Energizing the Solar Market in India: How Government Policies Are Causing Rapid Growth in Clean Energy

With nations around the world vying for clean energy leadership, India has taken a bold step toward becoming a leader in solar development. In only two years under India’s ambitious national solar policies, prices for solar energy in India have dropped dramatically, approaching the price of traditional energy from fossil fuels. While the Indian government has a long way to go to reach its goals of 20 gigawatts of solar energy by 2022, India’s experience is a strong example of how national and state policies can unleash the potential of clean energy.

Just today, NRDC and our partner, the New Delhi-based Council on Energy, Environment and Water (CEEW), released a new report showing how—in just two years—India’s National Solar Mission has transformed the solar market in India. The report, Laying the Foundation for a Bright Future, is the first independent, external analysis that’s been done on the strengths and hurdles faced by India’s solar efforts.

India’s solar numbers are nothing short of impressive: under the first phase of the project, India’s installed solar capacity jumped from only 17.8 MW to over 500 MW. During that time, solar energy prices dropped to as low as Rs. 7.49/kWh, or $0.15 USD/kWh, faster than most anticipated, as we discuss at the U.S-India Energy Summit hosted by TERI and Yale University.

Why are those prices significant? In India, solar energy is approaching grid parity, or the point where it can compete with energy from traditional sources like coal and natural gas—a fairly remarkable feat for such a young market. In order to make the transition to clean, safe sources of energy around the world, we need these new technologies to be able to compete with long-standing, dirtier sources of fuel, which have dominated the market for centuries. India is providing a strong example for other countries of how we might get there.

As India enters Phase 2 of the National Solar Mission, we know there are significant opportunities to grow the Indian solar market even more. As part of our report, NRDC and CEEW outlined concrete and feasible steps the central government, private sector and other stakeholders can take to work toward the Mission’s goal of 20 GW of installed solar capacity by 2022.

Here are a few of our recommendations. See them all here.

  • Benchmarks, Transparency and Monitoring: The Indian government urgently needs to increase the level of information available on the Mission’s progress, by enforcing period updates on the progress of each project, and making the commissioning system more consistent and transparent. Moreover, to increase confidence among investors in the solar market, project technology choices should be transparent and data on available sunlight (known as irradiance data) should be made publicly available.
  • Strategic Financing: Central and state government agencies, with the leadership of India’s Ministry of New and Renewable Energy (MNRE), should develop a strategy to optimize the role of different funding sources and financial institutions. Some institutions are better suited for project financing, while others are needed to increase information, offer payment guarantees, support R&D, or boost skills development. Only when a comprehensive financing strategy is in place, will different financial interventions succeed in scaling solar energy investments.  
  • Technology-Neutral Manufacturing: The Indian government can further grow domestic manufacturing by making policies technology-neutral and market-enabling. Options include: (a) a domestic content requirement (DCR) that all photovoltaic modules are manufactured in India, uniformly enforced across all PV technologies (currently, certain technologies are exempt and are therefore imported at a lower cost from other countries); (b) a DCR specifying that a certain percentage of the solar PV components be manufactured in India; or (c) consider a different form of incentive to promote domestic manufacturing without being restrictive to foreign-manufactured technologies.

With clean energy investments reaching a record $263 billion worldwide in 2011, it’s no secret that nations around the world are closely following the progress of the National Solar Mission. As other governments try to replicate the successes and learn from the hurdles encountered under India’s program, the Indian government has a huge opportunity to encourage growth in solar energy at a global level.

Here at NRDC, we’re excited to see India’s bold leadership on solar, and look forward to working with all stakeholders as they embrace the next phase of solar development, included more comissioned grid-connected projects as well as off-grid and rooftop solar projects.

About the Authors

Anjali Jaiswal

Senior Attorney and Director, India Initiative

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