India’s solar potential remains untapped, but the future's bright


India’s growing economy and energy demands are increasingly reliant on energy imports, in the form of coal and oil. Coal dominates India’s energy mix and the economy writ large faces constraints in the form of unreliable and fragmented electricity supplies. The Indian Planning Commission has forecast the country faces 12 percent electricity shortfalls during hours of peak consumption. In this environment, and with reliable year-round sunlight in some regions, solar and photovoltaic generation has the potential to take off and save the country $5.5 billion in coal imports over the next decade, write KPMG’s report authors.

$110 billion in Indian solar investment opportunities and vast domestic market expansion

The Indian solar sector is yet to become mature and replicate the nation’s successes in the information technology (IT) and auto industry. However, with significant investment it could be transformed. The KPMG report, The Rising Sun, breaks down the investment in solar required to facilitate such a transformation into five year periods, coming to the conclusion that $20 billion is needed between 2012 and 2017 and $92 billion between 2017 and 2022. These figures combine both small-scale and off-grid installations, and large-scale solar farms.

In the photovoltaic sector, KPMG predicts that with such investment levels, the Indian vendor market would increase correspondingly by over $14 billion over the next decade. In industries related to photovoltaics – but not exclusive to the field – the vendor forecasts are also for rapid growth to reach $9 million in 10 years.

KPMG also sees room for growth and investment in photovoltaic related technologies in India, including storage technologies; non-module equipment such as inverters, which are not presently manufactured in India; and integrated systems and applications, such as agricultural pump systems. Furthermore, the report identifies great potential in India as a low cost photovoltaic manufacturer.

The report authors conclude that financially, "the solar sector has the potential to transform the Indian economy in a way the IT sector transformed the Indian economy in the 90s. Industry should grab this golden opportunity, thus benefiting themselves and the overall economy."

Environment right for rapid solar expansion

The report also found that solar and photovoltaic industry trends favor a rapid expansion in India with falling costs and technological advances facilitating growth in both large scale and rooftop generation installations. In both cases, grid parity in India, as projected in the KPMG report, could be achieved in as little as six to eight years. Using this timeline, the report forecasts exponential growth in both the annual and cumulative solar markets.

Off-grid potential is also seen to be great with the report highlighting the potential of telecom towers as photovoltaic installation sites. Many are situated in areas with "limited or no grid connectivity" and at present rely on diesel fuel. With projected expansion in the number of such towers in rural and urban areas, the fuel requirements could amount to 3.5 billion liters per annum by 2020. At present, photovoltaic installations are price competitive with diesel and if a projected 30 percent reduction of diesel reliance is achieved, a saving of 5.4 billion liters over 10 years could be delivered.

Government role in India’s bright solar future

KPMG sees the role the government could play in realizing India’s solar potential as being crucial, and the report was supportive of the Jawaharlal Nehru National Solar Mission (JNNSM), which was launched in late 2009. The JNNSM set a target of a 22,000 megawatt production capacity in on- and off-grid production, to be realized by 2022. Regional governments also have a role to play in realizing India’s solar potential and KPMG reports that the states of Rajasthan, Gujarat and Tamil Nadu have significant potential in that their solar installation rates are high as are their conventional power costs.

Subsidies in the form of a feed-in tariff (FIT) scheme are noted and the structure of the German FIT program is cited as a workable model delivering, "innovation and rapid growth in the solar sector."

Securing funding for the Indian solar sector is crucial, write KPMG, and government here is an important player. While solar technologies are yet to be widely proven in India, their may be a reticence in the banking community to provide funds and the Indian government has moved to educate the sector’s potential.

The KPMG report also highlighted the potential of Indian manufacturing, and research and development facilities. Here, a governmental role could be decisive, on both state and national levels, and time delays in pursuing tax credit or support schemes in this field could be crucial in reaching the envisage significant solar potential.

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