The Aakhya Weekly #78 | The Green Push
The Aakhya Weekly #78 | The Green Push
In Focus: Navigating India’s Solar Revolution: Achievements, Challenges, and Future Prospects
By Sakshi Satija
India embarked on a transformative journey towards decarbonization in 2010, amid the prevailing dominance of thermal power in the country’s energy sector. The launch of the National Solar Mission that year marked a pivotal moment as both central and state governments set out to create conditions conducive to the expansion of solar capacity. This commitment to renewable power was rewarding for the country, as the national installed solar capacity surpassed 72 GW in November 2023.
At the COP26 conference, India announced its ambitious 2030 target to achieve 280 GW of solar capacity, showcasing the exponential growth potential from a mere 10 MW capacity in 2010. Government initiatives, including viability gap funding, 100% FDI allowance, and inter-state transmission charge waivers until 2025, played a crucial role in this remarkable progress.
Examining the Centre’s Policy Initiatives
In 2003, the Centre introduced renewable purchase obligations (RPOs) under the Electricity Act. Subsequently, certain large consumers were required to ensure renewable power as a sizable component of their energy mix. As the RPO mandate pushed obligated entities to procure solar power, more solar energy projects were installed. Growing adoption of solar power reduced prices and attracted more commercial and industrial consumers to the market.
In 2022, the Centre notified Green Open Access Rules to ease the adoption of renewable energy. By allowing consumers to aggregate load across multiple connections, consumers with dispersed units were encouraged to purchase power through the open-access route. Other changes under the Rules include streamlining of approval processes, increasing certainty on charges leviable by the States, and facilitating the transfer of green energy certification to the consumers.
Following the supply chain disruption caused by COVID-19, India also took initiatives to incentivize domestic module production to ensure self-sufficiency. In 2021, MNRE introduced an Approved List of Models and Manufacturers (ALMM) and allowed only government-approved domestic modules in open-access projects, starting April 2024. In 2022, a basic customs duty was levied on solar equipment imports. The government has also launched a PLI scheme to encourage the manufacturing and export of high-efficiency modules from India. Collectively, these measures are certainly pushing India towards its desired path of self-sufficiency.
Indian Leading and Lagging States
Among the states, Rajasthan is leading in solar installation, followed by Gujarat and Karnataka. This is due to higher solar radiation levels and easy availability of land in these states. Additionally, open-access solar capacity has been gaining momentum in states like Maharashtra, Karnataka, and Tamil Nadu, thanks to pre-existing and strong industrial bases in the respective states.
State government initiatives that typically affect the progress of solar project installations usually center around the availability of land and transmission, incentives that allow cost savings over the grid, and approval processes. Gujarat has proven to be an exemplary state in renewable power, as the state government has proactively permitted the setting up of solar projects, introduced favorable land policies, and allowed the banking of solar energy. Banking pertains to injecting surplus generation into the grid and withdrawing it whenever necessary. Gujarat is the frontrunner not just in terms of project installations, as it has proven its worth as a leader in solar module manufacturing. For instance, it received 76% of the total capex allocation under the solar PLI scheme. On the production side, it housed 53% of India’s module production capacity in 2022, showcasing its manufacturing heft and achievements in the renewable energy space.
On the flip side, states such as Uttar Pradesh, West Bengal, and Bihar, faced challenges with solar installations. This could be attributed to prioritization issues for the state governments, unavailability or lack of suitable land, and states’ expectations vis-a-vis lower tariffs. For instance, multiple solar projects were canceled in a state after noting lower solar power tariffs in other states. While states are justified in their attempt to procure solar power at lower prices, project allocations, and solar deployment as a policy choice are required to boost solar power penetration in the respective states.
Complications in Solar Energy Adoption
The solar power sector in India is at a mature stage. However, the frequent policy and regulatory interventions lead to delays in project execution. Decisions to bring back incentives, and reverse or delay non-tariff barriers, could force industry players into a predicament. For instance, the industry could adopt a wait-and-watch attitude, with the hope that favorable policies such as abeyance of ALMM would receive further extensions.
Adapting to the technical and compliance requirements under the new Electricity Grid Code, GNA, and DSM Regulations could also delay project execution, as the industry needs time to reshape.
At the state level, being resource-rich has led to challenges wherever renewables’ integration is high. Project installations place a heavy burden on the state infrastructure, leading to land and connectivity-related challenges. Sudden power flow variations in the grid due to the inherent variability in renewable energy generation can make the grid unstable. However, these challenges could be addressed in the long run, given how states are consciously course-correcting and engaging stakeholders on these persistent challenges.
What’s Next?
The country’s demand for solar energy will only grow in the coming years. Moreover, the Centre’s Green Open Access Rules, 2022, have been adopted by multiple states, leading to more commitments on energy transition by companies. With initiatives such as RE100, many businesses will target 100% renewable electricity.
Furthermore, we may see the industry rushing to avail of the inter-state transmission waiver on solar projects. In Q1 2024, solar project developers are likely to speed up project installations to also escape the ALMM mandate, which is applicable from April 2024. Post Q1, solar project installation costs may increase, as only domestic modules will be allowed. Project developers may initially struggle to procure solar modules with higher efficiency, as many manufacturers in India still produce older models. Project installations are likely to slow down post-Q3 2024, owing to the completion deadline for a large capacity of PSU projects.
In the next fiscal year, rapid increases in solar module production capacity should result in decreased module prices. However, the actual outcome remains to be seen, as government protection against imports may allow manufacturers to dictate the terms of supply and the setting of prices.
What Measures Could Work?
The government’s Green Open Access Regulations, RPO mandates. and incentives will continue to accelerate solar adoption. While churn in the policy and regulatory frameworks is natural in an evolving sector, clear visibility over the future regulatory landscape will help in addressing difficulties.
Moreover, solar adoption could be increased by exhibiting flexibility in accepting tariff outcomes in tender auctions and avoiding policy choices based on competitiveness with other states.
Additionally, the government auction processes could be made stringent, imposing costs on developers who fail to meet project execution timelines. Furthermore, land and transmission-related challenges, and infrastructure availability could be streamlined. Such proactive measures are essential to attract investments into renewables and aid India with its decarbonization goals.
Top Stories of the Week
Tamil Nadu Establishes a Gig Workers Welfare Board
The Tamil Nadu Government's Labor Welfare and Skill Development Department has introduced a dedicated welfare board to address the needs of gig workers involved in e-commerce, such as online food delivery and cab aggregators. Anticipating registrations from over one lakh workers, the newly established Tamil Nadu Platform-Based Gig Workers Welfare Board aims to extend social security and other welfare benefits to the large number of unorganized gig workers in the sector. The initiative follows TN Chief Minister MK Stalin's announcement last August about the creating a separate board to meet the welfare needs of gig workers, a move that garnered widespread acknowledgment from workers' associations.
Before the administrative process commences, gig workers in Tamil Nadu can presently register with the Tamil Nadu Manual Workers Social Security and Welfare Board. Subsequently, the labor department plans to shift them to the specialized Gig Workers Welfare Board. This development signifies the 19th welfare board in the state dedicated to workers, with a distinct focus on gig workers. The Tamil Nadu Government’s move resonates with a nationwide trend of recognizing the unique challenges faced by gig workers, with Rajasthan already enacting the Rajasthan Gig Workers Act (see Aakhya Weekly #56 for more). Other states, including Delhi, Karnataka, and Telangana are actively in the process of formulating and implementing similar frameworks and policies to provide social security for gig workers.
Cabinet inks India-Italy Migration and Mobility Agreement
Union Cabinet has given ex-post facto approval to the Migration and Mobility Agreement between India and Italy. The agreement aims to boost people-to-people connections, facilitate the movement of students, skilled workers, business professionals, and young talent, and enhance cooperation on issues related to irregular migration.
As per the agreement, Indian students will be eligible for extended permanent residence of up to 12 months after completing their studies, enabling them to gain initial professional experience following academic or vocational training in Italy. Italy has also outlined provisions for professional training, extracurricular internships, and curricular internships for Indians.
The accord designates quotas for non-seasonal Indian workers (5,000, 6,000, and 7,000 for 2023, 2024, and 2025) and seasonal Indian workers (3,000, 4,000, and 5,000 for 2023, 2024, and 2025) under the current Flows Decree. This decree is a system determining the number of visas for non-EU citizens entering Italy for employment, self-employment, or seasonal work.
The agreement is also expected to formalize a pact for the employment of Indian professionals in the healthcare and medical services sectors and address the irregular migration of workers from India to Italy. To monitor irregular migration, a joint working group has been established as part of the formal mechanism outlined in the agreement. This group will convene periodically in virtual or physical modes to oversee and evaluate the implementation of the agreement.
The Agreement will be effective from the first day of the second month following the completion of internal procedures by both parties and will remain in force for 5 years, with automatic renewal unless terminated by any party. crucial in ensuring the bill delivers on its promises.
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