The great strides India has made so far this year on clean energy are set to widen in 2017 as the country enters a new phase of multi-gigawatt renewables growth, finds a new report published today by Bloomberg New Energy Finance (BNEF).
While BNEFs calculation that India is on track to install more than 10 GW of renewables per year from 2017 is a little conservative (most experts think solar PV alone will reach that figure next year), the overall tone is one of a market on the cusp of dynamic growth triggered by increased investment in large-scale solar PV but also and crucially the emergent rooftop solar sector.
Off-grid solar opportunities are also poised to soar, the BNEF report finds, as costs for solar PV technology maintain their downward trajectory.
Up on the roof
The Indian governments National Solar Mission has set aside 40 GW of its 100 GW of solar by 2022 target specifically for rooftop. Thus far, progress has been painfully slow, with most trusted figures putting the cumulative rooftop PV capacity in the country below 1 GW. Hence, to meet 40 GW is a little over five years, BNEF calculates that the "small and rooftop sector" will require $50 billion investment.
However, BNEFs report, titled Financing Indias Clean Energy Transition, states that rooftop solar has already become the fastest-growing renewable power sub-segment in Indias clean energy market, growing three-fold from 72 MW per year to 227 MW per year since 2013.
Most of this uptake is being driven by cost. Rooftop PV in India is now priced between $69-$92/MWh, making the residential sector competitive with tariffs paid by C&I consumers and even comparable to average residential electricity rates, according to BNEFs lead India analyst Shantanu Jaiswal.
The sector is beset by challenges, however. A recent study by GIZ found that around 80% of Indian rooftops are flat due to the absence of the issue of snow load across the country, while in many large cities up to 90% of rooftops will be partly shaded. There is also a lack of awareness pertaining to the economic and environmental benefits of rooftop solar PV among the population, and a lack of access to loans without collateral.
The BNEF study also reports on how solar lanterns and off-grid home systems are increasingly becoming the first step on to the energy ladder for millions of Indians living in rural areas not connected to the grid. Annual sales for such solar-powered devices have increased by an average of 47% per year, electrifying 91,000 households between April 2012 and March 2016.
"Prime Minister Narendra Modi has a vision to provide 24×7 electricity to every person in India and one way to achieve 100% electrification is to make use of off-grid power," said Jaiswal. "This is not only quicker than building a conventional grid through remote and sparsely populated area, but also defers the investment needed to build transmission infrastructure.
The government has targeted 500 MW of small energy grid capacity by 2021, but will face problems in the sector as traditional power grids expand into underserved areas.
$10bn threshold surpassed
Another key metric analyzed in the BNEF report which was commissioned by The David and Lucile Packard Foundation is the fact that total annual investments in utility-scale renewable energy projects in India crossed the $10 billion mark in 2015. If India is to reach its renewables goal of 175 GW by 2022, the report finds, then annual investments in the sector need to hold steady at $14 billion until that date in order to support the 135 GW utility-scale growth required.
To meet these investment targets, Indian project developers are exploring various funding avenues, including increasing borrowings from multilateral organizations, as well as the issuance of green/masala bonds.
"Reaching $10 billion yearly investment was a significant event, and so was the issuance of the first green bonds," said BNEFs head of APAC power and gas markets Ashish Sethia. "The next one to watch out for on Indias clean energy journey would be the listing of infrastructure investment trusts."