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Last Update 21 November 2023

What are the key challenges for solar power development in India amidst the current context?

What are the key challenges faced up by the Indian solar industry and are likely to hinder the growth in future as well?


Understanding the growth trajectory for Solar capacity in India

The solar power has seen more than a three-fold jump from March 2018 to October 2023 wherein the capacity grew from 22.34 GW to 72 GW. This growth if averaged out on an annual basis would be around 9 GW from March 2018 to March 2023. Interestingly in the first three of the period of March 2018 to March 2021 (despite being COVID -19 hit) saw a growth of nearly 19 GW meaning an average capacity growth of just above 6.3 GW on annual basis. This, however, takes a quantum leap in the next couple of years wherein the cumulative sola installed capacity witnessed a growth of nearly 25 GW. The capacity growth from March 21 to March 22 was 12.76 GW and from March 22 to March 23 was 12.78 GW, which is slightly better than the last year. From April 2023 to October 2023 the quantum solar capacities added stands at 5238 MW and if the capacities are added at the same rate for the coming half of the FY 24 it is anticipated the overall 10-12 GW shall again be added on March 23 values of installed capacity.

Undoubtedly last year has seen highest capacities being added to solar power installed base owing to falling tariffs, more impetus on renewable generation, growth in RE based C&I open access transaction & dedicated power transmission corridors etc.



Mr. Ravi Shekhar, Director & Head, of Eninrac Consulting says “India must re-think solar projects delivery in the coming years. With consolidation in the market the key would be collaboration to be adapted as a key theme. This could be achieved through strategic partnerships, risk ownership and contracting/sub-contracting, work-force development, and digital technology adoption. For instance, established EPC players can forge tighter partnerships  such as by facilitating more integration between their respective engineering teams or promoting transparency on pricing and risk. And those without committed partners might entertain new options; for example, a utility developer might invest in building the capabilities of a regional contractor to install solar at scale.

In India traditionally as well for any industry have been a winning strategy and in solar industry as well the scene is no different. Leading utilities/developers have already locked in capacities with two or three core EPC players on an average which yields profits on both the sides. Clearly to ford through the challenges emanating from the solar industry dynamics in the India, partnerships would lead to be a winning strategy especially in solar project delivery. However, the landscape of partnerships is expected to change going forward. First, the industry could shift to include a broader set of stakeholders vying for committed partners. Second, new approaches to joint business growth and capability building could deepen partnerships and promote collaboration across larger and longer-term project portfolios."


Key reasons which India is likely to face despite registering higher growth in capacity additions in last two years for solar power


Despite GoI to address the concerns for solar supply-chain resolutions issues and unleashing PLI scheme to boost domestic solar manufacturing in the country, it still faces some of the enlisted key issues to tackle to carry on with the necessary fillip to solar segment. The concerns of the industry stakeholders are quite clear based upon Eninrac Survey which is spaced for short to medium term from 2023 and highlighted as under:

As for renewables, solar and wind will grow much faster than hydropower, with around 70% of installed capacity coming from solar, 20% from wind, and 10 percent from hydro by 2050. Gas is likely to play an important supporting role over the short to medium term by providing flexible capacity as renewables scale up and battery storage becomes more cost-effective. Demand for gas supply and infrastructure is, therefore, likely to continue to rise in the short term, with African gas demand projected to increase by 3 percent annually until 2030 and gradually decrease thereafter.
• Limited access to land & permits for utility scale solar
• Inflation and solar module pricing
• Grid interconnection costs & dedicated corridors
• Supply chain constraints and lack of domestic manufacturing in India
• Financing mechanisms for large scale solar parks
• Lower solar power tariffs
• Management of solar waste
• EPC & labor shortage

The challenge wise high concern issues were further split during the survey to understand the levels the challenges are difficult to address w.r.t to an Indian context. 


Limited access to land & permits for utility scale solar


Securing the land and approvals to install solar is a challenge for early-stage developers. A 100-MW solar project can require more than 500 acres of land, and interconnection and topographical constraints further limit the land available. Permitting is managed by local governments, producing a patchwork of different requirements and regulations that developers must navigate. In addition, permits can be difficult to obtain without community support.


Inflation and solar module pricing


Historically, solar module pricing has trended down as the technology has improved. However, the solar industry has not escaped recent inflationary pressures, and commodities such as steel, aluminum, and copper—which are used in modules, trackers, inverters, and bulk materials—have experienced record price volatility in the past 36 months. Going forward, pricing trends could be more uncertain because of geopolitical dynamics, commodity price volatility, and the challenges of rebalancing supply and demand amid the diversification of solar panel manufacturing.


Grid interconnection costs & dedicated corridors


Until an interconnection agreement is signed, grid connection can be one of the most uncertain costs for a renewables project. Additionally, in many regions, the interconnection process has become longer and more expensive.


Supply chain constraints and lack of domestic manufacturing in India


Many industries in India, including renewable energy, heavily rely on imports for critical components and equipment. This dependency makes them vulnerable to global supply chain disruptions, such as trade tensions, geopolitical issues, or pandemics, which can lead to delays and increased costs. Fluctuations in international markets, including currency exchange rates and commodity prices, can impact the cost of imported goods. Sudden changes in these factors can lead to uncertainties for project developers and increase the overall project cost. Disruptions in the global supply chain, such as transportation delays, shortages of raw materials, or manufacturing interruptions, can lead to project delays and affect the timely execution of renewable energy projects.


Financing mechanisms for large scale solar parks


Large-scale solar parks require significant upfront investment for land acquisition, solar panels, inverters, transformers, grid interconnection, and other infrastructure. Mobilizing such capital can be a challenge, particularly in emerging markets. The availability of low-cost financing is crucial for the economic viability of solar parks. High-interest rates can significantly impact the overall project economics and return on investment.


Lower solar power tariffs


Developers may face challenges in achieving satisfactory returns on their investments with lower tariffs, impacting the overall profitability of solar projects. Further, lower tariffs may affect the financial viability of solar projects, making it challenging for developers to secure financing and meet their debt obligations. At times it may lead to quality compromises. In an attempt to reduce costs and meet lower tariffs, developers may compromise on the quality of equipment and construction, which can affect the long-term performance of solar installations.


- Communications Team

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