The ever-shuffling pack of leading PV nations welcomed India into its fold sometime around 2012, and has since seen solar growth in the country ebb and flow like it has in many others.
From Italy and Germanys early-adoption rise and recent fall, through to Chinas stunning growth and slight stutter at the end of 2014, solar fortunes the world over are inextricably linked to a series of seemingly arbitrary external factors.
For India, the situation has been no different. Having enjoyed an encouraging 2013, experts in the solar industry were confident that 2014 would see India add more than 2 GW to its overall capacity. The reality was a little less illuminating: research from Mercom Capital Group suggests that India installed around 800 MW of solar PV capacity last year as the industry waded through the syrupy waters of elections and anti-dumping concerns.
However, the characteristic bullishness of the Indian solar market has shone brightly so far in 2015. On a seemingly daily basis news emerges from the subcontinent of yet another deal, yet another pledge, and yet another piece of encouraging PV progress.
Before the turn of the year, Indias Prime Minister Narendra Modi upped the countrys 2022 solar PV target to 100 GW a move that prompted a raft of multi-GW trade announcements, many from foreign investors, as word spread that India was once again open for business.
U.S. solar company SunEdison has been particularly active so far this year, signing two memorandums of understanding (MoU) that both have the potential to propel Indias solar sector into a market-leading position. The first plans to build a $4 billion, 7.5 GW solar fab in Gujarat was swiftly followed by a 5 GW solar and wind investment MoU in Karnataka, which itself echoes an earlier pledge in fall 2014 to develop 5 GW of solar in the state of Rajasthan.
However, Raj Prabhu, CEO and co-founder of Mercom Capital, is a little skeptical about these announcements. "The $4 billion Gujarat announcement was struck at a state investment conclave, which happen across India every year with the goal being to bring in foreign companies and have them pledge investments," Prabhu said. "But looking at market fundamentals, Im left wondering, where is the market for such a big manufacturing plant?"
Prabhu added that the manufacturers he speaks to on a regular basis talk of idled capacity, which hints at slack levels of demand. Perhaps, Prabhu suggests, these announcements are done to test the waters as part of a wider pro-solar PR strategy. "A similar thing happened with SunEdisons Rajasthan announcement in October. These are all just MoUs, and the last time we had contact with the Rajasthan government to find out how serious this was, they told us that there is no obligation [to develop] just yet.
"So I dont see these early announcements as overly serious at the moment. Karnataka does this every year, and perhaps just 5% of the announcements turn into something concrete."
Despite Prabhus caution, the analyst is confident that 2015 will be a year of real expansion for India’s solar industry, with around 2 GW of growth expected around double the capacity added in 2014 and the first tangible growth in around three years. "From here on we will see the new solar policy take effect, and this is the year that there will be more pivotal phases coming out with auctions and so on."
The Jawaharlal Nehru National Solar Mission (JNNSM) was launched in 2010 and has been instrumental in underpinning Indias solar direction. Its latest iteration not-so-snappily titled the JNNSM Phase II, Batch II, Tranche I outlines the amount of solar PV to be added between now and 2017, and how and where it must be done.
One of the key battlegrounds for growth will be in manufacturing. Indias domestic solar industry has been hamstrung by what it claims have been dumped solar produce entering the country in recent years, triggering the inevitable anti-dumping investigation, which was later dropped. Then there has been a push among local manufacturers for domestic content requirements (DCR), which may have prompted SunEdison to explore the prospect of building a fab in India.
"SunEdison have kept their plans vague," said Prabhu. "They havent revealed exactly when they will complete their 7.5 GW plant, but then, if the Indian government says the plan is to install 100 GW by 2022, it makes sense to construct a manufacturing plant in the country."
The question is, muses Prabhu, when and where is the pace of demand necessary to keep a 7.5 GW fab running going to come from? "Right now, only two countries are installing at that pace, and that is Japan and China. Nowhere else is doing that, and it is going to be a while for India to get there.
The way in which Indian companies prefer to do business also makes it difficult to properly gauge the need for added manufacturing capacity. "Domestic manufacturers were pushing strongly for AD tariffs last year, and have also backed DCR basically they are saying that they do not have a market because they cannot compete," said Prabhu. "But when you talk to individual manufacturers, they tend to say they are doing OK. As an association they give a bleaker view when they lobby the government, so it is difficult to assess what is happening."
Prabhu did confirm, however, that a number of local companies are looking to begin exporting their products to Europe and elsewhere, although Chinese competition remains a threat.
Climate change and DG solar
Two potentially pivotal developments could shape Indias solar landscape in the coming years climate change and distributed generation. U.S. President Barack Obama is due to visit India in late January in order to meet with Indian Prime Minister Narendra Modi to discuss matters on climate change. This meeting could lead to some interesting developments on climate change action, believes Prabhu.
"Traditionally, India has always opposed climate goals, but with China recently signing such an agreement with the U.S., the country is likely to want to follow suit." Air pollution and environmental matters are not as pressing a concern for India as they are for China the issue does not regularly make headlines nor impact the public on a daily basis but Modi remains an avowed activist for change and sees future in renewables. That future can be augmented by binding climate change targets, stresses Prabhu.
"India has been increasingly reliant on imported coal after its own coalmines were suspended following the discovery of irregularities in the auction process," he said. "This is steering the country towards renewables and, with it, the desire for U.S. investment."
Equally urgent is Indias need to plug the gaps in its grid infrastructure. With distribution losses of around 25%, Indias grid is one of the worlds leakiest. "Without fixing that problem, and at the same time investing heavily in solar, then India would be wasting even more energy," said Prabhu. This all hints at the transformative potential of distributed generation (DG) something that Modi appears to have recognized following his recent approval of a loan scheme designed to help Indian homeowners and businesses install rooftop PV systems.
"The distributed nature of solar power is a huge positive in India because you do not need to build a large-scale plant and because a lot of rural areas have poor connection," said Prabhu. Talk of the Indian government cutting the rooftop subsidy from 30% to 15% may even accelerate rooftop adoption, rather than slow it, suggests Prabhu, because the subsidy scheme has historically proven unreliable in the past.
"At 30%, many developers have not been paid by the government, which has negatively impacted a lot of companies and forced many to go out of business. This has created a lot of talk about how it is not even worth having a subsidy if youre not going to get paid. So the idea now is to figure out a way to install solar without subsidies, and it will be interesting to see how this approach pans out."
According to Jasmeet Khurana of Bridge to India, around 40 GW of the 100 GW solar target is earmarked for DG. "This is fairly significant," Khurana told pv magazine. "In the past, the focus has been on large-scale PV projects as they helped bring in economies of scale, creation of ecosystem and reduction in overall costs of installation and generation. Modis government realizes the benefits of DG and is looking to keep a healthy mix between it and large-scale solar."