India targets 500 GW of installed electricity capacity from non-fossil fuel (renewable energy + nuclear) sources by 2030. Around 293 GW of it must come from solar energy and 100 GW from wind as per the optimal energy mix laid out by Central Electricity Authority, under India’s power ministry.
The nation has so far installed 85,474.31 MW of solar power generation capacity as of June 30, 2024. This includes 12.92 GW from rooftop projects.
To meet the 2030 RE goal, the government has decided to invite bids for 50 GW of renewable energy capacity (including bids for 10 GW of wind capacity) annually for the five years, i.e., from financial year 2023-24 till financial year 2027-28. This capacity addition is over and above the RE capacities that would come up under schemes like Rooftop solar and PM-KUSUM of the Ministry.
Annual solar installation in FY 2023-24 stood at 14.7 GW (11.7 GW from utility-scale projects and 3 GW rooftop), according to JMK Research. Supply chain disruption is one of the key challenges for capacity addition. High GST and import duties on renewable energy components have increased project costs.
To reduce import dependency, the government has introduced Production Linked Incentive (PLI) scheme for high-efficiency solar PV modules. The scheme provides impetus to the domestic industry to scale up manufacturing.
Amit Jain, Global CEO, Sterling and Wilson Renewable Energy, says, “The green energy sector is witnessing a paradigm shift, driven by strategic government initiatives and innovative financial instruments. The Production Linked Incentive (PLI) schemes aim to boost domestic manufacturing and create a competitive edge for Indian companies in the coming years. This initiative alone could create numerous jobs and drive technological innovation.”
“Higher capital expenditure, evidenced by the government’s plan to invest over $360 billion in renewable energy infrastructure by 2030, highlights the [government’s] commitment to expanding the country’s renewable energy mix and enhancing grid capabilities.”
“Moreover, lower interest rates have facilitated more accessible financing options, helping in decreasing the cost of capital and making large-scale renewable projects more viable. Green bonds have emerged as a powerful tool, with India issuing over $21 billion in green bonds as of February 2023. These bonds are crucial for financing environmentally sustainable projects, aligning investor interests with the global push towards a low-carbon economy.”
Jain calls for reduction of the GST rates for renewable energy components to 5% from the current rates, thereby significantly lowering the cost structure for green energy projects. This, he says, will also increase the affordability and attractiveness of renewable energy investments, promoting faster adoption across the country.
Chandra Kishore Thakur, CEO – Asia, Africa, LATAM & Europe, Sterling and Wilson Renewable Energy, said, “Key areas of focus include the development of large-scale solar parks and ultra-mega solar power projects, necessitating streamlined approval processes and a single-window clearance system to simplify land acquisition.”
Thakur expects the government to enhance low-interest loans and financing schemes to aid solar power developers and EPC contractors. He also calls for tax rationalization, such as reducing GST on solar components and basic customs duty (BCD) on PV modules and cells, and extending the ALMM [Approved List of Models and Manufacturers] deadline until domestic supplies are sufficient.
Thakur also recommends accelerated grid integration, with a focus on enhancing substations and transmission line capacities; enhancement of manufacturing capacity for critical equipment like transformers, inverters, and HT panels; and capital subsidies and tax breaks to reduce the cost of setting up manufacturing facilities in India.
Neerav Nanavaty, CEO at BluPine Energy, expects increased support in the solar sector through adequate funding and favourable policies for driving innovation and expanding clean energy deployment. “Despite challenges such as high initial costs and regulatory complexities, robust incentives and streamlined processes are imperative to make solar power more accessible and affordable,” said Nanavaty.
Sharad Pungalia, managing director and CEO of Amplus Solar, urges the government “to support solar projects by alleviating the existing tax burden on project costs, especially now that the Approved List of Models and Manufacturers (ALMM) has been fully implemented.”
Pungalia said, “There must be rationalization of GST across all components of the solar sector, and the government should consider eliminating the basic customs duty (BCD) on solar modules. Furthermore, implementing concessional duties on BESS is crucial to advancing our storage capabilities and ensuring a stable and reliable energy supply.
Pungalia also recommends increased credit access for Micro, Small, and Medium Enterprises (MSMEs) through targeted lending by financial institutions.
“MSMEs represent a significant demand sector, particularly for rooftop and residential solar projects. By integrating them more comprehensively into the financial system, we can significantly boost capacity additions and drive growth within the solar sector,” he said.
N.P Ramesh, COO and co-founder of Orb Energy, proposes personal income tax benefits up to INR 3 lakh instead of current subsidy of INR 78,000 in order to drive residential solar adoption. For commercial and industrial (C&I) sectors, he said, increasing depreciation benefits to 60-80% from the current 40% will incentivize substantial investments in solar installations.
“The removal of anti-dumping duties on raw materials for solar modules is crucial to enhancing manufacturing competitiveness and reducing dependency on imports. Additionally, a proposed 7-year tax holiday for investments in PV module or solar cell production will stimulate domestic manufacturing capabilities, fostering job creation and economic growth,” added Ramesh.
Rakesh Jha, Partner, Energy Sector Solutions, Sustainability and ESG, BDO India, said, continuation of effective policies, such as the waiver of Inter State Transmission System (ISTS) charges and zero customs duty on ingots and other materials for solar module production, is crucial. With more intermittent renewable energy in the grid, the budget should support storage solutions to address green power unavailability during peak times. Implementing a storage obligation and reducing duties on batteries, along with other fiscal incentives, will help lower storage costs and enhance grid resilience.
In green hydrogen, Jha recommends the budget can promote offtakes by providing incentives or viability gap funding. Additionally, the budget should focus on infrastructure development for the entire green hydrogen value chain, including pipeline networks to facilitate offtakes.
Jeetu Bairathi, partner, Financial Due Diligence, BDO India, said, “There is a pressing need for increased financing and relaxed regulations to foster investment. Streamlining land acquisition and resolving Right of Way (RoW) issues are critical for facilitating project implementation and reducing costs.”
“The February 2024 Interim Budget introduced the PM-Surya Ghar Muft Bijli Yojana, promoting solar rooftop installations and viability gap funding for offshore wind energy. Key expectations include viability gap funding for battery energy storage systems and capital subsidies for smart grid implementation. Import duties on solar cells should be reduced to zero to lower costs and tariffs for consumers.”
Sumant Sinha, chairman and CEO, ReNew, said, “India stands poised at the brink of a renewables revolution, harnessing the power of its abundant solar and wind resources to lead a sustainable future. To tap its full potential, it is crucial to strengthen the manufacturing ecosystem for clean energy components, provide robust financing support to new technologies, establish new trade agreements with key global regions, and capitalize on the opportunity for India to become a global hub for RE technology, green hydrogen and related services.”
ReNew is a renewable energy developer which has ventured into solar module manufacturing. It has commissioned two module manufacturing plants in Jaipur, Rajasthan, and Dholera, Gujarat, with a total manufacturing capacity of 6.4 GW modules and backward integration of 2.5 GW cells
With the upcoming budget, Sinha urges the government to prioritize production and export promotion incentives to export-oriented sectors like green hydrogen and solar components manufacturing; the launch of a new Carbon Mission to synergise the current efforts: and classification of renewable energy projects with a capacity of more than 50 MW as projects of national importance under the PM Gati Shakti.
Sinha also calls for a uniform GST rate of 5% on battery energy storage systems (BESS) and related components and a reduction in customs duty on batteries for utility storage purposes.
Vinay Thadani, director and CEO, Grew Energy, urges the finance ministry to consider extension of concessional tax rate for new manufacturing units commencing after March 31, 2024.
Grew has launched its first PV module manufacturing facility in Jaipur with an annual capacity of 1.2 GW and will add another 1.6 GW at the same facility with TOPCon technology. The company is working towards establishing its second 2.8 GW solar components manufacturing facility in Kathua, Jammu & Kashmir.
“Indian solar capacity has reached 84 GW in May 2024, however, still falling short to achieve the nation’s 2030 goals. Hence, owing to the building up demand and to meet the target of international goals set at global platforms, we need to start enhancing our manufacturing capacities for which we request the finance ministry to consider the extension of concessional tax rate for new manufacturing units commencing after March 31, 2024,” said Thadani.
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