India’s solar ambitions face supply chain hurdles, but investor confidence steady, say experts

India's bold push towards renewable energy, particularly in the solar sector, is hitting significant roadblocks, with supply chain issues posing serious challenges to its ambitious targets. Industry leaders, speaking at the Mint Sustainability Summit 2024, underscored how these obstacles, coupled with policy shifts, are threatening the sector's growth trajectory.

Over the last two to three years, the solar industry's supply chain has faced intense strain, exacerbated by frequent policy changes. 

Read this | Mint Primer: India's solar capacity addition slowed in 2023. Why?

Manikkan S, executive director and chief executive of Radiance Renewable, noted that while the Production Linked Incentive (PLI) scheme offers some incentives, the sector is still far from self-sufficient. "The transition has been quite erratic, and supply issues continue to arise as Indian manufacturers increase production," he said.

Delayed production and financial viability

These supply chain disruptions are particularly problematic for the production of solar cells and modules. Although the capacity to manufacture solar modules isn’t a bottleneck at present, delays in solar cell production are causing concern.

Sujoy Ghosh, vice president & country managing director for India at First Solar, highlighted that the uncertainty in government directives has pushed back solar cell production timelines. "We are set back by 18-24 months, but we should be self-sufficient in meeting the demand for cells by March 2025," Ghosh stated.

This delay is significant, given that solar cells are a crucial component of solar panels, and any supply disruption can ripple through the entire value chain.

Financial sustainability within the solar industry is another pressing issue. Despite the rapid adoption of solar energy, the current tariff structure fails to fully cover production costs. 

Rahul Tongia, senior fellow at the Centre for Social and Economic Progress, emphasized that tariffs do not reflect the actual production costs. "We need to reimagine the grid, as distribution companies are not addressing all our challenges," he remarked.

The grid infrastructure is struggling to keep pace with the increasing load from solar energy, especially as electric vehicles and other renewable sources come online. This gap between production costs and tariffs is further strained by the financial difficulties of distribution companies, which are key to the sector's overall viability. Tongia warned that without a robust financial model, the expansion of solar energy could be at risk.

Investor confidence

Nevertheless, the solar sector in India continues to draw significant investor interest, buoyed by the government's proactive policy framework. 

And this | Data explainer: India’s green energy goals face stiff test

Shivanand Nimbargi, managing director and chief executive, Ayana Renewable Power, pointed out that the government's strategic handling of policy has been crucial in attracting investments. "The government's navigation of the policy landscape has instilled confidence in investors, and the investment opportunities here are immense," he said.

Nimbargi also advocated for a hybrid approach to energy generation, combining solar with other renewables like wind to ensure a balanced energy mix. "Solar on a standalone basis has a huge impact, especially on rooftop panels. However, energy transmission needs to be a mix of solar and other sources like wind," he noted.

Gurdeep Singh, chairman & managing director, NTPC, expressed optimism about achieving the 60GWh target but acknowledged the timeline's uncertainty. "Decarbonization and the transition to net zero is the ultimate reality, but the real question is how much time it will take," he remarked.