Potential for Solar Power Production in India

India is characterised by a high solar insolation and a dense population, which is a perfect combination for utilising solar power in the country. At present, the country is the world leader as regards wind power generation [2]. With respect to the solar energy segment, a number of large projects have been planed including setting aside an area of about 35,000 km2 in the Thar Desert for solar power generation projects, which has the potential of generating 700 Gigawatts to 2,100 Gigawatts [5]. In addition, the Ministry of New and Renewable Energy has also come up with a plan to implement the Jawaharlal Nehru National Solar Mission (JNNSM) Phase 2 draft policy (see figure 1 below); through this policy, the government of India has the objective of installing 10 Gigawatts of solar power. In the 10 Gigawatts target, central schemes have been allocated 4 Gigawatts whereas the State specific schemes have been allocated 6 Gigawatts [5]. During July 2009, the government disclosed a plan with a budget of US $ 19 billion aimed at producing 20 Gigawatts of solar power by the year 2020. This plan required the compulsory utilisation of solar-power applications and equipments in hotels, hospitals and government buildings.

During November 2009, the government reported that it was prepared to start implementing the National Solar Mission through the National Action Plan on Climate Change, with the aim of generating 1000 Megawatts of solar power by the year 2013 [6]. During the period between August 2011 and July 2012, the grid connected photovoltaics in India increased from 2.5 Megawatts to 1000 Megawatts [1]. The 2011 report published by the GTM Research and BRIDGE TO INDIA pointed out that India has the ideal storm factors needed to facilitate solar photovoltaic (PV) implementation at a significant pace in a period of at least five years [6]. The continuously reducing prices for solar PV panels come at a time when the cost of grid power in the country is increasing steadily. In addition, sufficient solar power resources and government support have also played a pivotal role in accelerating solar power adoption; however, the biggest factor accelerating the adoption of solar power in India is need [2]. This is because Indian has a growing economy characterised by a growing middle class size; as a result, the country is currently facing a significant electricity deficit of about 10-13% of the daily electricity required [6].

India has 300 clear and sunny days yearly, making its theoretical solar power reception to be nearly 5000 Petawatt-hours annually (PWh/yr), that is, on India’s land area only [4]. The average solar energy incident on a daily basis in India ranges from 4-7 Kilowatt-hr per square meter (kWh/m2); this depends on location [3]. In 2007, the total solar energy production in India was less than 1 percent of India’s total demand for energy. By 2005, the amount of solar energy funded by the government amounted to 6.4 MW-yr [2]. By December2010, the grid connected solar PV was only 10 MW. Nevertheless, India was ranked first with respect to the solar energy produced per watt installed; India has a solar insolation of 1700-1900 Kilowatt hours per Kilowatt peak. In 2010 and 2011, 25.1 MW and 468.3 MW were added respectively [2]. As of March 2013, India had a grid connected solar PV of 1686 MW, which relatively lower compared to Germany’s 34,000 MW of PV installations capacity [5] India is expecting that by 2017, there will be an extra 10,000 MW, and have 20,000 MW as of 2022 [2].

This study seeks to explore the potential of India with regard to the production of solar power. Currently, more than 400 million people living in the rural areas lack access to electricity and are still relying on kerosene for cooking and lighting up their homes. This indicates the high demand for electricity amid a supply shortage [2]. In addition to other renewable sources of energy, the potential for production of solar energy is the highest; this is because India experiences about 300 days of clear and sunny weather in most parts of the country and the annual solar radiation ranges between 1600 and 2200 KWh/m2 [3].

Scope

There are several forms of alternative energy sources that India can implement to address its energy sources problem; however, the scope of this project is only on solar energy production harvested using solar PV equipment.

Need for Solar Energy in India

There is no doubt that India has significant energy requirements and is currently facing several challenges in meeting its energy requirements using the conventional power generational approaches. During 2012, July 30 and 31, India had the largest power blackout across the globe (The Great India Outage), which stretched from Kolkata to New Delhi [2]. This blackout was attributed to the northern power grid failure, resulting in about 700 million people going without power [2]. This substantial grid failure highlighted the country’s massive demand for electricity, as well as its struggle to produce sufficient power to meet the country’s electricity needs. To this end, India has plans to increase its power generation capacity by 44% in the coming 5 years; however, current problems such as energy shortages and the Great India Outage point out the scope and magnitude of the challenge [2]. Prior to the blackout, India reported a decline in power generation by 5.8% during June 2012 (India had a production capacity of 209.27 GW during the 2011-2012 year); at a time when the peak-hour demand for electricity was 128 GW [2]. []

In addition, the consumption of electricity in India is increasing at a steadfast rate (4 percent) because of economic development, as well as population growth [4]. The economy of India is facing significant challenges since the supply of energy is not sufficient to meet the energy demand; the magnitude of the problem is worsened by the fact that energy shortages are evident in India (about 15% daily) [1]. As a result, lack of adequate energy, as well as unreliable supplies, is a significant threat to the economic growth of India. In order for India to meet its present and future energy needs and eradicate the frequent power outages, the government should perform an assessment as regards the best approach to tackle the issue of power demands [2]. To this end, the current energy shortage presents an ideal opportunity for India to devise a plan aimed at coming up with sustainable solutions to address the current, as well as future, energy demands. For environmental and economic reasons, there is a need for India to move towards the use of environmentally safe renewable energy sources to meet the current and future electricity demands [2]. There is no doubt that a renewable energy source is the ideal solution since it guarantees long-term economic growth. A good renewable energy policy has the potential of creating new jobs together with an economic stimulus of over US $ 1 trillion [4]. Using renewable energy sources will also facilitate a decentralised energy distribution, especially with regard to meeting the rural energy requirements [8]. Solar PV energy also has the potential of shifting nearly 90% of the daily petroleum mileage to electricity since people will be more encouraged to use plug-in hybrid cars; this has the potential of reducing the cost per mile by 25% [1]

At present, India lacks an overarching energy strategy; rather, it has several disparate energy policies. Instead of using an overarching energy strategy, India relies on a bunch of energy business policies and models that have not yielded any meaningful results with regard to addressing the increasing energy demand in the country [10]. In addition, these policies have detrimental impacts on expansion plans to increase the adoption of renewable energy sources.

Theoretically, there is no doubt that India has the potential to develop renewable sources to fill the gap between the demand and supply. During the period 2009-2010, the shortage of electricity supply for the customers connected to the grid was 10% [2]. The peak demand shortage was reported to be 12.7% [5]. With the economy of India experiencing a rapid growth, the country needs to devises ways to lessen the gap between electricity supply and demand. Energy security can only be achieved by relying on renewable sources of energy, which also reduces the dependence of fossil energy that is imported [1].

Current Trend in Global and Indian Solar Energy Sector

Several industrialised countries have incorporated significant solar capacity in their grid connections in order to increase or offer an alternative to the current electricity sources. Long distance transmission has the capability of displacing fossil fuel consumption by remote energy sources. Currently, Germany is the global leader with respect to solar PV installation [5]. As of December 2012, Germany had a solar PV capacity of at least 32.3 GW. In the same year, German witnessed an increase in the Solar PV installations by 7.6 GW, with solar PV providing about 18 Terawatt-Hours of electricity during 2011, which comprises of about 3 percent of total electricity produced in the country [5]. Market analysts project that the percentage of electricity produced by solar PV in Germany could clock 25% by 2050.  Germany aims to produce 35% percent of its electricity using renewable forms of energy by 2020 and 100 percent by 2050 [5]. The table 1 below shows the largest solar PV plants across the globe.

Solar PV power plant Capacity Location
Ague Caliente Solar Project 250 MW (plans underway to increase it to 397 MW) Arizona, United States
California Valley Solar Ranch 250 MW California, United States
Golmud Solar Park 200 MW China
Welspun Energy Neemuch Project 150 MW India
Mesquite Solar project 150 MW Arizona
Neuhardenberg Solar Park 145 MW Germany
Templin Solar Park 128 MW Germany
Toul-Rosières Solar Park 115 MW France
Perovo Solar Park 100 MW Ukraine

In addition, there are a number of large scale solar PV plants that are under construction; they include the Desert Sunlight Solar Farm in California with a planned capacity of 550 MW, and Topaz Solar Farm in California with an intended capacity of 550 MW among others [10]. The global production of electricity using solar energy has reported an increasing trend during the period 2005-2012 as indicated in the figure 2 below [11].

Aims

The following are the aims of this study:

  • To analyse the feasibility of solar PV power production potential in India;
  • To analyse and compare the renewable energy policies of European countries such as United Kingdom, Spain and Germany with India; and
  • To scrutinise the power demand in rural and urban parts of the country and formulate a roadmap to fill the gap between supply and demand.

Objectives

In order to achieve the aforementioned aims, the following are the specific objectives of this study.

  • To investigate the current energy demand and supply scenario.
  • To scrutinise the existing and ongoing solar energy projects in accordance with the future demand.
  • To examine the outlying possibilities of solar PV power productions maximum share to meet the future demand and existing deficit.
  • To find a way to reduce the use of fossil fuels in energy sector.

Chapter 2: Literature Review

The solar energy sector has witnessed a remarkable technological shift. Whereas the early solar technologies comprised mainly small-scale solar PV cells, present technologies comprise of large-scale solar PV systems and solar concentrated power, which supply electricity to grids [5]. In addition, there has been a substantial drop in the costs of solar power technologies during the last 3 decades. For instance, during the period 1982-2010, the cost of high power band solar cells reduced from $ 27000 to $ 4000 per kW; the installation costs of a solar PV system reduced from $ 16000 to $ 6000 per kW during the period 1992-2008 [5]. Furthermore, support policy tools, volatility of the fossil energy market and environmental concerns have played a pivotal role in accelerating the growth of the solar energy market. From a theoretical perspective, solar energy capacity far surpasses the worldwide energy demand [7]. Regardless of the technological potential, as well as the current market growth, the input of solar energy to the worldwide energy supply mix is insignificant.

Present Status of the Global Solar Power Markets and Technologies

Resources and Technologies

Solar power is produced by converting sunlight rays into electricity, which can be dome directly using photovoltaic (PV) systems or indirectly by concentrated solar power systems [2]. Solar power technologies are classified into passive and active, non-concentrating and concentrating, and thermal and photovoltaic. Passive solar energy involves harnessing solar energy and using it the way it is; for instance, one can make optimal use of the daylight suing efficient building design that allows maximum natural light [5]. On the contrary, active solar energy entails tapping the solar energy and storing it or converting it for other uses. Active solar energy can be further grouped into solar thermal and photovoltaic [8]. The solar PV technology functions by converting radiant energy found in sunlight rays to electricity when lights comes into contact with semi-conductor material resulting in electron excitation, which enhances conductivity. Currently, there are two kinds of solar PV technology: (i) crystalline silicon PV, which includes mono crystalline and poly crystalline cells; and (ii) thin film technologies, which include amorphous silicon, tandem micro crystalline, Thin Cadmium Telluride Film (CdTe) and Copper Indium Gallium Selenide (CIGS). Solar thermal technology makes use of solar heat either for a heating/thermal application or for electricity generation [8]. Therefore, solar thermal technologies can be grouped into solar thermal electric and solar thermal non-electric. Solar thermal non-electric could be used for applications such as solar cookers, solar cooling systems, solar air heaters, solar water heaters and agricultural drying [9]. Solar thermal electric is used for electricity generation (CSP). CSP technologies include Solar Dish Collector, Power Tower, Fresnel Mirror and Parabolic Trough [9].  A solar PV production system is shown in the figure 3 below.

The use of solar energy can be traced back to the period between 1860 and World War 1, wherein numerous technologies were used in steam generation by harnessing the sun’s heat and using it to drive irrigation pumps and turbines [55]. Bell Labs invented the solar PV modules in 1954 and have been utilised in space satellites to generate electricity since their initial development [8]. Shortly after the oil shock of the 1970s, solar energy technologies received substantial interest with respect to their commercialisation and development [5]. However, the developing solar energy sector declined in the 1980s following a significant fall in the oil prices together with the absence of policy support.

It has been reported that solar energy is the largest alternative energy source with respect to renewable energy sources [2]. The effective solar irradiation that reaches the surface of the earth is approximately 0.06 kW per square meter for highest latitudes and 0.25 kW per square meter for low latitudes [20]. The figure 4 below is a comparative analysis of the technical potential of the various renewable energy sources using the current conversion efficiencies of the existing technologies [10]. Even when the comparative analysis is performed on a regional basis, it is apparent that the technical potential of solar power in several regions is significantly greater with respect to the present primary energy consumption.

The table 2 below indicates the regional distribution of yearly solar energy potential together with the total electricity and primary energy demand for the year 2012. It is evident from the table 2 that the supply of solar energy is considerably more than the demand at both global and regional level [5].

Table 2: Yearly technical potential for solar energy measured in MW

Region Minimum technical potential Maximum technical potential Primary demand for energy Demand for electricity
Pacific OECD 1991 7309,280 117,672 18,933
Centrally Planned Asia 31935 1335519 299,344 34,482
Pacific Asia 11385 276,061 8164 883
Sub Sahara Africa 103219 2,646,162 5873 314
Middle East and North Africa 114427 3,071,634 8652 814
Former Soviet Union 55265 2,403,700 12,071 1069
Central and Eastern Europe 1116 940,099 1325 162
Latin America and Caribbean 31110 934,284 6687 860
North America 50264 2,057,940 31,761 4535
Total 436031 13,840,936 142,665 16,816

With 100% efficient conversion and storage, it has been estimated that installing solar PV modules in only 4 percent of the earth’s surface can produce sufficient electricity to cater for the present global energy consumption [12]. It has also been estimated that covering only 0.71 percent of the land mass in Europe with solar PV modules is adequate to meet the electricity consumption in the continent [11]. In most regions, 1 square kilometre can generate at least 125 GWh of electricity annually using the CSP technology. For instance, in China, 1 percent of the landmass (26,300 square kilometre) of the country’s wasteland found in western and northern parts with highest solar radiation, has the potential of generating about 1,300 GW, which is twice the projected amount of electricity that China intents to produce for 2020 [10]. In the US, a land area of 23,148 square kilometres in the southwest region is capable of producing the country’s current electricity generating capacity (1067 GW) [8]

Present Market Status

Solar PV

As of December 2010, the total solar PV installed capacity was about 40 GW, with 85 percent of this being grid connected and the remaining 15 percent being off-grid. Currently, crystalline silicon based solar PV modules are dominating the market (80 percent) [5, 25]. The remaining percentage of the solar PV market comprised mainly of thin film technologies. As indicated in the figure 5 below, the solar PV market is dominated by few countries. Nevertheless, there are a number of countries that are currently witnessing a substantial market growth. For instance, Czech Republic had an installed capacity of 2 GW for solar PV as of December 2010, this is up from nearly zero during 2008. In addition, India reported a cumulative solar PV installation capacity of 102 MW as of December 2010 [5]. China reported a cumulative solar PV capacity of 8300 MW as of December 2012 [2].

With regard to the scale of installation, solar PV systems can be categorised into off-grid (decentralised) systems and grid-connected (centralised) systems. Centralised solar PV systems are more dominant than decentralised systems and have installations of at least 200 kW [8]. The United States, Spain, Italy and Germany are the leading markets for centralised solar PV systems. Off grid PV applications (home solar applications) commenced during the 1970s commercialisation of solar PV; however, in the recent past, grid connected solar PV systems have overtaken the home solar applications market. Despite the fact that the grid-connected solar PV systems are dominant in the OECD nations, developing economies such as China and India tend to have a preference for off-grid solar PV systems, which reflects their large populations located in rural areas [8]. In addition, most developing countries are emphasising on the use of solar PV systems with the intent of fulfilling the fundamental electricity demand that is not met by the usual grid supply.

Concentrated Solar Power

The emergence of the CSP market was witnessed during the early 1980s; however, its momentum was lost because of the lack of supportive government policies. Nevertheless, in the last decade, the CSP market has experienced a strong revival as characterised with the development of 14.5 GW of CSP capacity in 20 countries together with an extra CSP capacity during the period 2007-2010 [5]. Despite the fact that several parts of the world have the perfect conditions for CSP development such as China, India, South Africa, Morocco, Algeria, Spain and Southwestern United States, the CSP is mostly found in Spain and Southwestern United States, whereby CSP development is supported feed in tariffs, investment tax credits and supportive policies [14]. Presently, most CSP projects across the globe are either in their planning phases, undergoing construction, or feasibility studies. Nevertheless, the market is anticipated to exhibit a significant growth [10, 15].

Solar Energy Economics

Regardless of the overwhelming potential of solar energy, its adoption has been relatively slow when compared to other power generation tools. This can be attributed to the high initial installation costs of solar energy technologies [8]. Nevertheless, the initial installation costs have declined, with an increase in the solar systems being installed. The decrease in the initial installation costs of solar PV systems can be attributed to the widespread adoption of solar energy. Solar PV systems do not utilise fuel and these modules have a typical lifetime of 25-40 years [5]. In addition, the only cost incurred is only the initial installation cost because of the little maintenance needed. The cost of installation is measured in usually measured in €/watt or $/watt. The electrical power generated is usually sold at ¢/kWh [5]. Typically, 1 watt of installed solar PV produced about 1-2 kWh per year depending on the local insolation. In addition, the breakeven point for solar energy systems depends on the local insolation, as well as the local electricity cost and the available subsidy. It has been estimated by the International Conference on Solar Photovoltaic Investments that the payback time for solar PV systems is usually 8-12 years [1].

A study by California Public Utilities Commission reported that, in the United States, for the case of large-scale solar PV installations, prices of less than $ 1 per watt are relatively common [60]. In a number of locations such as California and Southwest US, solar PV has managed to reach grid parity, that is, the cost of solar PV is competitive with the price gas-fired or coal-fired generation. Essentially, it is now apparent that at a carbon price of about $ 50 per ton, which is likely to increase the price of coal power generation by about 5c per kWh, solar PV is likely to be cost competitive in several regions in the United States [5]. In the context of India, Solar PV has not reached grid parity [55]. The constantly decreasing price of solar PV has played a pivotal role in increasing the number of solar PV installations globally. It has also been estimated that the total investment in renewable sources of energy in 2012 was more that the total investments in carbon based electricity production. In addition, numerous governments have implemented a number of financial incentives aimed at encouraging their citizens to utilise solar power such as feed-in tariffs and subsidies [5]. Furthermore, renewable portfolio standards have imposed a mandate on government institutions to acquire or generate a particular proportion of renewable power irrespective of the increase in the procurement costs. In several countries, Renewable Portfolio Standards goals can be attained by a blend of hydrogen, hydroelectric, municipal solid waste, geothermal, ocean, landfill gas, biomass, wind and solar energies [8]. It is also projected solar power technologies will compete against conventional energy technologies without subsidies by 2015 [8].

Energy Returned on the Energy Invested and Energy Pay Back Time

The energy payback time refers to the time needed to produce as much energy as the amount of energy that was consumed when the system was being produced [8]. As of 2000, the energy payback time for solar PV systems was 8-11 years. In 2006, the energy payback time was about 1.5-3.5 years (for crystalline silicon-based solar PV systems) and 1-1.5 years (thin film technologies in South Europe [8]. The energy returned on the energy invested (EROEI), sometimes referred to as Energy Return on Investment, refers to the ratio of the electricity generated to the energy needed to build and sustain the power generating equipment [8]. It is important to note that EROI is not similar to the Economic Return on Investment (ROI); this varies depending on the local energy prices, the metering techniques and the available subsidies [8]. With solar PV systems having lifetimes of more than 30 years, the EROEI of solar PV systems range between 10 and 30, which implies that they generate sufficient energy in the course of their lifetimes to make multiple reproductions of themselves (about 6 to 31 reproductions); this depends on the geographic location and the materials used in the manufacture of the module, which accounts for the range [8].

Power Costs

There are numerous solar energy technologies that are currently competing in various energy markets, especially the centralised power supply, stand-alone or off-grid applications and the grid connected power generation [9]. For example, large scale CSP and solar PV technologies are competing with other technologies poised to be integrated in the centralised power grid. Similarly, small scale solar energy applications are competing with other technologies such as off grid wind power systems and diesel generators [6]. The conventional approach to compare the cost of electricity generation from diverse technologies significantly draws upon the “levelized cost” approach (LCOE) of a power generating plant, which is computed using the following equation [7].

Whereby OC represents the Overnight Construction Cost, which denotes the investment minus the interest payments incurred in the course of construction; OMC represents the yearly maintenance and operation costs; FC represents the annualised fuel costs; CF represents the capacity factor; CRF represents the capital recovery factor; T represents the economic life of the power generating plant; and r represents the discount rate [7].

The solar PV industry is starting to make use of the LCOE as the costing unit. For instance, for a 10 MW power generating power plant in Phoenix, Arizona, the LCOE is approximated to be $ 0.15-0.22 per KWh in 2010 [70]. The table below shows the computed total cost of electricity generated by a solar PV system in US ¢/kWh as a function of efficiency and the investment cost. The depreciation period and cost of capital have been assumed [8]. The per peak kW (kWp) and the total cost a solar PV installation are shown in row headings. The annual energy output (kWh) is shown in the column headings, which depends on the geographic location since the average insolation is determined by the atmosphere’s thickness and cloudiness [65]. In addition, it is determined by the sun’s path with respect to the horizon and panel. Solar modules can be installed at an angle basing on the latitude; the reason for this is because the ideal scenario is when the sun rays are hitting the solar panel at a perpendicular angle (90 degrees) [8]. Furthermore, solar tracking can be deployed to make sure that perpendicular sunlight is accessed in order to increase the energy output.

Cost in US ¢/kWh Insolation in kWh/kWp
2400 2200 2000 1800 1600 1400 1200 1000 800
200 0.8 0.9 1.0 1.1 1.3 1.4 1.7 2 2.5
600 2.5 2.7 3.0 3.3 3.8 4.3 5 6 7.5
1000 4.2 4.5 5.0 5.6 6.3 7.1 8.3 10 12.5
1400 5.8 6.4 7.0 7.8 8.8 10.0 11.7 14 17.5
1800 7.5 8.2 9.0 10.0 11.3 12.9 15.0 18 22.5
2200 9.2 10.0 11.0 12.2 13.8 15.7 18.3 22 27.5
2600 10.8 11.8 13.0 14.4 16.3 18.6 21.7 26 32.5
3000 12.5 13.6 15.0 16.7 18.8 21.4 25 30 37.5
3400 14.2 15.5 17.0 18.9 21.3 24.3 28.3 34 42.5
3800 15.8 17.3 19.0 21.1 23.8 27.1 31.7 38 47.5
4200 17.5 19.1 21.0 23.3 26.3 30.0 35 42 52.5
4600 19.2 20.9 23.0 25.6 28.8 32.9 38.3 46 57.5
5000 20.8 22.7 23.0 27.8 31.3 35.7 41.7 50 62.5

Grid Parity

Grid parity refers to the point at which solar PV energy is cheaper than or equal to the grid power [69]. Grid parity is likely to be achieved in areas that are characterised by abundant sub, as well as high electricity costs, such as Japan and California [60]. In addition, grid parity has been achieved in Hawaii. In most parts of the United States, it is project that solar PV grid parity will be attained by 2015. In 2008, in most OECD nations, the fully loaded cost (FLC) of solar PV electricity was approximated to be $ 0.25 per kWh [15]. As of 2011, the FLC was less than $ 0.15 per kWh in most OECD countries, with sunnier countries reporting a FCL of $ 0.10 per kWh [20]. In addition, with the increasing demand for solar PV electricity, more companies are likely to enter into the solar electricity market, which is likely to further lower the cost if solar PV electricity [19].

Potential Growth of Solar Power and the Barriers

Proponents of solar energy as the most ideal solution to the energy crisis argue that solar energy will play a pivotal role in meeting the escalating energy demands while at the same time ensuring clean energy supply [18]. Current projects of long-term solar energy growth have drawn upon a number of assumptions. For instance, it has been reported that the growth of solar energy relies significantly on the global climate change mitigation circumstances [16]. With regard to the baseline scenario (that is, lack of climate change mitigation policies), the growth of solar energy by 2050 will range between 1 and 12 ExaJoule per year (EJ/yr) [17]. In the best case scenario characterised by effective climate change mitigation policies, whereby carbon dioxide concentrations are less than 440 parts per million by 2100, it is projected that the contribution of the solar PV energy to the main energy supply is likely to be 39 EJ/yr as of 2050 [19]. A joint investigation by the European Renewable Energy Council and the Greenpeace International estimates that the total global installed solar PV capacity will increase to about 1330 GW as of 2040 and about 2033 GW as of 2050 [20]. The International Energy Agency (IEA) approximates the potential development of solar power in two circumstances, which are distinguished basing on the global reduction targets for carbon dioxide emission. Under the first scenario characterised by global carbon dioxide emissions during 2050 being the same as the 2005 levels, the PV capacity is projected to reach 600 GW in 2050 [35]. For the second scenario characterised by a 50 percent reduction of the 2005 global carbon dioxide emissions by 2050, it is anticipated that the solar PV capacity would be at least 1,00 GW during 2050 [35].

Regardless of the optimistic projections of the potential growth of solar energy, a number of barriers exist with regard to the development of solar energy. These identified barriers can be grouped into institutional, economic and technical. Technical barriers differ depending on the type of solar energy technology [34]. For example, for solar PV, the primary technical barriers comprise of low conversion efficiencies of solar PV modules, insufficient raw materials supply, and performance limitations associated with components of the system, such as inverters and batteries [30]. For stand-alone solar PV systems, technical barriers may comprise of storage (shorter battery life), difficulties in safe disposal of batteries since there are no structured recycling or disposal processes for batteries currently.

Economic barriers to solar energy development relate to the initial installation costs.

When comparing the costs of solar energy technologies with the conventional energy technologies, which are established, benefit from economies of scale and vast industry experience, and small externality costs, there is no doubt that solar energy technologies are not in a “level playing field”, despite the fact that health, environmental and security benefits are not taken into consideration in cost computations [31]. Funding is also another significant economic barrier towards the development of solar energy. Solar energy institutions are perceived to be high risk investments by financial institutions; this stems from the fact that the existing solar energy undertakings have a limited revenue stream, long payback durations and shorter history, which translates to higher financial charges, such as interest rates that are levied on solar energy undertakings [35].

Besides technical and economic barriers, solar energy technologies are subject to institutional barriers, such as limited capacities to train workforce, ineffective policies and financial incentives, and lack of trained individuals to take part in installing, preparing and maintaining solar power systems [33]. For instance, In India, huge investments have been made in nuclear physics and engineering training since independence, whereas comparable requirements as regards renewable energy technologies have not been given much attention [34]. In addition, in some cases, there are laws and regulations that are likely to hamper solar energy development. For instance, small scale solar PV applications have been faced with the challenge of overcoming inappropriate and cumbersome interconnection requirements like billing issues, metering and insurance while attempting to sell the additional power generated into the main grid [63].

Possible Policy Tools to Help Increase the Development of Solar Energy

As mentioned before, the cost competitiveness of solar energy technologies is yet to beat the conventional energy technologies at both retail and wholesale levels [65]. As a result, if any major development in solar energy is to be realised under the present energy price and technological circumstances, chief policy incentives are needed. Several governments have embarked on a mission to increase the development of solar energy using market, regulatory, fiscal tools [65]. As a matter of fact, the expansion of the solar energy markers, particularly for the thermal water heating and grid-connected PV power, can be attributed to the use of policy tools in the United States, Europe and other developing nations in a bid to promote solar power usage. At a global level, the main policy instruments that have been deployed include public investment, renewable energy portfolio standards, mandatory purchase and access, favorable financing, direct subsidies, investment tax credits and feed in tariffs. Three justifications are often used to support the use of these policy instruments [64]. The first rationale is to promote the utilisation of low carbon energy technologies without the need to implement a comprehensive greenhouse gas mitigation policy such as the carbon tax. The second justification is that an increase in the solar energy investments is likely to help in reducing the costs of solar energy technologies. Evidence suggests that scaling up has helped in lowering the unit costs for solar PV; however, it has not reached the level of cost effectiveness of other conventional energy technologies [61]. The third justification is that subsidising small scale and off grid solar PV to distribute electricity to poor and rural areas with no access to power can help stimulate economic development [62].

Feed-in-Tariff

The feed-in-tariff is a premium payment for new renewable energy technologies that are overly expensive and not competitive when compared with the conventional electricity generation technologies. In feed-in-tariffs, the consumer has the initial financial burden. The tariff draws upon the cost of producing electricity, which includes a realistic ROI for the electricity producer [44]. Therefore, the tariff seeks to lessen the risk to prospective investors seeking to make long term investments in renewable energy technologies. As of early 2012, at least 75 jurisdictions globally were making use of this policy instrument including a number of states in the US, Ontario Province in Canada, Switzerland, South Africa, Singapore, Republic of Korea, Israel, China, Canada, Brazil, EU nations and Australia among others [45]. Feed-in-tariffs have been instrumental in increasing solar energy development in countries such as Italy and Germany, which are presently the market leaders in solar energy. It has been reported that feed-in-tariffs can result in the fastest growth and expansion of renewable sources of electricity at the lowest costs possible; this is achieved by distributing the costs to consumers [40]. An evaluation of the renewable energy policies in EU countries reported that feed-in-tariff is the most effective policy tool to support the development of biogas, wind and solar technologies [44].

Investment Tax Credits

Several authorities globally have adopted different forms of investment tax credits to help develop solar energy. For instance, the US federal government offers an investment tax credit of 30 percent for solar energy projects by businesses on the expenditures incurred to produce electricity and solar lighting systems [69]. In addition, the US federal government offers a hastened cost recovery plan via depreciation deductions [45]. In this regard, solar energy technologies fall under the five year property group. The investment tax credit of 30 percent in the United States has offered a vital leverage for the development of solar energy in the country. In another case, the investment tax credit is often perceived to be the main driver of the solar PV market in Bangladesh [41].

Subsidies

In most countries, direct subsidies act as the main tool to promote the development of solar energy. Subsidies take various forms including capacity payments, investment grants, production or output based payment systems, and soft loans [29]. One of the countries that have used subsidies as a driver for solar energy development is Spain, whereby the government offers grants that range from € 240.40 to € 310.35 per square meter for solar thermal projects [68]. India initially made use of capital subsidies, which were funded through government and donor funds. Solar hot water systems received a capital subsidy of Rs. 1500/m2, solar cooking systems received a capital subsidy of Rs. 1250/m2, and concentrating solar cookers received a capital subsidy of Rs. 2000/m2 [33]. Nevertheless, the main dependence on subsidies in India received criticism on grounds that it sought to incentivise only capacity but not production. As a result, the Indian government revised the policy by combining a production based subsidy together with a feed in tariff [25]. The subsidies are relatively higher for remote village electrification programmes. For families living below the poverty line, the Indian government underwrites 100 percent of the system cost. Another successful implementation of subsidies in promoting the development of solar energy us the California Solar Initiative ($ 3.3 billion scheme), which seeks to promote solar power development of 3GW of solar PV in the state by 2017 through rebates (sometimes referred to as the Expected Performance-Based Buy-Down (EPBB)) that draws upon the performance based incentives [29]. In this case, preliminary findings point out that the target of the CSI programme will be achieved since it had already achieved 506 MW as of April 2011 [28].

Renewable Energy Portfolio

Several developed countries have put in place the penetration targets for the contribution of renewable electricity in the sum electricity supply at both provincial/state and national levels. In order to achieve these targets, suppliers of electricity are supposed to have a particular fraction of their electricity supply being produced from renewable sources of energy [27]. The standards are usually referred to the renewable energy portfolio standards. The RPS can be boosted using a trading scheme wherein electricity producers having a small renewable electricity fraction in their supply portfolio and are likely to incur high costs to expand their renewable energy content can buy certificates from electricity producers having high renewable electricity content in order to meet their obligation [28]. An ideal example of this approach is the Tradable Green Certificate in Europe [58]. The RPS approach has also been used in the United States, with 31 states having solar PV specific standards. For instance, in the state of New Jersey, 3.8 percent of the electricity sold must come from renewable sources, out of which 0.16 must be derived from solar PV. This has been pivotal in creating a solar renewable energy credits (SRECs) market in the state [26, 25].

Financing Facilitation

Energy financing is also a potential policy tool that can be used to promote the solar energy development. An example of this application is in Bangladesh, wherein the Rural Electrification and the Renewable Energy Development Project came up with microcredit financed facilities, which led to the installation of at least 970000 home solar systems during the period 2003-2011 [55]. The government of Spain also introduced a programme that offers low interest loans to people seeking to use solar thermal applications [55]. The loans have a repayment period of 7 years and interest rates of 2-3.5 percent, which are less than the commercial rates [50].

Public Investment

Direct public investment is a primary driver for the development of solar energy in most developing countries, which has a number of donor and government financed projects aimed at supporting solar energy development through rural electrification programmes [50]. A case in point is the rapid growth of China’s solar PV industry, which can be attributed to government support through various rural electrification programmes [52]. The US government also came up with a funding mechanism for public sector projects associated with renewable energy under the federal Energy Policy Act of 2005 [53].

Chapter Summary

There is no doubt that solar energy has the potential of addressing the current energy crisis at the global level. Leading countries in the solar PV market have achieved their goals using supportive policy tools, some of which have been successful; others have reported preliminary success and others are yet to be evaluated. In this regard, the following chapter discusses the data collection and analysis procedures that were deployed to determine India’s potential in solar PV production and whether the success reported in other countries can be replicated in India.

Chapter 3: Methodology

In order to evaluate India’s potential in solar power production, data from various government and private institutions were analysed. The data collection and analysis procedures used in this investigation are outlined in the subsections below.

3.1 Data Collection

Data relating to the supply and demand for electricity in India were gathered from the state government’s electricity board, as well as the private power producing agencies. In addition, data was collected from the 28 government and private electricity suppliers in order to determine the possibilities of implementing solar PV power in India [52]. Besides data from private and government institutions, a literature search was conducted to identify the technical, institutional and economic barriers of solar power production in India and review the current regulatory and fiscal tools used in India to promote solar PV production [51].

3.2 Data Analysis

The collected data was analysed to report the electricity demand for both rural and urban areas in India. This was followed by determining the availability of barren land and the amount of solar irradiation in both urban and rural areas in India. The study also conducted an analysis of the capacity, capacity usage and grid connectivity to the mains grid for the completed and ongoing solar power projects. Furthermore, the study explored the national and statewide renewable energy policies in India including their effectiveness. This is followed by a comparison of the renewable energy policies in India with those in Europe. The data from various sources were then put together in order to determine the various ways through which India can expand its current solar PV production. PEST (political, economic, social and technological) analysis and Porter’s Five Forces analysis is also conducted for the Indian solar energy sector. Using the state wise details, a road map for the nationwide solar PV production is formulated.

Drivers of Growth and Key Drivers of Solar Energy in India

The factors driving the present and future growth in the solar power segment can be grouped into the demand side drivers, supply side drivers and government support.

Demand Side Drivers

Currently, India faces an unrelenting energy shortage characterised by a demand supply gap of about 12 percent of the country’s total power supply [54]. A combination of the unending energy shortage and the increasing energy needs form a significant factor that drives growth in the solar energy segment. India’s Power Ministry projects that the consumption of electricity is set to increase to about 1900 kWh by the year 2013, from the present consumption level of 600 kWh [69]. As a result, policy measures like the JNNSM, which aim to promote investment in solar power technologies, are likely to develop the solar power market in India, which is likely to drive down the costs. In addition, an increase in public awareness regarding issues associated with environmental preservation and energy scarcity will accelerate the demand for environment-friendly sources of energy, which hints the growth opportunities for solar PV production in India [55].

Supply Side Growth Factors

Currently, power generation in India relies significantly on non-renewable resources like diesel and coal, which are fast depleting compelling the government and power production companies to look into alternative sources of energy that are renewable, particularly solar energy The supporting environment that the government has created using subsidy scheme and supportive policies is playing a pivotal role in persuading power production companies to invest in the solar energy sector, thereby promoting its growth [60]. Other significant supply side factors that the driving the growth of the solar power sector include the enormous demand for electricity in rural regions that lack connectivity (see section 4.6), and the plentiful sun irradiation in India yearly (India has 300 clear and sunny days yearly) [59].

Government Support

Besides demand and supply side factors, government support is a key driver for the growth of the solar energy market in India. For instance, the Ministry of New and Renewable Energy (MNRE) has installed 51 solar Radiation Resource Assessment Stations throughout the country in order to monitor solar energy availability [57]. These stations collect and report data to the Centre for Wind Technology, which is charged with the task of developing a solar Atlas. In addition, the Indian government is also deploying various strategies to encourage the utilisation of solar power. For instance, in the 2010/11 national budget, the government allocated 100 crore to the JNNSM and towards the development of clean energy fund. This was an increase of about 380 crore from the preceding national budget, which has played a pivotal role in encouraging investments by private solar companies through a reduction in the customs duty imposed on solar panels by 5 percent and removing excise duty on solar PV panels [70]. It is anticipated that this will help in reducing the rooftop solar installation costs by approximately 15-20 percent. In addition, the Indian government has developed a Renewable Energy Certificate (REC) programme that aims to drive investment in the renewable energy sector, particularly the low carbon energy technologies such as solar PV [58]. Another form of government support that drives the solar PV sector in India is subsidies, whereby the government of India, through the MNRE, offers 70% subsidy for solar PV power plant installation costs in the states in North East and a 30 percent subsidy for other parts in the country [59]. This has played a pivotal role in driving the growth of the solar PV sector in India. For instance, the Mysore City Corporation agreed to start a mega solar power plant with a concession of 50 percent from the Indian government [69].

Technology and Its Outlook

There are two main solar technologies that could be applied in India to facilitate the utilisation of solar power: solar PV and CSP technologies; however, the focus of this study is on solar PV technologies [25]. In India, there has been a significant growth in the installation of solar power technologies during the last decade. As of March 2013, India the capacity of grid connected solar PV was 1686.44 MW, which is anticipated to increase by 10000 MW as of 2017 and 20000 MW as of 2020 [25].

Solar PV Technologies

Solar PV technologies function by converting solar energy into other forms of energy for use directly. Solar PV technologies in India comprise of solar cells and solar arrays. Solar cells refer to devices that are used in converting sun rays to electricity directly. Solar arrays comprise of modules of at least 10 solar cells to form solar PV arrays to generate electricity. Currently, India has about 90 companies in the solar PV industry, which comprise of 9 firms that manufacture solar cells, 19 firms that manufacture PV modules, and about 6 companies involved in assembling and supplying solar PV systems [24]. The market segments for solar PV include in India include grid connected solar PV power plants; roof based PV systems, bill board application, building integrated solar PV systems, residential back up applications, home solar lighting systems and solar pumps. Solar PV systems can either be crystalline silicon based or thin film based technologies. Nevertheless, new and emerging solar technologies are being developed to help in overcoming the shortcomings associated with the current solar PV technologies such as poor electrical performance and conversion efficiency [23]. Currently, researchers in solar PV technologies have set a target range of 30-60 percent while still ensuring the low cost manufacturing techniques and materials. The table below compares the current conversion efficiency and the cost of manufacture for both thin films and crystalline silicon based solar PV [22].

Table 3: Current conversion efficiency and the cost of manufacture for both thin films and crystalline silicon based solar PV

Technology type Current conversion efficiency (percent) Cost of manufacture in US $/W
Crystalline silicon 17-23 2.15-2.4
Thin film 6-12 1.35-1.75

Nonetheless, solar PV in India is not currently a vibrant energy technology because of the cost economics; however, solar PV has the potential of being a future energy source. It has been estimated that solar PV will be cost competitive in India by 2015 if the current subsidies are still in place and by 2020 without the subsidies [58].

Barriers to Solar Energy in India

The barriers to solar power development in India can be categorised into economical barriers, technical barriers, education barriers, institutional, and challenges associated with solar power harvesting. The barriers are discussed in detail in the following subsections.

Economical Barriers

The economic barriers to the expansion of solar power production in India relate mainly to the initial installation costs. In the context of India, the first economic barrier to expand the solar power production in India is the high installation cost of solar PV, which further complicated by the fact there are extremely few consistent financing options [21]. In India, the solar energy industry is still at its nascent stages; therefore, financial institutions investments in the solar sector as a high risk investment [23]. In addition, despite the declining costs of the solar PV module, the costs of other system components such as inverters and batteries are not declining; this hampers both large scale and small scale production of solar power in India.  In addition, a potential economic barrier of solar power development in India related to the fragile nature of the solar power development projects; this is because several solar PV undertakings are on a development partnership model, which is characterised by likely departure of a partner, resulting in financial constraints in completing, operating and maintaining the project [24].

Technical Barriers

Technical barriers in solar PV development in India mainly relate to the low conversion efficiencies associated with the solar PV modules and performance limitations associated with the components of the system such as inverters and batteries. For instance, thin film based PV have conversion rates of about 4-12 percent whereas the crystalline based PV have conversion efficiency of 22 percent; these low inefficiencies imply achieving the desired solar energy requires huge investments [36]. For the case of standalone solar PV systems, the main issue of concern is storage; this stems from the fact that batteries have relatively shorter life when compared to the life of the PV module. In addition, India does not have a structured recycling/disposal process for batteries, which is a significant challenge with regard to disposing batteries safely [41]. Another technical barrier relates to the supply of raw materials for manufacturing the solar PV modules. For instance, increasing demand for solar PV is increasingly outpacing the supply of silicon, which is likely to freeze the growth of solar power sector in India. In addition, thin film solar PV technologies need Tellurium and Cadmium, which are byproducts of the copper processing and zinc mining respectively; this implies that the availability of these materials is determined by the trends in the copper and zinc industries [39].

Institutional Barriers

There are a number of institutional barriers to the development of solar power production in India. First, there is no doubt that solar power projects are overly capital intensive; this, coupled with the lack of effective infrastructure in India impeded the growth of the Indian solar power sector. Presently, Research and Development (R&D) in the solar energy segment is progressing slowly because of the absence of goal and collaborative driven efforts in solar power technologies [40]. There is no doubt that technological innovations aimed at improving the efficiency of the present solar power systems in China are needed in order to make use of India’s solar power potential. Another institutional barrier that hampers the growth of the solar power sector in India relates to the lack of standards, which leads to the market fragmentation among suppliers and manufacturers. Other institutional barriers include [39]:

  1. India has limited capability to provide adequate training to enough technicians who can work effectively in the emerging solar power infrastructure;
  2. There is limited understanding between the main local and national institutions of the finance sector and the government;
  • There are procedural problems associated with the multi-agency cooperation in India such as the Ministry of Agriculture and Rural Development, the Planning Commission, IREDA and MNRE;
  1. There are barriers that hamper the entry of distributed solar energies into the grid characterised by the complications during interconnections, billing and metering.
  2. There is little public awareness with regard to the solar PV production;
  3. India has limited resourced needed to facilitate training and deploying workforce in the emerging solar power sector.

Challenges in Harnessing Solar Power

Abundant irradiance does not necessarily mean that solar power can be harnessed without any challenges. In India, there are several challenges that tend to hamper maximum harnessing of solar energy, which includes reflection of sunlight from solar panels, heat induction in solar modules, wind, durability and efficiency of solar cells (see figure 6 below) [37].

Figure 6: Challenges faced in solar PV power harvesting

Other Barriers

Besides technical, economic and institutional barriers in the development of the solar power sector in India, other challenges exist including:

  1. India has an extremely low per capita land availability, making land a scarce resource; therefore, dedicating land for solar cells installations will compete with land requirements such as farming;
  2. Manufactures of solar PV modules and cells are emphasising on export markets that purchase solar PV cells at relatively higher prices;
  • India does not have a close industry government cooperation for solar power technology to be implemented on a large scale;
  1. There is no intra-industry cooperation in India’s solar power industry

Solar PV Applications

Rural Electrification

One of the main challenges facing economic development in rural parts of India is the absence of electricity infrastructure. The current grid system in India is under developed, with most of the country’s population living off-grid. There are more than 80,000 villages in the country that have no access to electricity [35]. Solar PV energy is a potential alternative source of energy that can facilitate an electricity infrastructure that has a networked local grid combined with distributed electricity generation. Solar energy technologies can eliminate the need t make installations of the long distance, expensive and centralised power systems while at the same time ensuring that Indians access cheap electricity. Current, there are projects underway to electrify about 3000 villages in Orissa using solar PV energy by 2014 [50].

Solar Lighting and Lamps

As of 2012, India had installed about 861000 home lights that are solar powered and 46 million solar lanterns [37]. These applications replaced the use of kerosene lamps for lighting applications. The MNRE is currently providing about 30-40 percent subsidy for home lights and solar lanterns. It is estimated that 20 million solar lanterns will be installed by 2022.

Solar Water Heaters

Bangalore, the capital of Karnataka State, boasts of the largest utilisation of rooftop solar powered water heaters in the country, which generate about 200 MW [35]. In addition, the city was the first in India to implement an incentive mechanism through offering a rebate on the monthly power bills for people utilising rooftop thermal heating systems, which are now compulsory for all new buildings. The Pune city in western India has also made it compulsory for new buildings to install rooftop solar powered water heaters [36].

Agriculture

Solar powered water pumping systems are used to pump both drinking and irrigation water in India. Most pumps have a 200-3000 W motor powered using a solar PV (1800 Wp),which can pump about 14000 litres daily from a distance of 10 meters [58]. As of March 2012, India had installed about 7700 solar powered water pumping systems.

Irradiation and Solar Projects in India

The potential for solar energy in India is high because of its proximity to the Equator. The country received at least 3000 hours of sunshine annually, which translates to about 5000 trillion kWh [50]. In the table below, India has the capability of generating at least 1900 billion solar power units annually; this is adequate to meet the annual energy demand even during 2030 [46]. The figure 8 below shows that Gujarat and Rajasthan are the areas that have maximum solar power potential. Together with the presence of barren land in these areas, the feasibility of implementing solar power production systems is high.

Total Land area in square kilometres 3,287,590
Number of sunny days 200
Unit potential for 1 square kilometre 4 kWh per day
Conversion efficiency 15 percent
1 square kilometre (Million units/yr) 120
0.5 percent of land used in square kilometre 16,438
Potential units in billions 1972

Supply and Demand of Electricity in India

Increasing access to electricity globally means providing 2.4 billion citizens with electricity. Currently, 1.4 billion people do not have access to electricity and 1 billion can access electricity networks that are not reliable [47]. Out of the 1.4 billion lacking access to electricity, 300 million are from India. About 800 million people in India make use of traditional fuels such as biomass cakes, agricultural waste and fuel wood for heating and cooking needs. During 2010-2011, the demand for electricity in the country far exceeded the supply, both with respect to the peak availability and base load energy [47]. The base load requirement for 2010-2011 was 861,591 Million Units (1 MU in India is equal to 1 Million Units = 1 GWh) against the supply of 788,355 MU, resulting in 8.5 percent deficit [48]. For the same period, for peak loads, the demand for electricity was 122 GW whereas the supply was 110 GW, resulting in a 9.8 shortage. In the 2011-2012 period, the peak shortage was 12.9 percent whereas the base load energy shortage was 10.3 percent. The table below shows the trends in electricity supply and demand for 2002-2010 [47].

Table 4: The trends in electricity supply and demand for 2002-2010

Other vital trends regarding the demand and supply of electricity in India include [49]:

  1. The industrial demand for electricity in India accounts for about 35 percent of electricity demand; household (25 percent), commercial (9 percent), agriculture (21 percent) and public lighting and applications (10 percent);
  2. Demand for electricity in 2016-2017 is anticipated to reach 1392 TWh and peak demand of about 218 GW.
  • 33 percent of the rural population have no electricity
  1. 6 percent of the urban population lack access to electricity.

State wise Installed capacity and further required capacity of electricity (Implementing solar energy sector to meet the demand)

As of May 2013, the installed capacity of electricity in India was 225.133 GW [50]. Captive power plants produce an extra 34.44 GW. The table below shows the state-wise installed electricity capacities in India in MW.

Table 5: State-wise electricity installed capacity

State Total Installed Capacity
Maharashtra 28310.83
Gujarat 23887.54
Tamil Nadu 18382.13
Andhra Pradesh 16817.13
Uttar Pradesh 13682.99
Karnataka 13465.44
Rajasthan 10247.48
Madhya Pradesh 9085.36
West Bengal 8507.29
Haryana 7573.25
Punjab 7114.96
Delhi Territory 6932.15
Odisha 6596.33
Chhattisgarh 5649.11
Damodar Valley Corporation 5288.86
Kerala 3827.73
Himachal Pradesh 3714.10
Jharkhand 3049.86
Uttarakhand 2556.56
Jammu and Kashmir 2356.15
Bihar 1833.93
Assam 1020.04
Goa 418.32
Meghalaya 373.62
Puducherry Territory 279.66
Tripura 265.07
Sikkim 206.48
Arunachal Pradesh 213.76
Manipur 157.80
Mizoram 138.92
Nagaland 103.18
NLC 100.17
Chandigarh Territory 105.71
Dadra and Nagar Haveli Territory 75.38
Daman and Diu Territory 44.90
Andaman and Nicobar Islands Territory 65.40
Lakshadweep Territory 10.72

Indian Government Policies and Incentives for solar energy

There are a number of policy instruments that the government uses to expand solar power adoption in India [46]. The first policy tool used by the government is through direct public investment. For instance, the Ministry of New and Renewable Energy (MNRE) has installed 51 solar Radiation Resource Assessment Stations throughout the country in order to monitor solar energy availability [65]. These stations collect and report data to the Centre for Wind Technology, which is charged with the task of developing a solar Atlas. In addition, the Indian government is also deploying various strategies to encourage the utilisation of solar power. For instance, in the 2010/11 national budget, the government allocated 100 crore to the JNNSM and towards the development of clean energy fund [63]. This was an increase of about 380 crore from the preceding national budget, which has played a pivotal role in encouraging investments by private solar companies through a reduction in the customs duty imposed on solar panels by 5 percent and removing excise duty on solar PV panels. It is anticipated that this will help in reducing the rooftop solar installation costs by approximately 15-20 percent [65].

In addition, the Indian government has developed a Renewable Energy Certificate (REC) programme that aims to drive investment in the renewable energy sector, particularly the low carbon energy technologies such as solar PV. Another form of government support that drives the solar PV sector in India is subsidies, whereby the government of India, through the MNRE, offers 70% subsidy for solar PV power plant installation costs in the states in North East and a 30 percent subsidy for other parts in the country [5]. This has played a pivotal role in driving the growth of the solar PV sector in India. For instance, the Mysore City Corporation agreed to start a mega solar power plant with a concession of 50 percent from the Indian government [8].

India initially made use of capital subsidies, which were funded through government and donor funds. Solar hot water systems received a capital subsidy of Rs. 1500/m2, solar cooking systems received a capital subsidy of Rs. 1250/m2, and concentrating solar cookers received a capital subsidy of Rs. 2000/m2 [15]. Nevertheless, the main dependence on subsidies in India received criticism on grounds that it sought to incentivise only capacity but not production. As a result, the Indian government revised the policy by combining a production based subsidy together with a feed in tariff. The subsidies are relatively higher for remote village electrification programmes. For families living below the poverty line, the Indian government underwrites 100 percent of the system cost [48].

Comparison of Indian solar energy policies with UK and Germany solar energy policies

A number of similarities and differences can be drawn between the Indian solar energy policies and the UK and Germany solar energy policies. A striking similarity between both of them is the utilisation of incentives at both state and federal levels [48]. However, there are remarkable differences regarding the energy policies adopted in India and those in Germany and UK. First, India places emphasis on the use of capital subsidies and feed in tariffs as financial incentives to spur growth of the solar energy sector. On the contrary, UK and Germany use government grants (such as the Energy Saving Trust in the case of UK) for solar PV systems for domestic use. In addition, UK and Germany uses feed-in-tariff and net metering; this is contrasted with India, which lacks a comprehensive solar energy policy on the use of feed-in-tariff and net metering [47].

Despite the fact that both India and UK and Germany use financial incentives and government programmes to promote the use of solar energy, there are striking differences regarding the justification for using these policies. For instance, in Germany and UK, the primary aim of promoting the use of solar energy is to mitigate climate change whereas, for India, the justification relates to achieving energy security and socio-economic development [70]. Nonetheless, the policy framework is similar, but the rationale behind the use of these policies in India and in UK and Germany are different. It is worth noting that India is a developing country whereas UK and Germany are developed countries; perhaps, this accounts for the differences in the rationale for adopting the solar energy policies [58].

Pest Analysis of the Indian Solar Energy Sector

Political Factors

The National Action Plan on Climate Change develops a number of specific policy approaches including R&D aimed at lowering the production and maintenance costs, building a centre for solar energy research, and targeting about 1000 MW of CSP by 2017 [58]. The goal of the solar mission in India is to establish base load prices and ensure that solar power is cost competitive with other alternative forms of energy in the next 20 years [56]. Currently, the government of India is testing a feed-in-tariff for solar energy technologies of about 10 rupees/kWh for 10 years operations. In addition, the government has launched incentives aimed at attracting investments in the solar energy sector. Overall, the political and legal environment of India is favourable for the solar energy sector [12].

Economic Factors

The initial installation costs for solar PV systems are relatively high when compared to other forms of energy; however, the economic environment is promising since the increase in the installation of solar PV systems is driving the costs of solar PV systems. In addition, most raw materials, PV systems and modules, components and solar cells have nil imports and excise duty exempted on them; this is likely to lower the cost of production making solar power investments less risky [5]. A significant portion of demand in the solar PV industry is from domestic solar application and power plants in India. A key challenge that solar power in India is facing relates to the present subsidy levels that its main competition enjoys, that is kerosene. This is a significant challenge, especially for new industry entrants.

Social Factors

There is a guaranteed demand for solar PV systems stemming from the increasing size of the middle class population in India. In addition, solar energy is poised as one of the avenues through which India can achieve social equity through energy equity [56].

Technological Factors

There are numerous potential applications of solar power in India including solar PV systems, green cities, green buildings, and solar water heaters among others. Albeit slow paced, there are R&D initiatives being undertaken in India to enhance the cost effectiveness of solar PV systems [8]. The Solar Energy Center is a pivotal organisation with regard to the development of solar energy technologies and product development. In addition, India has already started collaborating with EU countries resulting in sharing expertise, low carbon finance, and opening opportunities for R&D in the field of solar power technologies [8].

Porters Five Forces Analysis of the Indian Solar Energy Sector

Threat of Substitute Products

  1. The cost effectiveness and demand for thermal power is a significant threat to the growth and development of solar power in India [5];
  2. There is a significant threat from wind power although solar energy can be easily connected into the grid system than wind power [5];
  • Distributed generation of solar power eliminates significant problems linked to electricity distribution and transmission, which gives solar power competitive advantage over other alternative and conventional energy sources [5].

Barriers of Entry

  1. High initial capital costs act serve as a barrier of entry [15];
  2. Numerous government incentives and programmes that can assist a private investors’ entry into the industry [15];
  • New entrants must embark on products efficiency together with minimised land usage as a point of differentiation [12];

Competitive Rivalry Intensity

  1. India has prominent Solar PV manufactures such as Signet Solar, BP Solar, Tata Industries, Moser-Baer [8];
  2. Smaller shops are also increasing their presence [5]
  • Competition is mainly focused on manufacturing solar PV systems [8].

Customers’ Bargaining Power

  1. Customers bargaining power is high because of the availability of cheap alternative energy sources [5];
  2. The government is the largest buyer, however, payment is somewhat erratic;
  • There is a need to increase the public awareness regarding the use of solar power systems in all regions of India. [45]

Suppliers Bargaining Power

  1. Suppliers have a low bargaining power since the tariff structure is controlled by the government [25];
  2. There are few players in the solar power industry [25];
  • Suppliers can increase their bargaining power if they develop differentiated technology such as improved cell efficiency and reducing in silicon utilisation [25].

Road Map for Solar Power Production in India

In order for the India solar energy sector to report substantial growth, the following steps are recommended basing on the analysis of the information collected in this study:

  1. Careful Implementation of On-Grid Application: currently, solar power technologies are about 15 percent efficient, which implies that large scale production is more viable in areas having abundant barren land coupled with high irradiation such as Rajasthan and Gujarat. The emphasis should be on these areas if India wants to realise maximum solar potential prior to moving to areas having low irradiance and barren land is scarce.
  2. Development of Mini Grids that are Localised: This can be set on parts that do not have grid connectivity because of either financial or physical barriers. Electricity that is produced by the mini grids can be distributed using local networks. Government subsidy can help in the initial installation whereas the local and state governments can finance distribution overlay. Revenue gathered can be used in financing the maintenance and operation costs.
  3. Emphasis on R&D activities by setting up research centres and financing the initiatives. The government can also partner with renowned universities to facilitate R&D of solar energy technologies; R&D initiatives should be collaborative, focused and goal driven.
  4. Closer industry government corporation should be built;
  5. Government should improve the current financing structure, arrangements and models in order to encourage the use of PV products and spur industry growth. An example is providing grants for solar power projects.
  6. The government and the industry players should embark on training and development of people in order to drive the industry and grow PV adoption;
  7. Avenues for intra-industry co-operation should be established to expand the solar PV supply chain through conferences, information sharing, workshops and publishing market projects and trends.
  8. Consumer awareness regarding solar power should be improved including its usage and economics.

Chapter 5: Discussion

This study has presented the opportunities for growth in solar power in India, the current efforts to spur growth and a road map that can be used to increase solar power PV production in India.

Opportunities for Growth

India has 300 clear and sunny days yearly, making its theoretical solar power reception be nearly 5000 Petawatt-hours annually (PWh/yr), that is, on India’s land area only. Currently, India faces an unrelenting energy shortage characterised by a demand supply gap of about 12 percent of the country’s total power supply. A combination of the unending energy shortage and the increasing energy needs presents a potential opportunity for growth in the solar energy segment. India’s Power Ministry projects that the consumption of electricity is set to increase to about 1900 kWh by the year 2013, from the present consumption level of 600 kWh. As a result, policy measures like the JNNSM, which aim to promote investment in solar power technologies, are likely to develop the solar power market in India, which is likely to drive down the costs.

Currently, power generation in India relies significantly on non-renewable resources like diesel and coal, which are fast depleting compelling the government and power production companies to look into alternative sources of energy that are renewable, particularly solar energy. The supporting environment that the government has created using subsidy scheme and supportive policies is playing a pivotal role in persuading power production companies to invest in the solar energy sector, thereby promoting its growth. Other opportunities for growth of the solar power sector include the enormous demand for electricity in rural regions that lack connectivity, and the plentiful sun irradiation in India yearly. The summary of the opportunities and challenges facing the solar energy sector is shown in the figure 10 below.

Current Efforts in Solar Power Production Development

The government has currently put measures to help expand solar power production in India, which include:

  1. Setting up 51 solar Radiation Resource Assessment Stations throughout the country in order to monitor solar energy availability. These stations collect and report data to the Centre for Wind Technology, which is charged with the task of developing a solar Atlas.
  2. Setting up a clean energy fund, which has played a pivotal role in encouraging investments by private solar companies through a reduction in the customs duty imposed on solar panels by 5 percent and removing excise duty on solar PV panels.
  3. The Indian government has developed a Renewable Energy Certificate (REC) programme that aims to drive investment in the renewable energy sector, particularly the low carbon energy technologies such as solar PV.
  4. Government uses subsidies in the solar energy sector. Through the MNRE, offers 70% subsidy for solar PV power plant installation costs in the states in North East and a 30 percent subsidy for other parts in the country.

The road map outlined in section 4.12 provides detailed steps of activities that India should implement in order to achieve its maximum potential from the solar power production

Chapter 6: Conclusion

Solar energy has a tremendous potential in meeting the current and coming demand-supply in India. A number of challenges are evident in the solar power industry in India including extremely few consistent financing options, high installation cost of solar PV systems, low conversion efficiencies associated with the solar PV modules and performance limitations associated with the components of the system such as inverters and batteries and absence of goal and collaborative driven efforts in solar power technologies among others. It is vital to overcome these barriers if India wants to witness a mass adoption and fast paced of its solar energy sector. Some of the recommendations made in this report include careful implementation of on-grid application; development of mini grids that are localised: emphasis on R&D activities by setting up research centres and financing the initiatives; closer industry government corporation should be built; government should improve the current financing structure, arrangements and models in order to encourage the use of PV products and spur industry growth. In addition, the government and the industry players should embark on training and development of people in order to drive the industry and grow PV adoption; avenues for intra-industry co-operation should be established to expand the solar PV supply chain through conferences, information sharing, workshops and publishing market projects and trends; and consumer awareness regarding solar power should be improved including its usage and economics. This road map has the potential of transforming India into a world leader in solar energy production.