New Delhi [India], December 19 : India's solar equipment manufacturing capacity is poised for healthy growth over the next 2-3 years, entailing a capex of nearly Rs 1 lakh crore, asserted CareEdge Ratings.
Of that Capex, an estimated debt funding of nearly Rs 70,000 crore is expected over the medium term, including investments in polysilicon and wafer capacities, the rating agency said in a report Thursday.
India's renewable energy capacity stood at 155 Gigawatt as of September 2024, with the solar segment being the largest contributor at 91 GW, thanks to significant capacity additions over the past 7-8 years.
The rising share of renewable energy capacity is due to strong policy focus, improving tariff competitiveness, and strong investor interest.
While India installed 18.5 GW of renewable energy capacity in 2023-24, CareEdge Ratings expects the annual installations to surpass 35 GW over the next two years, primarily supported by a healthy pipeline of more than 100 GW.
The growth in solar capacity in the medium term will be driven by an annual tendering target of 50 GW renewable energy capacity through renewable energy implementing agencies, with the majority expected from solar, the rating agency said in the report.
Significant capacity additions of 20 GW will come from rooftop solar, hybrid solar components, and off-grid solar over the next 2-3 years.
The government is proactive in its policy - it supports the industry through tariff and non-tariff barriers to drive demand for Indian players.
To safeguard domestic cells and modules against the predatory pricing of Chinese counterparts, the government imposed a Basic Customs Duty (BCD) of 25 per cent and 40 per cent on Chinese cells and modules respectively, effective from April 01, 2022.
The duty remains a key tool in enhancing the cost-competitiveness of domestic modules.
"The solar equipment manufacturing sector has several tailwinds including healthy domestic demand prospects, rising export opportunities, proactive policy support, and improved lenders' appetite for RE projects," said Jatin Arya, Director, of CareEdge Ratings.
However, Arya argued that lack of integrated solar equipment capacity, supply chain dependence on China, increasing competitive intensity, and delay in renewable energy capacity additions due to systemic issues are some headwinds that remain monitorable over the medium term.
India meets a sizable portion of its energy needs through fossil fuels, and various renewable energy sources including solar, are seen as an avenue to reduce the dependence on conventional sources of power.
At COP26 held in 2021, India committed to an ambitious five-part "Panchamrit" pledge. They included reaching 500 GW of non-fossil electricity capacity, generating half of all energy requirements from renewables, and reducing emissions by 1 billion tonnes by 2030.
India as a whole also aims to reduce the emissions intensity of GDP by 45 per cent. Finally, India commits to net-zero emissions by 2070. Green energy for climate mitigation is not just a focus area for India, but globally it has gained momentum.
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