Mapping Solar Potential in India’s Energy Portfolio

With the rise in India’s energy demands, leading organizations have confirmed that a wide-ranging portfolio of cost-competitive technologies will be needed to satisfy increasing demand for energy while meeting climate policy and other societal goals. In this article, we will look at major objectives, such as analysing the role of solar PV in India’s energy security, mapping solar energy potential and growth drivers in India’s solar industry, and ascertaining significant changes that need to be incorporated in order to meet energy security targets in the country.

The International Energy Agency defines energy security as the uninterrupted availability of energy sources at an affordable price. In another sense, energy security implies affordable, accessible and reliable sources of energy to masses of the country. The Indian economy is projected to grow at a GDP rate of more than 8 percent, and as per estimates, India requires 1,850 billion units of electricity till 2020 in order to align with that kind of projected growth. To deal with the challenges in making India energy secure, renewable energy will play a vital role in the present as well as future scenario.

India as of June 2015 has achieved 4,295 MW of grid-connected and off-grid solar capacity. Solar energy is predominantly an attractive renewable energy option for India with the confirmation of the fact that India is a tropical country, where most of the states receives 4.5-5.5 annual DNI (kWh/m2/day) and seven to eight hours average sunlight time daily distributed evenly across the country. As a solar energy system provides long-term assurance of energy supply, it becomes one of the credible pillars in any nation’s long-term energy security.

India’s government has set targets for achieving 100 GW additional solar capacities till 2020. This capacity will comprise of 40 percent rooftop solar, 40 percent large-scale solar, and 20 percent ultra-mega power projects.

Cumulative Year on Year Targets


In India, Solar energy dates back to 2006, when the rural electrification program was launched. The initiatives by government were subsequently added with moves such as the semiconductor policy of 2007, the generation-based incentive scheme of 2008, and introduction of the national solar mission. In India, market drivers for solar can be segmented into three categories: government incentives, supportive state and national policies, and price trends of the technology in the country.

Government Incentives

India has two types of incentives: tax based and non-tax-based incentives.

Tax-based incentives include:

  • Income tax holiday; 100 percent for 10 consecutive years – MAT at 20 percent to apply
  • Accelerated depreciation; accelerated depreciation at 80 percent on solar and wind assets
  • Reduced VAT; certain states allow reduced VAT rates (5 percent) on renewable energy projects
  • Additional one-time allowance; available at 15 percent in budget 2014 on new plant and machinery
  • Tax-free grants; received from the holding company engaged in generation, distribution or transmission of power

Non-tax-based incentives include:

  • Feed-in-tariffs; when renewable generators sell to state utilities under a memorandum of understanding route,
  • Rebates; available on the manufacturing of solar and wind components, and include subsidies and rebates on capital expenditures
  • Favorable land policies; reduced capital costs and favors ease of land allocation but vary state to state
  • Government R&D programs; lead to growing performance, importance and reducing costs

Supportive State and National Policies

Several state and national policies support solar development, including:

  • Jawaharlal Nehru National Mission target extension; the targets for solar energy capacity of India till 2020 have been extended to 100 GW solar capacities till 2020
  • Priority sector lending; soft loans are being provided on the priority sector basis for implementation of solar energy in various sectors
  • Net metering; a billing mechanism that credits solar energy system owners for the electricity they add to the grid.
  • Renewable purchase obligation has been set for all the states in India to generate domestic demand in the country

Price Trend of Technology in the Country

The price for solar modules and other equipment has reduced considerably in last few years of solar development in India. The prices are still expected to decrease at a 8 percent to 10 percent year on year basis in the coming years. In addition, soft cost, such as administrative and consultant fees, have reduced almost 10 percent compared to the same time last year and are further expected to decrease at a 10 percent year on year basis in the coming years

Per the records of government, the highest increase in solar capacity of 1,112 MW occurred from 2014 to 2015. Seventeen solar parks in 14 states have been approved with budgets allocated in the Govt. budget, and there is a tender to setup 2,170 MW solar projects in India. In addition, 1,000 MW of solar capacity are planned with solar cells made in India, and defence establishments will buy 300 MW solar plants.

As India emerges as the global hub for foreign investments, solar related investments hold no second position in the economy. There have been huge investment commitments by companies such as Sun Edison, Softbank, Foxconn Technology, Trina Solar, OAO Rosneft, and Aditya Birla Nuvo.

The following are recommendations and calls for action in India’s solar industry that would help the country achieve its solar energy targets and prosper with sustainable development:

  • Reduce net metering implementation time to weeks by single window clearance will boost the solar implementation projects among residential as well as industrial consumers
  • Extend the existing renewable purchase obligation policy to captive consumers
  • Monitor the industries/utilities mandated to use solar energy in their total energy consumption
  • Increase awareness of solar concepts and technologies
  • Create a simplified certification process to establish high growth rate and efficient operations in the solar industry
  • Improve quality guidelines, including development of proper standards and monitoring mechanisms
  • Increase education opportunities for solar PV technicians
  • Create process clarity by ensuring that subsidy system or Central Finance Assistance system adopted by government is flexible for end users.
  • Establish smooth processes for feed-in-tariff measurement across the country

Lead image: Indian arch silhouette in old temple. Credit: Shutterstock.

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Arpit Jain is an energy enthusiast and analyst at Markets and Markets serving in Energy & Power domain. His expertise lies in market intelligence projects related to Oil & Gas and power sector. He is a postgraduate from University of Petroleum and Energy Studies (India) and pursuing his passion for Oil & gas and renewable energy

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