Will the solar mission 2022 be successful? - Views on News from Equitymaster

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Will the solar mission 2022 be successful?

Jul 10, 2015

The government, led by Prime Minister Narendra Modi has laid down an ambitious plan to create capacities generate 100 GW of solar power capacity by 2022. This would come at an outlay of Rs 6 trillion. At present, India has about 3 GW of solar power capacity. Looking from where we currently stand in terms of solar power capacity, it looks to be a very aspirational target. As per the government, $100bn of investment would be required to meet this solar power capacity addition.

Foreign Investment Inflow

The ambitious project has created a lot of buzz among foreign investors. The local industry is not geared to meet the total demand and this is proving to be an immediate trigger for the foreign investor. The local players are equally upbeat as they see an opportunity to upgrade their technology via a foreign partner and achieve economies of scale. This has given a boost to 'Make In India' campaign with Indian company's engaging in joint venture with the foreign company. Recently Adani Enterprise and America's leading solar technology manufacturer SunEdison established a joint venture to build the largest vertically integrated solar photovoltaic manufacturing facility. In May, Azure Power commissioned a 100 MW solar plant with 60 MW of 'Make In India' equipment.

Increase in generation capacity

India's solar capacity has increased by 60% in three years to 2700 MW. Prices of solar modules have come down by 85% over this period. The cost is coming down dramatically. It is already close to parity with thermal. In a matter of time, renewable energy will be as expensive or inexpensive as thermal energy.

Concerns

Though solar power capacity is being planned along highways, canals and vacant stretches, land acquisition remains cumbersome. Also state governments face problems in feeding solar power to the grid. There is not sufficient demand for electricity due to the dismal state of State Electricity Board (SEBs). The plant load factor in 2014-15 has dropped to a fifteen year low at 65%. SEBs are facing a financial crisis and are minting losses to the extent of 700 bn annually. The SEBs do not have enough resources with them to enter into Power Purchase Agreement (PPA) with the power generation company to purchase power. The companies would be hesitant to invest their money in solar power generation if there is a demand deficit prevailing. With such constraints prevailing, it would be very difficult for the government to achieve the solar mission 2022 target.

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