Why did India’s solar growth fall short of expectations in 2018?

Solar Power India0.8 °C – that’s how high the average global temperature has risen as of 2018 since 1880. That may not sound too high for those of us who aren’t well-versed with the detrimental effects on life even a minor fraction of temperature rise can cause. It requires a lot of heat to warm the whole of earth surface – oceans, land, and atmosphere – by even half a degree Celsius. Also, a degree rise in global temperature may translate to 5-10 degree, or even more, rise in local temperatures in your area during the summers. This can affect the crops growing in the region along with its flora and fauna, which are adapted to living at much lower temperatures. Remember what separates us from the ice age is a mere 4 °C shift in global temperature. Well, you get the picture – ‘human footprints’ on earth are anything but warm.

That explains why the major world powers around the world are prioritising a transition to renewable energy – ‘enlightened’ self-interest, you might say. India, too, doesn’t lag behind. The third largest market for solar power in the world, the nation targets a 100 GW solar capacity by 2022. The current solar capacity is estimated to be around 28 GW. 

Ambitious, but unlikely

India’s stupendous growth in solar capacity from 2.5 GW to 28 GW in a matter of 4-5 years is indeed praiseworthy, thanks to the solar-friendly measures of the government. But annual solar capacity addition of 8.2 GW in 2018 against the 9.6 GW in 2017 bespeaks roadblocks in our trajectory, most of which arose from the government’s policy confusion in the preceding year.

Domestic manufacturers vs power consumers & investors

The conflicting desires over protecting the interests of domestic solar equipment manufacturers as well as procuring cheaper solar equipment to deliver electricity at lower prices to consumers created much policy confusion in the last year. In fact, a 25% increase in import tariff of solar panel imports from China and Malaysia in effect from last year under pressure from domestic manufacturers increased the costs involved for everyone involved, lowering the returns for developers and investors. Supporting local manufacturers by levying higher import tariffs leads to higher tariffs and lesser capacity addition in the short run, precisely what we can’t afford when a 100GW-by-2022 target hangs over our head.

GST hurting solar growth?

GST has increased the cost of solar power generation by 6 per cent, says a recent study by the Council on Energy, Environment and Water (CEEW) and the International Institute for Sustainable Development (IISD), while reducing the cost of coal-based thermal power production by 2 per cent. This widened gap between the costs of conventional and renewable energy can prove a major setback to our commitment to achieving parity between the two modes of energy generation.

The (hopefully) short-term uncertainty looming over India’s economic front due to imposition (and even their subsequent stays by the judiciary, only to be revoked later) of taxes and import tariffs, cancellation of auctions and tariff renegotiations, coupled with land disputes in the ongoing setting up of solar parks, have all contributed alike to solar growth in 2018 falling short of our expectations.  How India would achieve its balance in encouraging domestic manufacturing without slackening its solar race is what we are keen to witness in the upcoming years.