India’s solar power sector is projected to add an impressive 85-90 GW of capacity over the next two fiscal years, according to a report by ICRA.
This significant growth is spurred by a combination of favorable policy measures, declining costs, and steady demand from both central and state agencies, despite some challenges within the renewable energy sector.
Solar Capacity Growth in India
India’s solar power sector is on track for major expansion, with projections indicating an additional 85-90 gigawatts (GW) of capacity by FY27. Key drivers for this growth include supportive government policies, declining module costs, and strong demand from central and state agencies. Despite this momentum, the renewable energy sector still faces hurdles like land acquisition and payment issues. For a broader view on similar developments, check out how Iran is building a 15GW solar capacity.
The ICRA report forecasts total solar power capacity will reach 160-165 GW by the end of FY26, representing a compound annual growth rate (CAGR) of 18% from FY23. This figure is expected to climb to 185-190 GW by FY27, underscoring the rapid progress of a sector now central to India’s renewable energy mix.
Policies and Demand Driving Solar Capacity Growth
Both central and state agencies have played crucial roles in driving this growth. Central agencies like SECI, NTPC, and NHPC issued tenders for 126.8 GW and awarded 63.5 GW in projects over the past three fiscal years. During the same period, state agencies contributed by issuing tenders for 41.6 GW and awarding projects totaling 15.4 GW.
These efforts have put approximately 55 GW of solar power capacity under construction, with commissioning expected by the end of FY26. This new capacity will build upon the 60 GW already installed as of FY23.
Demand for solar power from state utilities is also rising, thanks to renewable purchase obligation (RPO) targets and solar’s cost-competitiveness against conventional power sources. In addition, commercial and industrial customers are creating significant demand as they work to meet their own sustainability goals.
Challenges in Solar Capacity Growth
Despite the positive outlook, the solar power sector still faces several challenges. Chief among them are land acquisition, a persistent problem affecting project timelines, and payment delays from state distribution utilities, which pose financial risks to developers.
To address these issues, the government has taken steps like issuing guidelines through the Ministry of Power to ensure timely payments to renewable energy developers. The effectiveness of these measures, however, hinges on their consistent implementation at the state level.
A recent increase in module prices has also impacted the sector. Global supply chain disruptions raised the cost of solar modules, potentially affecting the financial viability of some projects. Nevertheless, the long-term trend of declining module prices is expected to continue, fueled by technological advancements and economies of scale. For insights on how the US is expanding its solar panel manufacturing, see US Solar Panel Manufacturing capacity grows by 11 GW in Q1 2024.
Government Policies and the Future of Solar Capacity Growth
The Indian government’s commitment to its renewable energy targets remains strong, with a goal of installing 500 GW of non-fossil fuel capacity by 2030. Solar power is expected to be a major contributor, supported by policy measures like the Production Linked Incentive (PLI) scheme for solar manufacturing, which aims to reduce dependence on imported modules.
To further boost the sector, the Solar Energy Corporation of India (SECI) plans to issue tenders for another 20 GW of solar projects over the next two years, a move expected to attract more investment. As India moves toward a cleaner energy mix, solar power is set to be at the forefront of its energy transition. With continued policy support and investment, the country is well-positioned to achieve its ambitious renewable energy targets and become a global leader in the field.
