July 2022

Solar power constitutes nearly half of India’s renewable energy capacity and is leading the energy transition and decarbonisation initiatives in the country. On the back of favourable government policies and cost economics, solar capacity has increased over 50 times in the past decade, from 941 MW in 2011-12 to 55 GW in 2021-22.

A key growth driver for solar power has been declining solar tariffs. Between 2010 and 2020, utility-scale solar tariffs have declined from over Rs 10 per kWh to Rs 1.99 per kWh. The lowest solar tariff of Rs 1.99 per kWh was realised in an auction held by Gujarat Urja Vikas Nigam Limited in December 2020. This was mainly led by the declining cost of solar PV modules on account of maturing technology and economies of scale in the manufacturing process.

However, solar module prices have been on the rise for the past one to two years on account of a hike in the cost of key raw materials such as polysilicon, glass and copper as well as global supply chain disruptions triggered by the Covid-19 pandemic. An increase in GST rates on solar cells and modules as well as a rise in interest costs have added to the woes of project developers. Subsequently, solar tariffs have increased to Rs 2.14-Rs 3.26 per kWh between January 2021 and May 2022.

While traditionally utility-scale solar projects have dominated the solar space, rooftop solar and group-captive projects are now gaining traction among C&I consumers looking to decarbonise their operations as well as benefit from the cost economics and the popular opex model in the segment. Meanwhile, floating solar is becoming increasingly popular due to land acquisition challenges. Other emerging areas of growth such as solar-wind hybrids, round-the-clock renewables, solar plus storage and blending of solar and non-solar renewables are all helping ensure firm renewable power supply to the grid.

Power Line InFocus discusses in detail the key developments in the solar power segment in recent years, issues and challenges as well as the future outlook…

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