Two years ago, as part of its National Action Plan on Climate Change, India set out to boost the solar industry through subsidies, setting a generation target equivalent to about 3 percent of the country’s projected power needs by 2022.
The private sector has responded eagerly. With the price of solar energy dropping sharply, and with sun-drenched western states such as Gujarat and Rajasthan launching drives to subsidize solar power, many say the target will be more than met.
“India is a very important market for the solar industry, one of the top three markets worldwide,” said Jayesh Goyal of California-based Areva Solar, a provider of concentrated-solar-power technology. “The general view is that India will reach the 3 percent target before 2022.”
The logic for the Indian solar sector is compelling.
India enjoys more than 300 days of sunshine a year and is desperately short of electricity to power its fast-growing economy. Power cuts are frequent, and reliance on noisy, expensive and polluting diesel generators is widespread; about 400 million Indians are not even connected to the grid.
Last month, Gujarat opened Asia’s largest solar park in a stretch of desert near Pakistan, promising to outstrip its nearest rival, in Golmud in western China. Plans were also announced for a large solar plant in neighboring Rajasthan, a collaboration between India’s Reliance Power and Areva Solar.
But Rajendra Pachauri, who led the Nobel Peace Prize-winning Intergovernmental Panel on Climate Change, said India has taken only a small step in a much longer journey toward renewable energy.
“It can be a game changer, but you need a lot of enabling policies and private-sector investors who are prepared to take a few risks,” he said. “You need an extremely forward-looking R & D policy and infrastructure, and I am not so sure that is in play yet.”
‘Consolidation will happen’
India lacks the technological expertise and access to cheap capital that the solar industry relies on. That is where companies such as Azure Power come in.
The independent Indian power producer is looking to tap into American technology and capital to satisfy the growing demand at home. The U.S. government’s Export-Import Bank is among its main financiers.
“We are creating manufacturing jobs in the U.S. and service and installation jobs in India,” said Inderpreet Wadhwa, Azure’s chief executive.
In the past two years, the price of solar power has fallen sharply, thanks to a glut of solar panels in the market and falling silicon prices. Where the Indian government was initially prepared to pay up to 17 rupees (about 32 cents) per kilowatt hour (kWh) for solar energy, companies are now bidding for contracts to supply solar power for less than half that price.