An Indian solar saga: With the right policies, India can be a world leader in solar energy

“All roads to successful global clean energy transitions go via India… as the world seeks ways to accelerate the pace of transformation in the energy sector, India is in a unique position to pioneer a new model for low‐carbon, inclusive growth.”
“ The growth of India’s renewable energy sector has been highly impressive – and India is set to lead the world in areas like solar power and batteries in the coming decades.”
-International Energy Agency (IEA), 2021

In 2009, when the first commercial solar power plant of a humble 2 MW was set up in Amritsar in Punjab, India was laying down the prologue for an incredible story of harnessing clean and affordable energy from the sun.
12 years later, with more than 36,000 MW of installed solar capacity, India now stands at the forefront of a global solar revolution and is even ready to lead it. This article details the policies and initiatives India took to achieve this, the challenges and the future of solar power in India.

India has been one of the fastest growing economies in the world and is expected to remain so once it recovers from the COVID- 19 shock. Since 1991, India has skyrocketed into a path of high growth rate that had even touched double digits. To fuel this tremendous growth, an equally massive increase in energy demand is inevitable, especially as India now focuses more on the industrial sector which is more energy intensive than the service sector on which India’s growth story has traditionally been hinging on.

Before you read on:
An intuitive understanding of the standard units used in reference to power generation and capacity can be useful in putting things in perspective as you move on: The capacity for power generation and power generated are different. The former is expressed in Watts while the latter is expressed in Watt-hours. Watt is the rate at which energy is consumed by a device. Similarly, the rate at which a solar plant provides power into a consumption unit is measured
in watts. An electrical appliance of 1 watt consumes 1 joule of energy per second. So watt is basically the rate of energy consumption in a unit of time (usually a second).
Watt-hour is the amount of energy used or produced by a device in one hour. So a solar plant of 10 MW capacity would generate 10Mwh of electricity in one hour and 20Mwh of electricity in two hours.
India’s current total installed power generation capacity is around 375 GW. All the power numbers mentioned in this article can be viewed against this number to have a better perspective.
One GW is 1000 MW
One MW is 1000 KW
One KW is 1000W
One unit of electricity is equal to what is consumed by a 1KW device during one hour operation, in other words. 1Unit= 1KWh = 1000Wh

India’s primary energy consumption pattern has always been and still is dominated by coal, followed by oil. As is evident from the graph, the growth of the Indian economy fuelled by growth of energy usage from less than 1000 TWh in the 1960s to over 9000 TWh in 2019. That is a nine-fold increase. This increase in energy demand was met by increasing the share of coal and oil in India’s energy mix, as a result of which the share of renewables including hydro was reduced from the 1960 levels, although an absolute increase in installed capacity of renewables
has been there (see figure 1 and 2).
But this trend is showing signs of reversal. As one can observe from figure 2, although marginally, the share of coal & oil is showing signs of decrease and that of renewables like solar & wind is showing increased share beginning since around 2015-16 in India’s energy mix. According to IEA, India added nearly five times as much solar capacity in 2019 as it did in 2015.The main driving force behind this was the global decline in cost as a result of improved
technology and efficiency of solar panels.

The International Energy Agency in its India energy outlook 2021 explains how this is just the tip of the iceberg. If India’s current policies are to be fully realised, it predicts that India will add a whopping 900 GW of solar & wind capacity by 2040, with solar PV leading the charge. The current capacity of the entire national grid is about 375 GW.
According to IEA, this means that “India’s power sector is on the cusp of a solar-powered transformation which will challenge the long-established position of coal as “king” of India’s power sector”.

The National Action Plan on Climate Change points out that “India is a tropical country, wheresunshine is available for longer hours per day and in great intensity. Solar energy, therefore, has great potential as a future energy source. It also has the advantage of permitting the decentralized distribution of energy, thereby empowering people at the grassroots level.”
Among the various renewable energy resources, solar energy potential is the highest in the country. In most parts of India, clear sunny weather is experienced 250 to 300 days a year. The annual radiation is comparable with radiation received in the tropical and subtropical regions. The equivalent energy potential is about 6,000 million GWh of energy per year. (India Energy Outlook 2021)
India ranks third in Asia and fourth in the world in terms of solar power production. Currently, solar contributes less than 4% to India’s electricity generation, while coal accounts for close to 70%. But the IEA points out that by 2040, they are likely to converge in the low 30%s (See figure below). This is based on a reasonable but relatively conservative model. In other models, the switch is even more rapid.

This change is powered by India’s policy goals, especially the target to reach 450GW of renewable capacity by 2030 (Remember, the current capacity of the entire national grid is 375 GW).
Record low tariffs were realised in the reverse bidding auctions for solar projects, with the lowest ever auction happening at Rs. 1.99 per unit. These have made solar power production cheaper than coal-based generation.
An interesting aspect of the beginning of this change is seen in the Indian Railways freight sector – which had coal as its main freight with about 50% of all cargo transported as coal. It is now reporting that the share of coal is declining and alternatives such as “roll on-roll off” services for trucks are being thought of to accommodate this reduction in coal transport revenue.

India’s remarkable performance in the solar sector so far is evident from the fact that we have already achieved the initial target of 20 GW capacity for 2022, four years ahead of schedule. That being the case, the target was raised to 100 GW of capacity by 2022, with an investment of $100 billion US dollars. India has also established 42 solar parks, making land available to solar promoters.

If we look at the growth rate of different sources of power, although coal currently dominates the sector, renewable energy has had the highest growth rate in recent years, a good part of which is contributed by solar. The highest rate of annual growth from 2016-17 to 2017-18 in installed capacity in utilities is from renewable sources (excluding hydro) – 20.58%, followed by thermal power – 2.10%. [Energy Statistics 2019, Ministry of Statistics and programme implementation].

In 2020, coal‐fired generation was most exposed to the dip in electricity consumption. Even during the testing times of Covid-19, while a lot of industries and the economy as a whole faced downward pressure, the solar industry in India remained resilient, both in the private and government sector and managed to complete or even exceed targets in some cases.

Solar infrastructure in India

By 2017 itself India’s solar capacity had reached 19.7 GW, making India the third-largest global solar market. In India solar photovoltaic systems broadly consists of two categories – one is utility level, ground-mounted solar systems and the other is rooftop solar systems. India’s solar capacity is dominated by utility-scale systems while the rooftop capacity is much less than in other leading solar countries, and thus has potential for growth.

India’s economy and geography are also well poised to receive maximum benefit from the falling panel and battery prices. In a country blessed with ample sunlight, the current rural electrification drive has a significant share of solar power systems. The major advantage of solar over traditional power connectivity in rural areas is that it can be set up as an off-grid, independent systems that can power a single street lamp, a single lamp or even a cluster of houses or villages, without the requirement of drawing power lines connecting it to the national grid. This is especially helpful in
mountainous or remote regions, where the cost of setting up poles and drawing electric lines is too high.

Indian economy is also largely rural with about half of the population employed in agriculture. The power required for irrigation is one of the major costs that farmers in India face. With off-grid independent or small utility-scale local solar power systems, irrigation pump sets can be powered by cheap solar electricity.

The National Solar Mission (NSM) launched in 2010, spearheaded various schemes and policies which resulted in the current achievements in the solar sector.

Solar Parks & Ultra Mega solar projects: Schemes incentivising the development of solar parks and ultra mega solar power projects resulted in setting up 42 solar parks along with other large utility level projects. Also, the government-backed solar power company Solar Energy Corp. of India (SECI) and state governments have been auctioning solar energy capacity to various private developers using a bidding process that favours the cheapest tariffs (reverse bidding).
Solar-powered government utilities: NSM has also led policy initiatives which already commissioned more than 800MW of grid-connected solar PV power projects in various CPSUs and other government organisations. The Annual report of MNRE 2019-20 details the second phase of this project that envisages to scale this up to 12000 MW within 4 years from 2019-20 to 2022-23 for self-use or use by government/government entities, either directly or through Distribution Companies (DISCOMS). NSM has also set up solar projects in collaboration with other departments and industries, including defence.
Generation based incentive (GBI) programme for smaller solar PV units aims to incentivise rooftop solar and smaller-scale power generation and it aims to achieve a cumulative capacity of 40 GW from Rooftop Solar Projects by the year 2022, to be implemented through DISCOMS.
Off-grid and decentralised PV application programme: Under this programme, the government has been providing Central Financial Assistance for the deployment of Solar Street lights, Solar Study Lamps, Standalone Solar Pumps, Solar Power Packs and other off-grid solar applications.
Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyaan (PM -KUSUM) Scheme: the scheme aims to set up 10 GW of decentralized grid-connected solar or other renewable energy power plants on barren/fallow land, Install 17 lakh stand-alone solar agriculture pumps and solarise 10 Lakh grid-connected agriculture pumps. All three components combined, the scheme aims to add a solar capacity of more than 25 GW by 2022.
Green Energy Corridor: The intra-state project aims at synchronizing electricity produced from renewable sources, such as solar and wind, with conventional power stations in the grid by 2021.
Atal Jyoti Yojana (AJAY): Under this scheme, over 1.34 lakh solar street lights are installed till now.
Financial assistance: The solar policy has also focused on initiatives for loans and international funding. The government provides viability gap funding to support this sector while RBI has included renewable energy projects under priority sector lending.

Despite our commendable performance in the solar sector, to achieve our ambitious targets, there lies a variety of challenges ahead.

  1. Land stress: Solar systems are wide-area low-intensity captive systems that require a large surface area for energy generation. The utility-scale power projects require large swathes of land for their deployment and this causes
    problems related to land availability, land documentation related problems, and can cause changes in local land-use patterns. One way out is to efficiently identify and use wasteland that can be used at the lowest cost and lowest impact, invest in improving the energy efficiency of solar panels, encourage more use of rooftop solar.
  2. Large initial capital requirement: Solar power generation is a capital intensive project which requires proactive support from the government for small players to set up shops in the solar industry.
  3. Global competitive pricing and challenges: Many experts also opine that the record low solar tariffs may have touched rock bottom, at least in the short term, due to increasing cost of finance and increase in the cost of inputs due to increased demand in the global market. The increased tariffs on imported input materials would also increase the cost of production. India currently imports most of the raw materials for its solar panels.
    India faces competitive challenges from other countries which lie in the tropical and temperate zone, especially China. To be a world leader in solar production, it is important to further our competitive trade and tariff policies while also aggressively pushing for local production and export of all possible components in the solar PV and battery value chain. Investments in other countries for lithium mining (South America has the highest deposit for lithium and China has already done a great deal of investment in mining projects there) should also be aggressively pursued.
  4. Jevons paradox: This occurs when there is an increase in the efficiency of a resource (say solar energy), generally as a result of technological progress or government policy, but the rate of consumption of that resource rises due to
    increasing demand. Solar energy is becoming increasingly cheap and efficient but may result in higher land stress, higher demand for raw materials used in PV products, higher demand for battery storage capacities (Since solar cannot provide round the clock supply by itself), which further increases the pressure on mining of minerals and production of chemicals required for batteries, offsetting the environmental and cost advantages of solar systems to some extent.
  5. Environmental pressure: Although Solar panels are one of the most eco-friendly power generation methods, due to their high area of deployment, they may cause destruction of local ecosystems (even seemingly lifeless deserts have fragile ecosystems), may alter local weather patterns and may lead to clearing of forests for solar deployment. While Solar may be able to aid in fighting climate change, care should be taken to not increase environmental degradation.
    In this regard, it will be a good idea to deploy renewable systems as per a ‘least impact-high returns’ hybrid model, combining different renewable sources and deploying the most suited renewable model for each location. This would mean solar and wind hybrid models, combining hydrogen and even nuclear power generation wherever safe and suitable to complement solar power generation.
  6. Dust reduces the efficiency of solar panels: Automated dust cleaning systems need to be put in place to exploit the maximum potential solar PVs.
  7. Grid connectivity – flexibility issues: Solar panels produce electricity only during hours when there is adequate sunlight available. This is the highest during noon and lowest at night. When a solar plant is connected to the grid, the grid will experience a power surge from the solar plant during noon when the energy consumption is not at maximum; and a decrease in power from the plant after dusk, which is the peak time of electricity consumption. As a result, there will be a curtailment of power generated from solar plants during noon, and there will be a deficiency during evenings. To manage this, solar plants would either require storage systems such as battery power or should be used along with thermal or other sources of power generation. Not only that there exists the need to control and manage the power supply effectively which will add to the cost.
    Thus, broadly we can identify the following steps that can be taken to overcome our challenges in solar production.
  8. Vertical integration of supply chain within the country: In order to reap all the value additions at multiple stages of solar PV production, as well as to reduce import dependence and high costs, India needs to emphasise more on local production of inputs and further a conducive policy environment for the same.
  9. Faster adoption of all modes of solar production: The international race for solar dominance is gaining momentum. China is aggressively pursuing solar alternatives for its energy needs. The faster one is, the faster one can realise the economies of scale faster and gain a technological advantage.
  10. Data and evidence-based policy formulation. This will result in the efficient deployment of solar systems with the least adverse impact. Data based policy formulation is also required to manage costs and export and domestic competitiveness of Solar PV.
  11. Phased transition to renewables to reduce flexibility issues.
    It is true that coal will not be out of the picture all of a sudden. While on one hand, it is comparable to solar PV costs as well as have been in use for long and manufacturers have the installed capacity and know-how to produce and use coal for electricity generation; on the other hand, coal will be needed to manage flexibility issues associated with solar power plants in the short run. Coal-based thermal generation can be done round the clock and can be used to supplement solar during the wee hours. Coal can be gradually phased out and battery and other renewables can take their place to provide grid flexibility.
    The IEA opines that battery storage is particularly well suited to the Indian context and by 2040, it is estimated that India has 140 GW or more of battery capacity, the largest of any country.
  12. Promote more rooftop solar panels with higher efficiency to reduce land stress.
  13. Promote floatovoltaics wherever possible: Floatovoltaics are simply floating Solar panels. These can be effectively deployed in reservoirs of dams or in canals. It has the dual advantage of reducing the stress on land as well as the cooling effect of water on the panels which can increase its efficiency by up to 10%. ( For solar panels, light and not heat is used for power generation. In fact, heating of solar panels reduced its generational efficiency)

    By 2040, it is estimated that India’s leadership in the deployment of clean energy technologies would expand its market for solar PV, wind turbine and lithium‐ion battery equipment to over $40 billion per year. As a result, 1 in every 7 dollars spent worldwide on these three types of equipment in 2040 will be in India, compared with 1 in 20 today. India’s clean energy workforce will grow by 1 million over the next ten years. The share of coal in the overall energy mix steadily declines from 44% in 2019 to 34% in 2040, if our current policies are continued to their fruition (IEA 2021).

    The IEA neatly sums it up: “Many aspects of a model for low‐carbon, inclusive growth model are already evident in India’s policy vision, and many more are highlighted in the Sustainable Development Scenario (a more optimistic scenario detailed by IEA) that points the way for India towards net‐zero emissions. If this can be done, it will show the way for a whole group of energy-hungry developing economies, by demonstrating that robust economic expansion is fully compatible with an increasing pace of emissions reductions and the achievement of other
    development goals. India is already a global leader in solar power – and solar combined with batteries will play a massive part in India’s energy future. But India will need a whole host of technologies and policies to chart this new path.”

    Thus, with the right kind of policy and institutional support, the sun is only set to shine brighter on India’s energy future.


  1. India Energy Review 2021, IEA.
  2. Annual report 2019-20, Ministry of New and Renewable energy
  3. Energy Statistics 2019, Ministry of Statistics and programme implementation
  4. CEA Annual Report 2018-19, Ministry of Power

Harshajith S H
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Harshajith writes on the Economy and Development. He studied Development Studies at Tata Institute of Social Sciences. Previously he has worked with The Economic Trail and The Indian Economist.