The 5 Questions 2023 Could Answer for Renewable Energy in India

India has over 174 GW of installed renewable capacity, including large hydropower at the conclusion of December 31, 2022. Solar power constituted the largest share of about 64 GW of the total. Wind power (41.9 GW), large hydro (46.85 GW), biomass/co-generation (10.2 GW), small hydro power (4.93 GW), and waste to energy with 0.52 GW installed capacity sum it up. Adding to its green transition spectrum, the renewable energy industry in 2023 will take the first tentative steps for green hydrogen production as well.

However, the current rate of expansion of green energy has to align with the target of installing 500 GW of renewable energy by 2030. The year 2023 will be a major milestone for the renewable energy industry, as the trajectory will be set by the policy measures and projects that will be undertaken this year. We look at the five questions that 2023 could answer for renewable energy in India.

Can India be Self-sufficient in Solar Supplies?

India’s total installed solar capacity was 63.8 GW as of January 31, 2023. Having failed to reach its solar target of 100 GW by 2022, the country needs to reconsider and revamp its solar policies to tap its vast solar energy potential. While it is probable that the country will make amends for its shortcomings, the question is – can the country become self-sufficient in solar supplies this year?

One of the key bottlenecks of the country remaining a laggard was the cost of solar panels. India traditionally relied on Chinese-made components such as polysilicon wafers, necessary to make modules. However, the country has taken several measures to boost domestic manufacturing of ingots and wafers. For instance, MeitY tried to attract investments by offering capital expenditure subsidies under M-SIPS – 20 per cent for investments made in SEZs and 25 per cent for non-SEZ investments.

Moreover, the PLI plan is being expanded by an additional Rs 19,500 crore as the next step in increasing local manufacturing capacity from its current level of about 10 GW to more than 40 GW by 2025. The PLI results should be out by mid-year, with a minimum capacity creation of an additional 30 GW possible.

Expect results on the ground to be visible by end 2023 when current module manufacturing capacity is expected to push beyond 30 GW, while cell manufacturing gets closer to 5 GW. Domestic production and sourcing of wafers, and even polysilicon production, is expected to appear only by 2024 and beyond, when the circle would be truly completed for solar panels at least. Solar glass, another key component where Borosil Renewables was the sole supplier for long, will also see additional firms launch their domestically produced options by the end of this year, However, power electronics will still remain a missing gap.

Is Green Hydrogen Worth the Hype?

The National Hydrogen Mission was announced in the Budget Speech of FY 2021-22 to produce hydrogen from green energy sources. India’s target is to produce 5 Mt of green hydrogen by 2030. The GOI allocated a fund of Rs 17,490 crore for the Mission. As per a NITI Aayog report, green hydrogen has the potential to abate 3.6 Gt CO2 emissions by 2050 as its demand may grow fourfold by then. Undoubtedly, Green Hydrogen is seen as a crucial measure for India’s green transition. But, is it worth the hype? The current year is already setting the tone as commitments turn to real investments.

A lot depends on lowering the cost of green hydrogen to US$ 1 per kg by 2030. India is actively advancing green hydrogen projects. For instance, Kawas Green Hydrogen Blending with Natural Gas project in Gujarat and Green Hydrogen Mobility Project in Leh. The government is also promoting Research, Development & Technology Demonstration projects for the fuel. Further, NTPC has also planned to allocate 5 GW of its targeted 60 GW renewable capacity by 2032 for green hydrogen and ammonia. Similarly, the private push is also evident with an industry giant like Reliance coming up with a mission to produce green hydrogen at $1 per kilogram by 2030.

By the end of 2023, expect the first of many concrete plans to establish manufacturing centres, as well as moves by the industry to source green hydrogen produced nearby (to reduce storage and transportation costs – the largest challenge currently) by 2026-27 or even earlier. Plans for methanol and Green ammonia should be visible even earlier.

Will Rooftop Solar Increase Its Share in Solar Capacity?

A major part of the failure to install 100 GW solar power capacity by 2022-23 was the failure of India’s rooftop solar target of installing 40 GW. India barely installed 7 GW of rooftop solar. The current year may well be a turning point for the country’s rooftop solar in particular, and total solar capacity in general. This is because finally, multiple states have also accepted the case for solar, and are tuning policies to reflect that.

The silver lining is that India’s Rooftop Solar (RTS) subsidy programme has received a four-year extension till the end of FY-2026. However, there is no increase in the budgetary allocation. The measures, if any, the government will take this year will decide the fate of rooftop solar in the nation’s goal to install 280 GW of solar by 2030. With states from Delhi to Maharashtra, Punjab and UP pledging to make rooftop solar a simpler process, and Southern states reviving momentum again, both the residential and C&I segments, especially the latter, will drive rooftop solar growth much more strongly in 2023, to hopefully establish a strong momentum for the rest of this decade.

Can the States Match Intent With Execution?

The states of India have taken an active front on renewables trying to contribute toward national goals of the green transition. For instance, the state of Uttar Pradesh has set a target to generate 22 GW of solar power over the next five years. Rajasthan also set a target of 30 GW of solar power by 2025 and 75 GW by 2030 (Rajasthan Solar Energy Policy 2019). While the targets paint a rosy picture, they will come to fruition only if the states walk the talk.

In addition, the renewable distribution is not uniform across the country. While a few like Rajasthan, Gujarat, and Maharashtra, are leading in renewable installations, others like Uttar Pradesh, West Bengal, Jharkhand, and Bihar are laggards. The role of the states will be crucial for the overall energy transition of India. While tending had picked up in 2022 itself, many states are exploring options like floating solar to work around limitations of land availability and permissions. Expect a bigger push in organised segments like government and public buildings, besides the commercial segment as open access rules are notified across more and more states.

How Long Will the Industry Need Protection?

Considering the country’s growth and development, India’s electricity demand is set to increase 1.8 times between 2021-22 and 2031-32. While the year 2022 saw accelerated renewable energy growth in the country, the renewable industry still needs the state’s protection against non-fossil competitors. The country needs at least 38 GW addition each year to reach its 2030 target.

Hefty duty protection added on to enable domestic manufacturing will also have to be balanced out vis-a-vis the need to provide cheap power, especially if the gap with import costs remains high. While there is no question of any reduction in the duty structure for the first 5 year period, the government has already shown a level of pragmatism by allowing non ALMM modules for older projects. One hopes domestic industry will relentlessly seek competitiveness with other manufacturers, something that will also show up on export figures for domestic manufacturers.

Indian energy transition will bring several challenges including the possible impact on fossil-dependent jobs, disruptive forms of future energy access, and shrinkage in the State’s capacity to spend on welfare programmes. As we saw, with the order to operate at full capacity to thermal plants using imported coal, that day is still some time away for India. It is only post 2027-28 that the issue will assume significance, a period by when many old, higher polluting plants in any case will be due for retirement as their PPAs also run out.

But based on our feedback, industry clearly accepts a phase down of duty protection (40% on modules and 25% on cells) to start as early as 2025-26, to end in time for 2030. Preferred barriers, if at all, would be non-tariff barriers like ALMM.