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In many ways, solar demonstrates what can be achieved in India, even in infrastructure
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Masayoshi Son, the Chairman of Softbank, could never be accused of lacking ambition. The man who profited most from Alibaba now wants to transform India’s solar sector. Softbank is reported as seeking to invest $1 trillion in solar in India by 2030.
This interest from a serious foreign investor reflects the extraordinary success of India’s solar energy policy. In January 2010, the government set a target of 20 GW of solar energy by 2022. That target has been achieved already, four years early. Narendra Modi was an early advocate of solar energy as Chief Minister of Gujarat. One of the early actions of the incoming Modi government was to increase the solar target to 100 GW by 2022. India is emerging as one of the largest solar markets in the world.
This achievement has been enabled by a dramatic reduction in the cost of solar equipment due to the scaling up of manufacturing, especially in China. As a result, the cost of solar power has been slashed well below “grid parity” set by coal generation. The lowest price offered from solar last year was Rs 2.44/ KwHr, about the same pricing achieved by the bids for Ultra Mega coal plants.
Good policy-making has also played a significant role, at both central and state levels, supported by sensible regulation from CERC and state regulators. The rounds of bidding under the central policy were models in efficiency and transparency and many states have implemented solid solar policies. In many ways, solar demonstrates what can be achieved in India, even in infrastructure, when the private sector is encouraged to compete in a well-regulated policy environment.
Equally, however, solar demonstrates India’s vulnerability to the competing demands of vested interest. The clarity of the vision for solar risks being eroded by the complex interplay of conflicting policy objectives, the interests of public and private incumbents and the opacity of state versus central powers in a conjoint policy sphere. Political courage is needed to maintain focus on the key objective: delivering reliable, affordable and clean power to Indian consumers nationwide.
Investors and developers need predictability of policy. Yet, for example, there has been an ongoing battle over whether to favour India’s uncompetitive solar manufacturing sector over imports. A desire to encourage Make in India has seen waves of protectionist policy targeting imported equipment, especially from China. In the past six months alone, at least three separate arms of government have announced new import barriers on solar kit, the most pernicious being a 70 per cent tariff proposed by the Directorate of Safeguard Duty but not accepted by the government after a legal challenge. Projects suffer in this policy flux. The interests of consumers are undermined for the narrower protection of a few weak producers.
Solar policy in India has been a major success to date. Yet the Government needs to stay focused on the key objective of that policy: clean and affordable power for all. The confidence of investors must not be undermined by policy surprises. Policy-makers need to demonstrate confidence in market mechanisms.
As one of the largest solar markets in the world, solar manufacturers will invest in India. The underlying reasons for the slow ramp-up in globally competitive solar manufacturing need to be addressed. With predictable policies promoting competition, India can emerge both as a leading solar market and as a location for world-scale and competitive solar manufacturing.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.