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

Initially, India’s solar capacity depended on imported cells from China. (Photo: Bloomberg)
Initially, India’s solar capacity depended on imported cells from China. (Photo: Bloomberg)

Summary

  • In 2023, India added 7.5 GW of solar capacity, declining significantly from the previous year’s record of 13.4 GW

NEW DELHI : Following two years of robust growth, India’s solar capacity additions sharply declined by 44% in 2023, the lowest since 2016. What triggered this slowdown, and will this trend persist? Mint explores.

How much solar power was added in 2023?

In 2023, India added 7.5 gigawatts (GW) of solar power capacity, declining significantly from the previous year’s record of 13.4 GW. This marked the lowest levels since 2016, barring the pandemic-hit 2020. The drop was primarily in large solar power projects, with capacity additions declining by over 50% to 5.8 GW from 11.7 GW in 2022. However, rooftop solar power capacity, which is being aggressively promoted by the government, grew by 1.7 GW, in line with 2022 levels. India’s cumulative solar power capacity reached 72 GW at the end of 2023, with large-scale solar power projects contributing over 60 GW.

What were the reasons for the decline?

Solar power producers encountered several regulatory hurdles in recent years, including stricter grid connectivity rules and a Supreme Court directive of 2021. The apex court ruling mandated the relocation of overhead power cables to safeguard the Great Indian Bustard habitats across Rajasthan & Gujarat. Compliance became increasingly demanding following the amended grid code provisions, leading to delays in project execution. Challenges with land acquisition persisted. Several projects spilled over to 2024, with the central government granting extensions and waiving penalties for delays in project completion.

How much capacity is likely to be added in 2024?

The fall in solar capacity addition in 2023 seems to be a temporary blip. The pipeline for 2024 is robust at 105.3 GW, with additional 70.6 GW awaiting auction. Delayed large-scale projects, auctioned by SECI, NHPC, NTPC, and IREDA, which were given extensions from December 2022 to June 2023, will contribute significantly to capacity additions this year.

How did Make in India impact the industry?

Initially, India’s solar capacity depended on imported cells from China. Subsequently, the Centre imposed 40% and 25% customs duty on imported solar modules and cells, respectively, leading to significant decline in imports. Besides, India introduced the Approved List of Models and Manufacturers in 2021 as a non-tariff barrier. This enabled local manufacturers to participate in government bids, but to maintain the momentum of solar installations, the ALMM mandate was suspended till April 2024.

Is solar in line with India’s energy targets?

In 2023, India’s renewable energy capacity surpassed 180 GW, with solar capacity contributing a significant 40%. Initially, the Centre had set a renewables power target of 175 GW by 2022, with solar accounting for 100 GW, but due to the pandemic, the targets were missed. However large-scale solar projects achieved 60 GW a year later. Now, India seeks to achieve a renewable energy target of nearly 600 GW by 2032, with solar at 365 GW. To achieve it, 30 GW of fresh solar capacity must be added annually for next 8 years.

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