to think in GW as against MW in the past. This intent along with consequent thrust on solar energy nationally and internationally showcases India’s seriousness about making solar energy a prime mover in the energy sector. Though halted due to pandemic, the pandemic itself is a critical opportunity for India to plan is own green deal on the lines of the European Union. Solae energy sector is a solution to most of our pressing issues such as equitable and sustainable development, social sector, employment generation, etc.  It forms an important component of the quest for Atmanirbhar Bharat.

Practice Question for Mains

Critically analyze India’s National Solar Mission for its policy, implementation and success potential (250 words)