India’s Solar Journey: Policy trumps politics

22-May-2015 #Policy News Source: India Inc

India’s solar journey has so far been a textbook example of what the country can achieve when policy and development agenda trumps politics.

The central government, under Prime Minister Narendra Modi’s leadership, has set out an ambitious agenda to make solar power a key part of the energy mix in it’s bid to deliver electricity to each and every Indian 24 x 7 365 days a year.

In early September 2014, the Energy Minister Piyush Goyal had announced the National Solar Mission that sought to raise solar capacity in the country to 20 GW (from existing 2GW) by 2020 and 100 GW by 2030. At the time, New Delhi envisioned the country to have a capacity of generating 200 GW of solar power by 2050. And the central government made it clear that it would work with states and the private sector to ensure this vision was achieved.

Buoyed by the central government’s political will and willingness to listen to and support both the state governments and private sector, investors suddenly found that the solar sector in India was lucrative. State governments of all political persuasions, including those who are politically opposed to the BJP, bought into the centre’s vision and started developing policies to boost solar capacity in their respective states.

Most importantly, however, it was not just the states that were already leaders in solar power such as Madhya Pradesh, Rajasthan and Gujarat but relatively new comes such as Andhra Pradesh, Telengana, Karnataka, Odisha stepped up to the plate. Even states such as West Bengal, Uttar Pradesh and Jammu & Kashmir, started developing policies to attract solar power investment with an aim to build capacity.

The coordinated efforts of the central and state governments had a major impact on the private sector including institutional investors. This was reflected in the quantum of investments made in the sector in India in 2014. In the second quarter of 2014, the average investment in solar projects were a little more than $2 billion per month, which rose to over $3 billion per month in the quarter ending in September. The cumulative investment in the industry was approximately $10 billion in the third quarter.

This trend has continued to grow and the private sector along with institutional investors are increasingly more confident in their rates of return from investment in India’s solar energy sector. The decision by Piyush Goyal to move away from an auction model to a set price based model, as suggested by the private sector acted as a catalyst in making the solar sector self-sustainable in the long run. In addition the pledge to increase the requirement of state power corporations to purchase renewable power from 10 per cent – 15 per cent and then 20 per cent over a period of time also boosted confidence.

The momentum in investment and support from state governments enabled Prime Minister Modi to announce the revision of national solar targets in October 2014. India now has an ambition to have 15 GW of solar capacity by the first quarter of 2019. But the solar story has not just been about increasing capacity – it has also focused on improving quality of life for rural Indians through innovative solutions and applications such as developing micro-grids to power villages and using solar power to ensure farmers can irrigate their lands. While pioneering states such as Gujarat, Rajasthan and Madhya Pradesh have led the way, others such as Odisha have also followed suit.

The centre and state governments are also now working together in various parts of the country to build mega solar parks so that the energy demand of India can be met. In order to facilitate the growth of solar and wider renewable energy, the Modi Government is working on a new Renewable Energy act (with emphasis on solar power) in consultation with the states that streamlines investment opportunities and articulates tariffs and subsidy policies. It is expected that this effort of the government, in itself would create $250 billion worth of investment opportunities in the sector.

No wonder companies operating in the solar sector are seeing profits, such as Tata Solar. Some are confident of taking their ventures to the IPO stage. For others this is a lucrative market where returns on investments are certain as long as they play by the rules and support India’s efforts to deliver uninterrupted power supply to its citizens 24 x7 365 days a year.

Analysts around the world are confident that India will lead the world in solar power – the question now is when and not whether. Sadly though, there is little coverage of this success story in mainstream Indian media – be it print or TV. There are times when policy makers and industry deserve brickbats but on solar power, the maturity and the commitment shown by both politicians and the private sector along with institutional foreign investors must be applauded.

Read Full Article..