India’s solar energy installation reaches 42 GW; over 45 GW in pipeline: Lessons Learnt
The previous decade will be known for the transition of the power sector from the conventional coal-based plants toward renewable sources such as solar, wind, etc. For the first time ever, the renewable energy capacity addition overtook the capacity addition of the conventional sources. While the renewable energy sector showed significant growth overall in the last decade, the growth of various segments varied quite distinctly. Solar energy outperformed the other segments of renewable energy sources in terms of both installed capacity and share of electricity generated. The total installed capacity of solar energy has increased multi-fold from around 150 MW in 2010 to 42 GW currently. This increase in installed capacity through the years has resulted in solar energy accounting for 12.4% of the power sector’s total capacity. Subsequently, the solar tariff has reduced significantly from Rs. 10.95/kWh in 2010 to Rs. 2.14/kWh in 2021.
Some of the lessons learned from the previous decade of development observed in the solar energy sector are as follows.
Govt. support through the years
The Govt. has initiated programs such as the National Solar Mission to attract investors to participate in the Indian solar energy sector investments. As a part of this National solar mission, multiple schemes have been introduced to further bolster the development of the solar energy sector in the country. The PM-KUSUM scheme was introduced to de-dieselize the farming sector with a target of adding 30.8 GW of solar energy capacity through the financial support of over Rs. 34,000 Crores. Similarly, to support domestic manufacturing, the Production Linked Incentive scheme “National Programme on High-efficiency Solar PV Modules” was launched with an investment target of Rs. 4500 crores, which has recently increased to Rs. 24,000 Crores in the Union budget 2022-23.
Despite the introduction of these schemes, there have been certain developments that are being viewed as a stumbling block to the solar energy sector in recent times. One such example is the Govt.’s decision to withdraw the subsidy scheme on residential rooftop solar projects up to 10 KW in Rajasthan. Similarly, the state-run Gujarat Urja Vikas Nigam Ltd.’s (GUVNL) decision to withdraw subsidies on small-scale distributed solar projects affected nearly 4000 projects with an aggregate capacity of around 2.5 GW. Additionally, the increase of GST from 5% to 12% on solar panels & 15% on BOS has made project costs unviable to the developers who have been a part of recent bids &/or in the process of implementation.
Generation curtailment issues
Despite the “Must-run” status issued to all renewable energy sources as per Electricity Rules, 2021, generation curtailment issues have been observed in many solar projects across India. This issue can be attributed to the fact that the tariff for solar generation is around Rs. 2.50 per unit, which is not the cheapest source of electricity generation. Therefore, the total costs of generation are generally higher than that of conventional thermal sources (~Rs. 1.30-2.00 per unit), which in turn leads to SLDCs (State Load Dispatch Centres) defying the ‘Must-Run” status of renewables to ensure DISCOMs can save money by curtailing the generation from renewables. Adopting a 2-part tariff is being contemplated as a possible resolution to minimize the generation cost & thereby avoid curtailment issues.
Regulatory uncertainty
Most of the capacity developments observed across the country can be attributed to the central procurement of solar projects through the Solar Energy Corporation of India (SECI) and the National Thermal Power Corporation (NTPC). There is a significant gap between the central-level & state-level procurements of solar projects, and this is highlighted by the considerably lower bids observed in the central-level procured projects. However, nearly half (~50%) of the solar capacity come under the state-level procured projects. A high level of regulatory uncertainty exists with regard to these projects. These regulatory uncertainties have resulted in the renegotiation of previously signed Power Purchase Agreements (PPAs) by the state governments after observing the decreasing trend in the solar tariffs. States like Andhra Pradesh, Punjab & Jharkhand are witnesses to the respective state governments trying to renegotiate the signed PPAs with the project developers so as to reduce the tariffs to the current trend, and this has consequently led to payment delay/denials & stalling of the projects due to legal battle. Therefore, a legitimate framework along with a rapid dispute resolution mechanism is needed to reduce these uncertainties.
Power evacuation & grid availability issues
Many solar projects face power evacuation & grid availability issues due to the lack of appropriate grid infrastructure. Transmission line projects typically range for a period of over 5 years from the commissioning of the solar project. This causes an issue with regard to the evacuation of the power from the solar plants to the grid. Similarly, solar projects also face grid availability issues and therefore are unable to ensure that the grid absorbs the power generated during the peak. In the state of Rajasthan, solar parks of nearly 3700 MW capacities have not been given approval for power evacuation into the grid for a period of nearly 3 months. The Govt. is coming up with plans to boost the developments in the energy storage sector so as to limit these grid-related issues. However, these issues still remain a big challenge to reaching the target of solar energy contributing to more than half of the 500 GW of renewable energy capacity set for 2030.
Land challenges
Arranging & acquiring contiguous land for the development of solar projects is a big difficulty that is generally faced by the project developers. Although there are not many land issues faced by projects in the form of solar parks, the projects developed in private land units face massive delays with regards to land availability & conversion from agricultural to non-agricultural use. In some states, there are restrictions that do not allow accessing large units of land under the Land Ceiling Act. Therefore, with the increasing project size, there is a need for providing considerable relaxation to the Land Ceiling Act from the state governments.
Environmental challenges
Despite solar energy projects having minimal environmental effects during their lifespan, there are a few factors that arise due to the installation of solar projects. Loss of biodiversity at the site of installation, depletion of potable water resources, e-waste disposal leading to soil contamination, etc. are some of the environmental issues that have been observed through the years. A proper policy framework for evaluating the ecological benefits of solar projects with the biodiversity impact, along with adopting novel techniques such as dry-cleaning/robot-cleaning & a proper waste management framework for end-of-life disposal of solar waste can possibly act as the solutions to minimize the previously listed environmental challenges respectively.