At the moment, the country has reached 60 GW of this 175 GW target.
Some 135 GW of the overall target is utility-scale, and the new report by Bloomberg New Energy Finance (BNEF) estimates that India will need to invest $83bn to build this capacity – which is $19bn less than in previous BNEF estimates thanks to falling capital costs.
However, the report finds that some of the most interesting activity will be in small-scale solar.
Shantanu Jaiswal, head of India research at BNEF, said: “Rooftop solar in India will grow inevitably with or without the support of power distribution utilities.”
The cost of electricity from rooftop PV has halved in the last five years due to fierce competition in the market and a drop in equipment prices. In contrast, average retail electricity rates have increased by 22 per cent in the same period. This has made rooftop PV cheaper than commercial and industrial grid tariffs in all major states in India.
Bloomberg New Energy Finance expects residential sector PV growth to pick up rapidly post-2021. It notes that currently, “its attractiveness is being held back by the high upfront capital expenditure that is necessary, by a shortage of financing options, and the fact that grid electricity is cheaper for residential consumers with low consumption”.
Itamar Orlandi, head of frontier markets at BNEF, said: “Net metering is a far more important enabler for residential small-scale solar than for business-scale projects.”
The report notes that homeowners are usually drawing less power during the hours when their PV panels are producing, making self-consumption much harder. Solar projects also have a big and untapped potential to power irrigation pumps and reduce the use of back-up diesel generators.
Ashish Sethia, head of Asia-Pacific research at BNEF, said: “Growth of rooftop solar presents an opportunity for the distribution companies to diversify and start their own businesses in that area rather than lose customers to other rooftop developers.”
Power distribution companies can also work with other rooftop PV companies to provide operations and maintenance services, billing, lead generation, branding and sales support, Sethia added.
India is expected to install more renewable energy than fossil fuel power generation this year. Commissioned renewables projects amounted to 10 GW through September, compared with 8 GW for coal and gas
India has a target of installing 10,000 rural micro-grids with a cumulative capacity of 500 MW by 2021. However, BNEF notes that the risk of stranded commissioned assets as a result of grid extension is the biggest concern for investors. “That is impeding rapid build-out of small rural grids. Five states in India have released micro-grid policies and regulations in the last two years to promote investment and installations in this sector.”