India's solar energy industry stands at the forefront of innovation and resilience, propelled by abundant raw materials, particularly silicon sourced from vast quartz reserves. Fuelled by many government initiatives and schemes, the industry is shifting away from historical reliance on Chinese imports. The estimated compound annual growth rate (CAGR) for the solar power market in India is 34.24% from 2022 to 2027, with a projected market size growth of USD 273.82 billion during this period. Investors in India's solar sector can capitalise on opportunities extending from project development to the entire solar value chain, including manufacturing and research, contributing to a sustainable and cleaner energy future. The industry's global influence positions India as a potential exporter of solar solutions, emphasising a promising trajectory for investors looking to navigate the evolving arena of renewable energy.
Raw Materials
At the core of solar energy production are crucial raw materials, none more significant than silicon—the elemental building block of solar panels. India, endowed with vast reserves of quartz, finds itself in a favourable position for silicon production. This abundant resource has laid the groundwork for a robust solar energy infrastructure. Furthermore, technological strides have led to the development of thin-film solar cells, diversifying the raw material basket and encouraging innovative approaches within the industry.
India's historical reliance on China for solar equipment, constituting nearly 90% of imports, is witnessing a substantial shift. In the first half of 2023, India's solar module imports from China decreased by almost 80%, amounting to a reduction of $2 billion, according to Ember. Contributing factors include the 'Make-in-India' program and the Production-linked Incentives (PLI) scheme, which aim to bolster domestic manufacturing. Imposing tariffs in April 2022, with a 40% duty on solar modules and 25% on cells, significantly curtailed Chinese imports. The Ministry of New and Renewable Energy's mandate of the Approved List of Models and Manufacturers (ALMM) further limited options for solar PV modules, excluding Chinese imports from government-backed projects.
The PLI scheme, with a goal of creating a 48 GW domestic module manufacturing capacity in three years, has seen substantial allocations and investments. Challenges persist, highlighted by the government's suspension of the ALMM until March 2024 to balance the reduction of Chinese imports without hindering local solar capacity building.
Weaning India off cheap Chinese imports is a nuanced, long-term effort requiring strategic policymaking to sustain domestic industry growth amidst rising solar power demand, which is the path Indian companies are treading on gradually.
Beyond silicon, other essential components, such as silver, aluminium, and glass, contribute to the manufacturing of solar panels and related equipment. India's robust manufacturing capabilities, combined with a growing emphasis on research and development, position the nation as a key player in the global supply chain of solar energy raw materials.
Industry Overview
The Indian solar energy industry has undergone a remarkable evolution, fuelled by progressive government policies, attractive incentives, and a supportive regulatory framework. The National Solar Mission, inaugurated in 2010, set an ambitious target of deploying 100 GW of solar energy capacity by 2022. While this goal was not fully met, the mission provided the impetus for a surge in solar installations nationwide.
The industry view is diverse, featuring a mix of domestic and international players contributing to the development of solar parks, rooftop installations, and large-scale utility projects. The solar photovoltaic (PV) manufacturing sector has witnessed significant growth, with several domestic companies establishing themselves as key contributors to the global solar supply chain thanks to the Production Linked Incentive Scheme (PLI). India's commitment to sustainable energy is evident through initiatives such as the International Solar Alliance, further cementing its position as a global leader in the renewable energy sector.
Here are some of the major players in the Indian Solar Energy sector:
Company Name | Market Cap | P/E Ratio | Last Traded Price |
Websol Energy Systems Ltd | ₹ 743 Cr. | - | ₹ 192 |
Ujaas Energy Ltd | ₹ 45.1 Cr. | | ₹ 2.25 |
Suzlon Energy Ltd | ₹ 56,957 Cr. | 154 | ₹ 42.3 |
Waa Solar Ltd | ₹ 99.7 Cr. | 9.27 | ₹ 75.2 |
Gita Renewable Energy Ltd | ₹ 46.5 Cr. | 7.78 | ₹ 113 |
Urja Global Ltd | ₹ 673 Cr. | 314 | ₹ 12.8 |
Surana Solar Ltd | ₹ 142 Cr. | - | ₹ 29.0 |
Gensol Engineering Ltd | ₹ 3,006 Cr. | - | ₹ 794 |
Challenges
Despite the substantial progress, the solar energy industry in India grapples with challenges that require targeted interventions. Land acquisition for solar projects remains a bottleneck, necessitating streamlined processes and transparent policies. The development of robust transmission infrastructure is critical to efficiently channel the energy generated from solar projects to consumption centres.
Solar installations in India between April and October 2023 slowed to 5,238 MW, a decrease from 7,628 MW during the same period last year. The current solar capacity stands at 72,018 MW as of October 31. Industry experts expressed surprise at the slow pace, especially considering the upcoming expiration of the "ALMM waiver" on March 31, 2024, which allows the use of cheap imported solar modules. Developers rushing to beat this deadline may lead to increased installations in the coming months. Auctions for firm power, particularly in hybrid capacities, are brisk, with falling module and battery prices which indicate a promising future for renewable energy.
Financing hurdles also persist, particularly for smaller-scale projects and innovative technologies. Achieving grid parity—a state where the cost of solar power matches or becomes cheaper than conventional sources—is an ongoing challenge. Additionally, the intermittent nature of solar power generation poses a challenge to maintaining a consistent and reliable energy supply. These challenges underscore the need for collaborative efforts between the government, private sector, and financial institutions to create an enabling environment for sustainable growth.
Initiatives to Propel Solar Energy Industry
National Solar Mission (NSM): Launched in 2010, NSM is one of the flagship programs with the goal of deploying 100 GW of solar power capacity by 2022. It encompasses various schemes and initiatives to promote both grid-connected and off-grid solar applications.
Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyan (PM-KUSUM): This scheme, initiated in 2019, aims to support farmers in installing solar pumps and grid-connected solar power plants on barren or agricultural lands. It promotes decentralised solar power generation and helps farmers increase their income.
Atal Jyoti Yojana (AJAY): AJAY focuses on providing solar LED lighting systems in areas with inadequate grid power or no access to electricity. The program contributes to rural electrification and enhances energy access in remote regions.
Solar Cities Programme:The Solar Cities Programme encourages urban areas to adopt solar energy and promotes the development of solar city master plans. It aims to increase energy efficiency, reduce emissions, and create sustainable urban environments.
Solar Parks and Ultra Mega Solar Power Projects: The government supports the development of large-scale solar parks and ultra mega solar power projects. These initiatives provide a conducive environment for developers by offering land, transmission infrastructure, and other necessary facilities to streamline the implementation of solar projects.
Renewable Purchase Obligation (RPO): RPO is a regulatory mandate that requires obligated entities, such as distribution companies and large consumers of electricity, to procure a certain percentage of their total power consumption from renewable sources, including solar energy.
Prospects
Investors eyeing the Indian solar energy sector are presented with a plethora of opportunities aligned with the nation's ambitious renewable energy targets. The government's revised goal of achieving 175 GW of renewable energy capacity by 2022 underscores its commitment to clean energy, with a significant share earmarked for solar power.
Investment prospects extend beyond project development to encompass the entire solar value chain. Manufacturing, research and development, and technological innovation are areas ripe for exploration. As India focuses on improving energy storage solutions, smart grid integration, and digitalisation, investors have the chance to contribute to and benefit from the evolution of a comprehensive solar energy ecosystem.
The prospects for investment are not limited to the domestic market; India's prowess in solar technology positions it as a potential exporter of solar solutions to the global market. The export of solar panels, inverters, and other related components presents a lucrative avenue for investors looking to capitalise on India's growing influence in the renewable energy sector.
The Gist
In conclusion, India's solar energy sector, with its dynamic blend of innovation, resilience, and government commitment, stands at the cusp of growth. From the abundant raw materials powering solar panels to the challenges of land acquisition and intermittent power generation, the industry has navigated a complex landscape with determination. The prospects for investors are vast, extending beyond project development to encompass manufacturing, research, and global market export. As India aims to achieve and exceed its ambitious renewable energy targets, investors have the unique opportunity to not only capitalise on a burgeoning market but also contribute to a sustainable and cleaner energy future. The radiant promise of solar power in India illuminates a path towards a greener tomorrow, where strategic investments today hold the key to unlocking a brighter and more sustainable future.
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