According to a report by ICRA, the solar power sector in India is projected to add 85-90 GW of capacity over the next two fiscal years. This growth is driven by favorable policy measures, declining costs, and steady demand from both central and state agencies, despite some challenges in the renewable energy sector.
Solar Capacity Growth in India
India’s solar power sector is expected to significantly expand, with projections indicating an addition of 85-90 gigawatts (GW) of capacity by FY27. This growth is driven by favorable policy measures, declining module costs, and strong demand from both central and state agencies. However, the renewable energy sector still faces challenges such as land acquisition and payment issues with state utilities. For a broader view on similar developments, check out how Iran is building a 15GW solar capacity.
According to a report by ICRA, the total solar power capacity is forecasted to reach 160-165 GW by the end of FY26, representing a compound annual growth rate (CAGR) of 18% from FY23. By FY27, the capacity is expected to rise further to 185-190 GW. The report highlights the significant progress in the solar power sector, which has become a key component of India’s renewable energy mix.
Policies and Demand Driving Solar Capacity Growth
The central and state agencies have played crucial roles in driving this growth. The central agencies, such as SECI, NTPC, and NHPC, have issued tenders and awarded projects totaling 126.8 GW and 63.5 GW, respectively, over the past three fiscal years. The state agencies have also contributed by issuing tenders of 41.6 GW and awarding 15.4 GW of projects during the same period.
As a result of these efforts, around 55 GW of solar power capacity is currently under construction and expected to be commissioned by the end of FY26. This is in addition to the 60 GW of capacity that was installed by FY23.
The demand for solar power from state utilities has been rising due to various factors. These include the renewable purchase obligation (RPO) targets set by the government and the cost-competitiveness of solar energy compared to conventional power sources. Additionally, there is significant demand from commercial and industrial customers, who are seeking to meet their own sustainability goals.
Challenges in Solar Capacity Growth
Despite the positive outlook, the solar power sector still faces challenges. One of the major issues is the availability of land for setting up solar projects. Land acquisition has been a persistent problem, affecting the timely implementation of projects. Additionally, payment delays by state distribution utilities continue to pose risks to the financial health of solar power developers.
The government has been taking steps to address these challenges. For instance, the Ministry of Power has issued guidelines to ensure timely payments by state utilities to renewable energy developers. However, the effectiveness of these measures will depend on their implementation at the state level.
The solar power sector has also been impacted by the recent increase in module prices. The global supply chain disruptions caused by the COVID-19 pandemic have led to a rise in the cost of solar modules, which could affect the financial viability of some projects. However, the long-term trend of declining module prices is expected to continue, driven by technological advancements and economies of scale. For insights on how the US is expanding its solar panel manufacturing, see US Solar Panel Manufacturing capacity grows by 11 GW in Q1 2024.
Government Policies and the Future of Solar Capacity Growth
The Indian government’s commitment to achieving its renewable energy targets remains strong. The country aims to install 500 GW of renewable energy capacity by 2030, with solar power expected to play a major role in achieving this goal. The government has introduced various policy measures to support the growth of the solar power sector. These include the Production Linked Incentive (PLI) scheme for solar manufacturing, which aims to reduce the country’s dependence on imported solar modules.
The Solar Energy Corporation of India (SECI) is also planning to issue tenders for 20 GW of solar power projects over the next two years. This is expected to provide a further boost to the sector and attract more investments. The solar power sector is set to play a crucial role in India’s energy transition. As the country moves towards a cleaner and more sustainable energy mix, solar power will continue to be at the forefront of this transformation. With the right policies and investments in place, India is well-positioned to achieve its renewable energy targets and become a global leader in solar power.