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India’s solar ambitions

April 2, 2018 | Expert Insights

In what is likely to be a major boost to India’s solar ambitions, China’s GCL System Integration Technology Co. Ltd. and SoftBank have agreed to invest $930 million in a joint solar venture in the country.

Background

India is a developing economy that is one of the fastest growing in the world. As the nation continues to progress, its energy needs have also increased. The energy policy of India is largely defined by the country's expanding energy deficit. The country has also increased focus on developing alternative sources of energy, particularly nuclear, solar and wind energy. In terms of self-sufficiency, India ranks 81 in the world.

Much of India’s primary energy consumption comes from crude oil and coal. Around 4.01% of the country’s energy consumption comes from hydroelectricity and 2.28% comes from renewable energy such as solar power.

One of the main initiatives that was introduced by the Indian government to promote solar power is the Jawaharlal Nehru National Solar Mission. It is one of the initiatives that is part the National Action Plan on Climate Change. Inaugurated in 2010, the program has a target of 20GW by 2022. The new government has expanded the target to 100 GW.  India increased its solar power generation capacity by nearly fivefold from 2,650 MW in 2014 to 12,288.83 MW in 2017.

Currently, the world’s largest solar plant is in India in a region called Kamuthi in Tamil Nadu. It has the capacity of 646 megawatts. The plant will have 2.5 million solar panels covering an area of 10.36 square kilometers. It cost $679 million to build, and is capable of powering an equivalent of 150,000 homes.

"India is expected to become the world's third biggest solar market from next year onwards after China and the US," said a Bridge to India spokesperson. Bridge to India is a consultancy firm that specializes in renewable energy. The spokesperson stated, “India is expected to add new solar capacity of 5.1 GW this year, which is a growth of 137% over last year.”

Analysis

In recent years the Indian government has made solar a top priority. In 2016, the government announced that it was planning a 210 billion-rupee ($3.1 billion) package of state aid for India’s solar panel manufacturing industry. The Economic Times reported, “The so-called Prayas initiative, short for “Pradhan Mantri Yojana for Augmenting Solar Manufacturing,” a central-government plan designed to lift India’s installed photovoltaic capacity as well as to create an export industry.”

China’s GCL System Integration Technology Co Ltd along with SoftBank has come to an agreement to invest heavily in India’s solar plans. They will launch a $930 million joint solar venture. In 2016, SoftBank signaled its intentions to meeting PM Modi’s goals in solar. “To build large-scale manufacturing efficiency matching Chinese economics of scale will require government support,” Manoj Kohli, executive chairman of SB Energy said in an interview in New Delhi. He described Indian support policies as being in an “evolution stage.”

In addition, India has become one of the biggest clients of Chinese photovoltaic manufacturers. Bloomberg New Energy Finance reported that in the first six months of 2016, India imported 18% of China’s production worth $1.1 billion.

According to a report by the Reuters, “SoftBank said in 2015 that it would invest up to $20 billion along with Foxconn Technology Co. Ltd. and Bharti Enterprises in solar projects in India, which has a goal of generating 100 gigawatts (GW) of power from solar by 2022.” SoftBank’s Vision Fund will be funding this venture.

Assessment

Our assessment is that one of the key ways to address the energy deficit in India is by investing in clean energy like solar power. As a signatory of the Paris Climate Agreement, India has set an ambitious goal of expanding on its solar program. It is also economically sound as it has been estimated that India’s clean energy sector could generate over 300,000 new jobs by 2020. However, there are concerns that India’s reliance on China for photovoltaics would increase as a result.