India should encourage its banks to finance existing projects and promote new ones so that by 2022 the country can meet its targets and be well on its way to becoming a solar power leader and pioneer.
As a historic accord to limit the degradation of the environment through controlling the emissions of Carbon into the atmosphere, the Paris Agreement represents the widest and most concerted assault by humanity upon the dangers of climate change. Signatory countries have pledged to curb emissions and take whatever measures necessary to ensure that the global temperature rise due to pollution stays below the threshold of 2 degrees Celsius. With 35% of the global greenhouse gas emissions being directly or indirectly caused by electricity and heat generation, countries have looked to other means to reform their power sectors and replace fossil fuels with renewable energy generation.India has been an enthusiastic participant in this landmark movement and has pledged to meet more ambitious targets than the EU, long considered the leader in environmental conservation. The country plans to rely on its incredible potential for solar power generation and looks to generate 175GW through renewable sources by 2022, of which 100 GW is to come from solar power. India is targeting to generate 40% of its total energy requirement via eco-friendly sources by 2030. The Indian government has even taken the initiative of establishing the International Solar Alliance, headquartered in the country, with 120 other nations as members. Clearly, India is betting big on solar power to meet its obligations.
The challenge
As with any ambitious target, India’s solar dreams are not easy to achieve. However, the country has made a fantastic start. The world’s largest utility-scale solar projects are concentrated in China and India, and 5 out of the 10 largest solar parks under construction are in India. This includes the 2,225 MW Bhadla Industrial Solar Park, which will be the largest solar power generating facility in the world. The country has already achieved its initial target of generating 20 GW through solar power as of February 2018 and is even mooting a massive 5000 MW solar park in Gujarat. Thanks to a supportive policy environment as well as the dropping costs of solar panels, solar power in India became cheaper than coal-based power, which is the largest current source of India’s power generation capacity. These factors have contributed to make India the third-biggest solar power market and the industry worth INR 30,000 crore.
However, much is still left to be done. It is estimated that meeting the 2022 target of 175 GW through renewable sources would require funding of at least USD 125 billion. Even as notable foreign investors like Goldman Sachs, Morgan Stanley, JPMorgan, and EDF have evinced interest in backing India’s solar ambitions, surveys indicate a 65% drop in domestic corporate funding for the solar industry from Q4 2017 to Q1 2018. India’s banks are the biggest source of financing for new solar projects, and this fall in investor interest could scuttle the effort at this critical juncture.
Currently, the industry is dealing with changes due to GST, falling solar tariffs, and renegotiated Power Purchase Agreements, which is curtailing its growth. While a much-feared 70% duty against imported solar panels (90% of the panels being used in India are imported) didn’t come to pass, it certainly added to a cautious environment when the industry needs to expand rapidly. The duty was one of the reasons that a 500 MW project in Gujarat was shelved, and may now see light once more. However, there are other concerns – for instance, most state governments have not kept up with their Renewable Purchase Obligations (RPO), which is a problem because most producers have to sell the energy they generate to the state.
The future
Even though the United States was a key stakeholder in the process of bringing the Paris Agreement to life under President Obama, the new government of Trump subsequently withdrew from the accord last year. This left the climate leadership space open, and India has moved to fill this gap with the International Solar Alliance. However, the confusion over the regulatory frameworks and the sudden drop in domestic funding are creating an environment that is chilling the rapid pace of growth that the industry requires to meet India’s ambitious goals and targets. We must redouble our commitment to the targets to ensure that we make the transformation to renewable energy to safeguard our vulnerable ecosystem.
2017 was the first year in which more solar power capacity was added than coal in India. For this positive trend to continue, we need to take more concrete steps. India must bring the delayed Green Energy Corridor project back on track. It must remove regulatory blocks and signal clearly that it won’t impose tariffs that could impede the industry’s growth. It should encourage its banks to finance existing projects and promote new ones so that by 2022, India can meet its targets and be well on its way to becoming a solar power leader and pioneer.
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