The solar sector in India bounced back to make 2021 the best year in new PV capacity addition. The year also witnessed a massive response to PLI tender for solar manufacturing and launch of 50 GWh battery cell tender and green hydrogen mission.

As we head into 2022, pv magazine looks back at the outgoing year that claimed the crown for maximum new solar addition in India despite significant challenges. In 2021, the nation added a record new solar capacity of about 11.1 GW within eleven months ending November 30, according to JMK Research. This included about 7 GW of utility-scale solar and 2,605 MW of rooftop solar and some off-grid capacity.

PV installations improved considerably in the first quarter with developers completing their delayed projects from last year. And the rest of the year saw developers rushing to complete their projects before the customs duty on solar panels and cells kicks in from April 1, 2022.

Rooftop solar picked up as finalizing the net metering cap at 500 kW has removed uncertainty for installers.

Explaining the rooftop uptake in 2021, the Amplus Solar team said, “The start looked rough with the Ministry of Power’s recommendations on limiting net metering to 5kW (which was increased to 10 kW) for prosumers. Following representations from several affected quarters, the MoP revised the recommendation to 500 kW, providing much-needed relief to the rooftop sector.”

Among other policy developments, “the sale of renewable energy via energy exchanges, proposals facilitating Open Access, proposed amendments to the Electricity Act, along with an increased demand for solar from the industry as well as residential consumers has led to a strong growth for the sector.”

Household rooftop solar in India saw a gradual improvement after almost stagnant annual growth of 100-200 MW until the fiscal year 2020, according to a Bridge To India report. While subsidies paid under a Ministry of New and Renewable Energy (MNRE) scheme were the main enabler for residential PV uptake, the market outlook is also becoming positive due to a steady improvement in consumer awareness, affordability, financial viability, and financing options, as well as the entry of large organized solar installers. 

“Free net metering in most states also strengthens [the] investment case for residential rooftop solar,” stated the report. “The average marginal tariff for a household with monthly consumption of 300 kWh in 15 states – accounting for 90% of [typical] residential consumption – is INR7.18/kWh, effectively yielding an investment IRR [internal rate of return] of 8.3% for [a] 3 kW system.”

Significant milestones

Shriprakash Rai, head-commercial and industrial business, Amp Energy India, says the [renewable energy] sector achieved significant milestones in 2021 such as reaching 100+GW of renewable installed capacity with solar dominating the mix, increase in investments into the solar sector by almost 50% quarter on quarter, and favorable government policies such as Introduction of Production Linked Incentive (PLI) schemes to promote domestic manufacturing, 100% FDI using the direct route, the launch of Green Hydrogen Mission and Green Term Ahead Markets to boost RE sales through exchange among others.

The total value of acquisitions in India’s renewable energy sector surged by more than 300% to US$ 6 billion in the first ten months of 2021 (till October) from less than US$ 1.5 billion reported in 2020, according to a study by the CEEW Centre for Energy Finance (CEEW-CEF) and the International Energy Agency (IEA). 

The government’s production-linked incentives scheme for gigawatt-scale manufacturing of high-efficiency solar modules received bids for an overwhelming 54.8 GW of capacity with participation from existing manufacturers and new players alike. Out of the total 18 bidders, half were new to solar manufacturing.

The PLI tender saw Jindal India Solar, Shirdi Sai Electricals, and Reliance New Energy Solar emerging as beneficiaries through the allotment on a bucket filling basis. Others, including Adani Infrastructure, First Solar, Coal India, Larsen & Toubro, Renew Solar, Tata Power, Waaree Energies, and many more, were on the waiting list in that order based on their cumulative scores. 

Seeing the massive response to the PLI tender, the government approved the ministry’s proposal for INR 19,000 crore more under the PLI, enhancing the Scheme’s layout to INR 24,000 crore. The move will help accommodate more willing manufacturers under the Scheme.

That apart, the Ministry of Heavy Industries invited bids to develop a cumulative 50 GWh of advanced-chemistry battery cell manufacturing units in India under its production-linked incentive scheme with an outlay of INR18,100 crore. The selected bidders would be supported with fiscal benefits in the form of a cash subsidy for production. The pre-bid conference received wide participation and interest from bidders both in person and virtually with around 100 participants from about 20 companies.

2021 also saw the launch of the National Hydrogen Mission by prime minister Narendra Modi. The mission envisages commercial production of green hydrogen production in the nation from the financial year 2025-26 onwards. The draft document of the National Green Hydrogen Mission, currently under inter-ministerial consultations, proposes to undertake hydrogen production projects through a competitive bidding mode that would be open to participation from both private and public entities. 

The Mission also includes frameworks for indigenous manufacturing and research & development aimed at improving the efficiency of electrolyzers—systems that use electricity to break water into hydrogen and oxygen in a process called electrolysis. 

Constraints

Having said that, the sector has also faced market challenges such as supply constraints, project cost increases triggered by an increase in raw material prices, freight charges, or the recent increase in module prices in addition to policy uncertainties or frequent changes in policies. To add to the woes of the project developers, the government has also notified BCD and other taxes which will additionally burden developers and inflate project costs, said Shriprakash Rai. 

ICRA reported the price of imported mono PERC PV modules in India increased to 22-23 cents/ watt in June 2021, 15-20% up from 19-20 cents/watt in December 2020. It further went up to 27-28 cents/watt in October 2021. It attributed the increased module costs to an increase in the polysilicon prices and the supply-side disruptions in China. 

However, Rai still hopes that the sector will be able to tide over these issues constraining its growth, and 2022 proves to be a stronger year for renewables in India.