India: Solar Investment Opportunities Emerging Markets Task Force Report

FOREWORD

SolarPower Europe established its Emerging Markets Task Force in March 2018 to identify business and cooperation opportunities in emerging markets outside of Europe with the aim of contributing to the global energy transition. Since its inception, SolarPower Europe’s Emerging Market Task Force has become an active working group with more than 120 experts from over 60 companies, working on a series of reports presenting solar investment opportunities in new and emerging markets around the world.

PHOTOVOLTAIC POWER POTENTIAL INDIA

ENERGY GEOGRAPHY
India has a huge potential to generate energy from renewable energy sources, especially solar PV. The country’s natural conditions are estimated to offer a renewable energy potential of 900 GW that are commerially exploitable. With an attribued potential of 750 GW, solar power is considered to be the most promising renewable energy source, followed by wind power (102 GW), bio-energy (25 GW) and small hydroprojects (20 GW) (IBEF, 2019). However, among the
country’s 28 states and 8 union territories the potential to generate solar power varies greatly. As data from the National Institute of Solar Energy in India (NISE) shows, Rajasthan has the highest solar PV potential, followed by Jammu and Kashmir1 Maharashtra and Madhya Pradesh. Considered together, these four regions account for more than half of India’s solar potential.

DEMOGRAPHICS
India’s population of around 1.353 billion people is predominantly young and makes up a share of around 17.7% of the world’s total population (World Bank, 2019). In terms of population size, India comes second to China, which remains the world’s most populated
nation. India’s population size doubled within the past 40 years, growing by around 181.5 million people between 2001 and 2011 alone. Over the next couple of decades India’s population size is expected to further increase and with a current annual growth rate of 1.08%
expected to overtake China’s by 2030.

ESTIMATED SOLAR POWER POTENTIAL PER STATE

MACROECONOMIC CONTEXT
India had a nominal Gross Domestic Product (GDP) of USD 2,726.32 billion in 2018 (World Bank, 2019). Therefore, compared internationally, India is the sixth largest economy in the world, falling slightly behind the UK with a GDP of USD 2,825.21 billion. The Gross
National Income (GNI) per capita in 2018 was USD 2,020 – compared to only USD 1,600 in 2015 – and is expected to continue rising (Macrotrends, 2019).

MAJOR MACROECONOMIC INDICATORS
STRENGTHS AND WEAKNESSES OF THE INDIAN ECONOMY

government currently is implementing measures to improve the economy, so that it is estimated that India’s economy will be the second largest in the world after China by 2050.

BUSINESS ENVIRONMENT
Despite India’s difficult economic situation, the country has managed to significantly improve its ranking in the World Bank’s Doing Business Report over the past two years, climbing up 23 spots to rank 77 out of 190 states in the 2019 edition. For this improvement, as well as being acknowledged as part of top 10 improvers for the second consecutive year, the country is accredited special merit.

EASE OF DOING BUSINESS IN INDIA, 2019

POLITICAL AND SOCIAL CONTEXT
India has a stable government which also is positive for investors. The current ruling party of India, the Bharatiya Janata Party (BJP), renewed its strong majority in the 2019 general election (bringing the National Democratic Alliance, NDA, to hold 353 out of 542 seats). This makes
it easy for the party to implement decisions. Under Prime Minister Narendra Modi, there is currently also a very positive political climate to support renewable energy development in India.

ELECTRICITY INFRASTRUCTURE

India’s national electricity grid developed in a phased manner. The country’s power system is composed of five interconnected network zones – Northern, Eastern, Western, North Eastern and Southern Region – together forming a national grid with one frequency. Transmission lines account for only about 5% of the country’s network length, while the rest consists of distribution lines.

NEW DEVELOPMENTS FOR SOLAR POWER
Solar PV is considered to be India’s most promising renewable energy source. This is due to India’s favourable climatic conditions that provide the country with an average solar irradiation of 4-7 kWh/m2 /day, with about 300 sunny days a year (MNRE, 2014b). To utilise this potential, the Union Government has identified solar as a key pillar for its power supply strategy and is committed to one of the largest solar energy capacity expansion programmes in the world.
While wind is still the major contributor to renewable energy sources, solar is expected to overtake wind by 2020 (Climate Investment Fund, 2018). Along with falling panel prices and available government subsidies, solar power is increasingly being perceived in a positive light
and is promoted in both on- and off-grid areas.

ELECTRICITY PRICES FOR MAJOR CONSUMER CATEGORIES (Rs/kWH)

This is not unusual for emerging markets. Installing large quantities of utility-scale solar is much easier than establishing a distributed PV rooftop market, which takes a substantial period of time with having to educate many consumers. This is why emerging markets usually begin their solar chapter with tenders for utility-scale solar and struggle to set up the distributed rooftop segment (SolarPower Europe, 2019).

ROOFTOP SOLAR
ANNUAL INSTALLED CAPACITY
CUMULATIVE INSTALLED CAPACITY

FOR INVESTORS
India is counted among the countries with the highest solar irradiation. Recognising this potential, India’s government has taken large steps to develop solar PV and
to create opportunities for national and international investors, ensuring the sector’s consistent growth. The country’s ambitious National Solar Mission illustrates this, as well as the country’s various development finance institutions investing and backing investments in solar.

FOR LOCAL PRIVATE STAKEHOLDERS
India has an ambitious plan to develop rooftop solar: a target of 40 GW capacity by 2022. To facilitate the scaling up of grid-connected solar rooftops, around 20 states have
introduced dedicated policies and net metering regulations. Still, the segment has recorded very little growth so far.

Source: solarpowereurope

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