India’s ambitious push to install 100 gigawatts of solar capacity by 2022 is generating debate about whether the target is achievable.
Last month, Finance Minister Arun Jaitley announced a doubling of India’s coal tax, with much of the revenue to be directed to clean energy. But on the Council on Foreign Relations blog, newly-arrived Fellow Varun Sivaram questioned whether the target is achievable and consistent with the country’s energy security and environmental goals.
“Announcing aspirational goals to elicit a windfall in foreign financing could prove a clever strategy to bootstrap a thriving renewables industry,” he writes. “But beyond the fanfare, few details are forthcoming on how the government will actually improve the investment climate and why renewable energy will meet India’s underlying energy needs.”
Sivaram asks whether India, with three to four gigawatts of solar currently installed, can finance the capital projects that will be needed to meet a 100-GW target by 2022. “Foreign equity investors will still have to produce the lion’s share of capital to finance these projects, and most are wary given India’s high rate of stalled capital infrastructure projects,” he writes. Even if that problem could be solved, “the grid would likely be overwhelmed by the massive amounts of intermittent generation coming online.”
On the Energy and Carbon Blog, analyst Gerard Wynn acknowledges that the 2022 target calls for 52% compound annual growth in solar capacity. That’s ambitious, but “it only requires the same (meteoric) rate of growth the global industry has seen in the past decade,” he writes. “Add huge unmet electricity demand in India, and solar costs which are sliding towards those of coal, and it starts to look achievable.”
Analysis by both the Climate Policy Initiative and Deutsche Bank indicates that India can reinforce the 100-GW target by reducing financing costs. CPI “concluded that the best way to support solar power in India may be to subsidize the cost of capital, rather than using feed-in tariffs to pay a premium rate for power generation,” Wynn writes. Deutsche Bank, meanwhile, “estimated that the gap between solar and coal-fired power costs was already closing,” and that solar will fall to 8¢ per kilowatt-hour by 2017, compared to 8-12¢ for coal.