Fractured/Earth

Where is India’s solar sector headed? One possible view of the future came in September last year. That month, REMCL (Railway Energy Management Company), a joint venture between Indian Railways and RITES, floated a tender seeking 750 MW of round the clock renewable power.

The bids triggered excitement across India’s renewable sector. The lowest bidder, Gujarat-based Torrent Power, had sought just ₹4.25/unit. The other four winning bidders — ReNew Solar; TEQ Green Power; NTPC Renewable Energy; and Tata Power Renewable — had bid between ₹4.37 and ₹4.43 per unit.

Three months earlier, another REMCL tender had netted an even lower price. Chasing a 300 MW renewable round the clock tender, Bangalore-based Ayana Renewable had bid ₹4.1/kWh. To put these numbers in perspective, the cost of thermal power/kWh stood at ₹4.13/kWh in 2022.

Intermittency has been the bugbear of the renewable sector. It has fomented grid instability, compelled discoms to simultaneously pay for standby power from thermal power projects and been a major argument against renewable energy adoption.

With these bids, the sector saw chatter on whether ‘round the clock’ renewable power had finally turned cheaper than thermal power — and if exponential growth would now follow.

Over the last three months, I have taken a closer look at India’s solar sector.

Since 2021, when CarbonCopy and I last wrote on the sector, it has seen large changes — largely around industrial policy. India has tried to boost domestic manufacturing through import restrictions on Chinese panels and incentives (like PLI) for domestic manufacturers. With these, the country has seen a spike in domestic manufacturing and rising ebullience in the sector that solar has reached the “take-off” stage. In this narrative, the only limits to the sector’s growth are weak transmission grids and slow land acquisition.

This narrative should not be taken at face value. Over the last year, with protectionism, the prices of domestically manufactured modules have spiked. This profiteering is another barrier to growth. Two, the sector continues to enjoy subsidies from discoms. This is creating an outcome where, before cheering India’s possible doubling of solar generation, we have to ask if discoms, their customers and tax payers can afford the accompanying doubling of subsidies.

In a nutshell, the risks and rewards of solar power are very unevenly distributed across India’s electricity market. In effect, the country is subsidising a few manufacturers and developers right now.

Our opening report provides an introduction. Do read.