A ‘solar boom’ is coming to India and companies are lining up to profit

One of the world’s fastest-growing economies aims to triple its renewable power capacity

Workers carry a damaged photovoltaic panel inside a solar power plant in Gujarat

Irshad Salim, BE2C2 Report — India is betting big on green energy with plans to draw 40 percent of the country’s energy needs from renewables by 2030.

According to reports, India aims to triple its renewable power capacity by 2022 to 175 gigawatts (from 82 gigawatts at present) by drawing on new solar and wind energy sources.

Solar and wind companies are taking notice of this.

The country’s economy is among the fastest growing in the world, getting support from lower crude oil prices. The International Monetary Fund expects growth could expand to more than 7 percent next year.

Taking advantage of the tailwind, India, in addition to meeting its own energy targets, which Bloomberg New Energy Finance estimates may cost $200 billion, wants to emulate industrial developments in neighboring China, where solar manufacturers have created a world-leading export industry.

The driving force behind this initiative is Prime Minister Narendra Modi, who wants to spend $3.1 billion on state aid for the country’s solar panel manufacturing industry to increase India’s photovoltaic capacity and create an export industry, according to Bloomberg. Called the Prayas initiative ( part of Modi’s “make in India” campaign), the plan has not yet been made public.

For the more than 300 million people that’s a good news – they aren’t connected to the electrical grid. Solar energy would serve as an affordable way to produce their own power – even sell extra capacity to the national grid.

In November, India built the world’s largest solar plant that can produce enough energy to power roughly 150,000 homes. Similar plants are said to be in the pipeline all over the country.

SunPower CEO Tom Werner said India is about to become the biggest market for solar energy, “primarily because of Modi’s interest in growing the sector.”

“The market that’s going to boom is India,” Werner told Business Insider. SunPower is the second biggest solar installer in the US– owned by European oil giant Total.

The American outfit has already partnered with Mahindra EPC, a solar subsidiary owned by Indian conglomerate Mahindra Group, to build a 5-megawatt solar plant in Rajasthan state. The plant generates enough electricity to power 60,000 rural homes.

Werner didn’t disclose whether SunPower has any upcoming projects in India, but said the market will become increasingly more important to global players in the future.

Tesla is also eyeing India and could enter the market as early as this summer, CEO Elon Musk tweeted earlier in February. Tesla acquired SolarCity in a deal worth $2.1 billion in November and is continuing to expand its battery division.

India has become one of the biggest clients of Chinese photovoltaic manufacturers and in the absence of its own domestic capacity, that reliance could potentially grow. In the first six months of 2016, India imported 18 percent of China’s production worth $1.1 billion, according to Bloomberg New Energy Finance.

Japan’s SoftBank Group Corp. told Bloomberg News in October it’s considering a manufacturing joint venture in India that could produce the solar panels needed to meet Modi’s energy targets.

According to International Energy Agency, India, which accounts for about 6 percent of total world energy demand, is making strides with renewables, but needs more investments, and a better business climate said Paul Cashin, the IMF mission chief for India.

“Significant new investment in the grid, greater regional integration and market design that rewards flexibility from more efficient thermal generation and hydropower will be important for a more robust system with a high level of solar and wind,” wrote Michael Waldron, an energy investment analyst, in a commentary for IEA.

According to Cashin, “A key concern for us is the health of the banking system, which is still dealing with a large amount of bad loans, and also heightened corporate vulnerabilities in several key sectors of the economy.”

For the IEA, one of the policy priorities for India should be drawing diverse sources of capital to renewables and other low-carbon energy resources.

“Providing incentives to invest in renewables and flexibility over time will be important to meet the country’s energy strategy goals,” Waldron wrote.

Though coal is still a dominant energy form in India, and parts of the country still lack a reliable source of electricity, the IEA lists India as No. 4 in the world in terms of new solar power and No. 4 in the world based on cumulative wind power capacity.

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BE2C2 is a business unit of Irshad Salim Associates  which produces reports, infographics, analytics and analyses based on available data and related information from sources readily available on the web and in the public domain.

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