Electricity Demand Trends (2022-2028):

• Rise in Demand: Electricity demand increased by approximately 2% in 2022, a slight decline from the 2.4% average growth rate observed from 2015-2019.
• Renewables & Nuclear Energy: Over the next three years, over 90% of the new electricity demand is expected to be met by renewable and nuclear energy sources.

Global Renewable Energy Expansion:

• China's Role: China is anticipated to contribute over 45% of the growth in renewable generation between 2023-2025, with the European Union following at 15%.
• Solar PV Capacity: Globally, about 189 GW of solar photovoltaic (PV) capacity was added in 2022, bringing the total to 1,055 GW, marking a 22% increase from the previous year.

Leadership in Solar PV Market:

• China's Dominance: Approximately 45% of the global solar PV capacity is attributed to China, with key European countries holding around 23%.
• Future Projections: According to the International Energy Agency (IEA), cumulative solar PV capacity is projected to triple to 2,359 GW by 2027, overtaking hydropower, natural gas, and coal in successive years.

India's Power Sector Growth:

• Power Demand Growth: India is expected to witness a 5.0-6.0% compound annual growth rate (CAGR) in power demand between fiscal years 2024 and 2028.
• Generation Growth: Power generation in India is projected to grow at a 5.0–5.5% CAGR in the same period.
• Renewable Capacity Increase: The share of renewable capacity, including large hydro and battery energy storage systems (BESS), is set to rise from 41% in fiscal 2023 to around 57% in fiscal 2028. Coal's share is expected to decrease from 51% to 37% over this period.
• Investment Forecast: CRISIL Consulting anticipates investments of Rs 23-23.5 trillion in the power sector over the next five years.

Impact of COVID-19 on Capacity Addition

The COVID-19 pandemic, particularly the lockdowns in 2020, significantly affected India's renewable energy capacity addition. The country could only achieve 82% and 55% of its annual renewable energy capacity addition targets in fiscal years 2018 and 2019, respectively. By the end of December 2022, India had achieved approximately 69% of its 175 GW target set for fiscal 2022.

Energy Demand-Supply Forecast (2024-2028)

Power Demand Momentum:

• Recent Trends: In fiscal 2023, power demand exhibited a 10% growth, driven by economic activities, industrial robustness, and infrastructure investments.
• Future Outlook: A 5.0-6.0% CAGR in power demand is expected, sustained by strong economic fundamentals and government reforms in the power sector.

Generation Growth and Fuel Mix:

• Coal Generation: Despite a slower growth rate, coal-based generation will remain a significant part of the energy mix in the long term.
• Renewable Growth: Renewable energy sources have shown a ~24% CAGR and are expected to continue strong growth at 17-18% CAGR over the next five years.

Peak Demand Outlook

The peak demand has consistently outpaced base demand, growing at approximately 5% CAGR from fiscals 2017-2022. This trend is attributed to economic growth, climatic changes, and urbanization. The peak demand is forecasted to grow annually at ~6.5% from fiscal 2023-2028, reaching nearly 296 GW by fiscal 2028.

Expected Capacity Installation by Fiscal 2028

Thermal Power Generation Capacity

• Under Construction: About 27 GW of thermal power generation capacity is currently under construction as of April 2023.
• Forecast: CRISIL Consulting anticipates the commissioning of 27-28 GW of coal-based power between fiscals 2024-28.
• Contribution from National Thermal Power Corporation (NTPC): NTPC is expected to dominate capacity additions with 8.4-8.8 GW in the next five years. Additionally, NTPC announced five brownfield expansion projects totaling approximately 6.1 GW in fiscal 2023, with tendering planned over fiscals 2023-25 and commissioning beyond the next five years.
• Private Sector Participation: Private players are expected to contribute 7.8-8.0 GW to conventional capacity additions over fiscals 2024-28, compared to about 6.5 GW in the past five years.

Renewable Energy and Storage Capacity

• Installed Generation Capacity: As of fiscal 2023, the total installed generation capacity reached 416 GW, fueled by around 56 GW of renewable energy capacity additions over fiscals 2018-23.
• Projections for 2028: The installed capacity is expected to reach 620-630 GW by fiscal 2028, with renewable capacity additions (solar and wind) nearly tripling to 166-172 GW.
• Storage-Based Capacity: This is likely to reach 24-25 GW by fiscal 2028, driven by additions in pumped hydro and battery energy storage systems (BESS), projected to be 8.5-8.7 GW and 19-25 GW, respectively.

Solar and Wind Capacity Additions

• Solar Capacity: CRISIL Consulting expects 130-140 GW of solar capacity additions between fiscals 2024 and 2028.
• Wind Capacity: An addition of 24-25 GW is anticipated through wind energy.
• Growth Drivers: Government support, technological advancements, and policy initiatives are key enablers, although challenges such as component pricing and additional taxation could impact capital costs and power offtake agreements.

Electrification and Power Demand Drivers

Railway and Metro Rail Electrification

• Indian Railways Electrification: 100% electrification is expected by fiscal 2027, driving an incremental power demand of around 27 BUs annually.
• Metro Rail Growth: Around 987 km of metro rail is under construction with an additional 245 km proposed, potentially adding 4-5 BUs of power demand annually.

Electric Vehicles (EVs)

• EV Charging Demand: The adoption of EVs is projected to boost power demand by 4-5 BUs annually over fiscals 2023 to 2028.

Factors Influencing Power Demand Reduction

Transmission and Distribution (T&D) Losses

• Declining Losses: The Revamped Distribution Sector Scheme (RDSS) aims to reduce T&D losses further, potentially decreasing power demand by 16-18 BUs annually.

Off-Grid and Rooftop Solar Projects

• Rooftop Solar: By fiscal 2028, 15-16 GW of rooftop capacities are expected, leading to a 1-2% reduction in base demand from the grid.

Open Access Transactions

• Market Dynamics: The share of short-term transactions in total electricity generation is expected to rise to 14% by fiscal 2028, reducing grid power demand.

Historical Development

• Origins in 1981: The Indian government's response to oil shocks led to the establishment of the Commission for Additional Sources of Energy under the Department of Science and Technology in March 1981.
• Department of Non-Conventional Energy Sources: Formed in 1982 within the Ministry of Energy, it absorbed the earlier commission, marking a significant step in India's renewable energy journey.

Advantages of Renewable Sources

• Environmental Benefits: Renewable energy sources, unlike fossil fuels, do not release pollutants, thereby reducing carbon emissions and mitigating global warming.
• Resource Availability: The abundant availability of renewable resources like solar, wind, hydro, biomass, and bagasse makes them less prone to depletion compared to conventional energy sources.

Growth and Current Status

• Significant Increase in Installations: Renewable energy installations, including large hydro, have expanded fivefold to approximately 179 GW as of October 2023, up from about 63 GW in March 2012.
• Solar Energy Dominance: Solar power has seen a dramatic rise, growing to around 72 GW from just 0.09 GW in the same period.

Executive Summary: Recent Trends and Future Projections

Solar Energy Capacity and Projections

• Recent Additions: Approximately 13 GW in fiscal 2023 and over 5 GW by October 2023 in fiscal 2024.
• Required Tariff: A tariff of Rs 2.8-3.0 per unit is necessary to generate a 10-12% internal rate of return (IRR), factoring in the Basic Customs Duty (BCD) and supply-side issues.
• Future Growth: Anticipated solar capacity additions of 130-140 GW over fiscals 2024-2028.

Green Hydrogen and Solar Energy

• Government Focus: An additional 30-34 GW of solar capacity is expected by fiscal 2028 to support Green Hydrogen initiatives.

Central and State Tendering

• Increase in Tender Activities: There is a significant increase in tendering activities with a strong project pipeline.
• Critical Challenges: Resolution of execution-related hurdles remains vital for project success.

Risks and Challenges

• ALMM Order Impact: The Approved List of Models and Manufacturers (ALMM) order could risk about 8-9 GW of solar projects if capacity expansion is delayed.
• Open Access Utility Projects: Around 11-12 GW of projects are slated for commissioning under the open access utility segment in the next five years.
• Green Energy Open Access Rules 2022: Aimed at providing clarity on various open access-related provisions.

Rooftop Solar Growth

• Projected Additions: Approximately 19.0-21.5 GW of rooftop solar additions are expected over 2024-28, marking a threefold increase from FY19 to FY23.

Industry Challenges

• Financial Health of Discoms: Issues include offtake challenges and payment defaults due to deteriorating financial health of distribution utilities.
• Market Dynamics: Declining power deficit and aggressive bidding are key factors to monitor.

Wind-Solar Hybrid (WSH) Projects

• Growing Preference: WSH is increasingly favored for its round-the-clock (RTC) power, reliability, and grid stability benefits.
• Implementation Risks: Challenges include the lack of optimal sites, higher tariffs, and grid balancing requirements.

This overview captures the significant growth and dynamic evolution of India's renewable energy sector, particularly in solar power. The sector's expansion is underpinned by government initiatives, technological advancements, and a focus on sustainable energy solutions. However, the sector must navigate various challenges, including financial, infrastructural, and regulatory hurdles, to maintain its growth trajectory and contribute effectively to India's energy security and climate goals.

Evolution of Solar Power in India

The development of solar power in India is a remarkable story of strategic policy initiatives and rapid capacity growth, driven by both governmental and private sector participation.

Early Developments (2008-2009)

• Initial Steps: The journey began with the commissioning of 15 MW solar photovoltaic (PV) pilot projects between 2008 and 2009.
• NVVN Scheme under JNNSM: Acceleration occurred with the NTPC Vidyut Vyapar Nigam Limited scheme, integrating solar power with thermal power.

JNNSM Phase I and State-Level Schemes (2011-2013)

• Tendering of Capacities: Under JNNSM Phase I, 450 MW of solar PV capacities were tendered in two batches, alongside 470 MW under solar thermal technology.
• State Policies: Gujarat and Rajasthan initially led with state solar policies, followed by other states like Andhra Pradesh, Tamil Nadu, Karnataka, and more.
• Growth to 1 GW: By March 2012, India's installed capacity neared 1 GW with satisfactory generation performance and timely payments.

MNRE Initiatives and SECI Establishment (2012-2016)

• Stricter Bidding Guidelines: To ensure project delivery and serious participation.
• SECI Formation: The Solar Energy Corporation of India was established for handling solar bidding and managing subsidies and incentives.
• Multiple Schemes: Several schemes were released, including NSM Phase II, with different tranches, and initiatives for canal-top plants and rooftop solar plants.
• State Participation: Many states introduced solar policies with combined allocations of 7 GW during this period.

Infrastructure and Tariff Developments (Post-2016)

• Solar Parks and Green Corridors: Focus on building infrastructure to support solar projects.
• Revised Solar Targets: The NSM target was increased from 20 GW to 100 GW by fiscal 2022.
• Growth of Solar IPPs: Attractive attributes such as lower counterparty and offtake risks led to the proliferation of independent power producers (IPPs).

Recent Trends and Capacity Additions (2018-2023)

• Share in RE Basket: As of March 2023, solar energy constituted 38.8% of the renewable energy basket.
• Robust Growth: A CAGR of ~25.27% was registered over fiscals 2018-23, with 54.8 GW capacity added.
• Impact of COVID-19: Despite the pandemic, there were significant additions, but the sector missed its capacity targets for the fifth consecutive year.

Conclusion

India's solar sector has shown a remarkable trajectory, evolving from modest beginnings to becoming a global leader in solar energy. This evolution is underpinned by a combination of innovative policy frameworks, strategic capacity additions, and the development of necessary infrastructure. While challenges such as pandemic-related delays have impacted growth, the sector continues to show resilience and potential for future expansion. The ongoing commitment to increasing solar capacity is a testament to India's dedication to sustainable energy and climate change mitigation.

Key Policy and Regulatory Reforms Supporting Renewable Energy Growth in India

Overview

India's commitment to renewable energy (RE) growth is evident through various policy and regulatory reforms initiated over the past years. These reforms aim to achieve ambitious targets set for renewable energy capacity, reflecting India's dedication to reducing emissions and embracing cleaner energy sources.

Significant Policies and Initiatives

Electricity Act 2003 and Subsequent Reforms

• Mandate for SERCs: State Electricity Regulatory Commissions (SERCs) are required to promote cogeneration and generation from renewable energy sources, including provisions for grid connectivity and minimum purchase percentages.

National Action Plan on Climate Change (NAPCC)

• Jawaharlal Nehru National Solar Mission (JNNSM): Launched in 2010 with an initial target of 20 GW grid solar power, revised to 100 GW by 2022.

Commitments at COP 26 Summit

• Net Zero by 2070: India's pledge includes an updated intended nationally determined contribution (NDC) with a goal of 500 GW non-fossil fuel-based capacity, 50% energy from non-fossil fuels, and a reduction in emissions intensity of GDP by 45% by 2030.

Recent Government Initiatives

• 100% FDI: Permitting foreign direct investment up to 100% under the automatic route for renewable energy projects.
• ISTS Waiver: Waiving interstate transmission system (ISTS) charges for inter-state solar and wind power projects commissioned by June 30, 2025.
• Renewable Purchase Obligation (RPO) Trajectory: Setting a trajectory for RPO, hydro purchase obligation (HPO), and other obligations up to fiscal 2030.
• Ultra-Mega Renewable Energy Parks: Providing land and transmission to RE developers on a plug-and-play basis.
• Green Energy Corridor (GEC) Scheme: Establishing new transmission lines and substations for renewable power evacuation.
• Standard Bidding Guidelines: For tariff-based competitive bidding for solar PV and wind projects.
• Generation-Based Incentive (GBI): For wind projects commissioned before March 31, 2017.
• Green Energy Open Access Rules 2022: To accelerate the RE program and ensure sustainable and green energy access.
• Payment Security Mechanisms: Including Letter of Credit (LC) for timely payments to RE generators.
• National Green Hydrogen Mission: Targeting 5 million tonnes per annum (mtpa) green hydrogen production with 125 GW associated RE capacity.
• Renewable Generation Obligation (RGO): For new thermal plants with commercial operation dates on or after April 1, 2023, to establish/procure 40% RE capacity (recently revised targets in 2023).
• Transmission System Plan: For integrating over 500 GW RE capacity by 2030, including HVDC transmission corridors and 765 kV AC lines, among others.
• Bidding Trajectory for Renewable Power: Aiming for 280 GW solar capacity by 2030 with annual bids for 40 GW solar energy.
• Viability Gap Funding for Battery Storage: Proposed in the fiscal 2024 budget with a capacity of 4000 MWh and an expected outlay of Rs 3,500 crore.
• Pump Storage Project Guidelines: Issued to promote such projects for energy storage.