As India celebrates its 65th Independence Day this week, its dynamic solar mission continues to make progress. India’s solar mission recently crossed its first major milestone as it aims to 20 GW of installed grid-connected solar capacity by 2022. No small feat for India’s burgeoning solar industry, 35 of the 37 phase-I projects under the mission have successfully demonstrated financial closure, meeting the firm government deadline. With the first batch of solar PV projects expected to be commissioned by January 2012, India’s installed solar capacity will be nearly 200 MW, up from 20 MW less than two years ago. The Indian government is also expected to auction another 400 MW of capacity later this month.
The recent reverse auction shows India’s competitive and dynamic market. Over 400 projects applied for the mere 37 slots available through the phase-1 reverse auction – setting India’s solar feed-in tariffs at remarkably low levels. Leading up to the auction, many skeptics raised doubts about the viability of the projects at such low feed-in-tariffs. The Indian government demonstrated its seriousness in achieving the mission’s targets by providing a payment guarantee scheme to developers. This scheme eliminates the risk of payment default by state-utilities buying solar power and makes projects more attractive. Encouraged by these actions, Indian banks have loaned estimated $1billion in the first year. In a remarkable show of confidence in the growing solar market in India, the US Export-Import bank has granted loans worth $75 million to four solar projects in India so far and has another $500 million of solar projects in the pipeline making India the largest market for the bank.
The phase I of the solar mission has seen rapid developments in the Indian manufacturing sector as well. While recently most of the domestic Indian solar companies have been operating in the narrow band of assembling solar panels and modules, there is an increasing trend of vertically integrated manufacturing facilities. Indian conglomerate, Birla Surya, is establishing a $1.2 billion integrated unit for multi-crystalline silicon wafers and solar PV cells manufacturing with a December 2011 production start date.
Interestingly, while the solar mission guidelines released last year mandate the use of domestic content for state sponsored projects – which has been an issue of discussion between the US and India - the mandate is restricted only to those projects that utilize the crystalline silicon technology. US manufacturers like First Solar, the leader in the alternative thin film photovoltaic technology, have already signed contracts with project developers in India for providing equipment. In the next set of guidelines, the Indian government is expected to increase the minimum project size to attract big Indian players, like Tata Power, to make the solar industry even more competitive and help bring down the costs.
Solar energy has a dual role to play in India in powering its rapidly growing economy and fighting climate change. While the solar mission’s first phase seems to be off to a good start with the project-financial closures, the Indian government strong support, and dynamic-market action, fully implementing the mission’s 20 GW goal of solar power by 2022 requires even greater action. Achieving the mission’s 20 GW goal is critical to India’s path for sustainable development and to the planet as a whole.
Co-authored by Sameer Kwatra, NRDC Speth Fellow