Why You Should Have High Expectations for India’s Domestic Solar Sector

India’s Domestic Solar Sector

Investors searching for long run investments are shifting their focus to the Indian solar market these days. India’s prime minister Narendra Modi actively pushes the conversion from fossil fuels towards renewable energy through promoting the construction of utility-scale solar parks.

The administration’s plan for the following five years is to push the domestic solar industry by implementation of world-bank backed investments exceeding USD 100 billion. Within 2017, World Bank Group invested more than one billion USD, constituting the institution’s greatest commitment to solar power in any country.

Backed by favourable domestic yield conditions, decreasing prices for equipment and modules as well as the low interest rate, installed capacity has increased tremendously over the last three years, resulting in a total installed capacity of 12 Gigawatts. While total electric capacity is expected to double from 315 to above 600 GW within the next two decades, prime minister Narendra Modi plans to reach a capacity of 100 GW installed solar capacity until 2022. By 2030 their goal is to derive 40% of their overall energy consumption from solar power. Therefore, government tries to actively attract foreign direct investment – and first initiatives have been successful so far. Several deep-pocket and multinational investors including Goldman-Sachs, JPMorgan and Morgan Stanley are already present on the Indian market with having renewable energy assets in their portfolios. However, there is also a fraction of investors looking more sceptical on this window of opportunity, assuming risk of falling energy prices through the stark increase of installed capacities.

Examining this trend not only from the economic perspective, the rapid expansion of solar power is expected to include large social benefits by providing millions of households with a reliable source of electricity, hence improving the quality of life for millions of Indians. In addition, the creation of jobs in the solar industry will significantly contribute to the economic growth of the country. The social and economic impact of pushing the domestic solar sector shall help the country fulfil its dream of becoming the ‘India of the future’, according to Onno Ruhl, World Bank Country Director in India.

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