However, despite this large installed generation base, the Indian energy market has some serious challenges:
The need to consistently and reliably balance electricity supply and demand will determine whether India’s aspirations to maintain an annual GDP growth rate of 7% can be achieved.
Installing new generation capacity at the rate required to maintain India’s economic growth will require huge amounts of capital. For this reason the energy sector is one of the areas of the Indian economy where foreign investors are able to own 100% of Indian companies.
"While India’s renewable energy sector has always enjoyed broad political support, the election victory of Narendra Modi’s Bharatiya Janata Party in May [2014] is expected to reinvigorate a sector that is still far from fulfi lling its potential. Modi, previously Chief Minister of Gujarat state, home to a third of India’s installed solar capacity, has always been a strong advocate of a clean energy revolution in India."
Ernst & Young, Renewable Energy Country Attractiveness Index, June 2014
Ernst & Young consider India to be the fifth most attractive country for investing in solar, ahead of established markets such as the UK and Spain
The Directors of Armstrong Energy Global believe that projects can be developed in India at grid parity, that is, without any need for subsidy from the Indian Government. This is because of several factors, including:
The Indian Government has set a target of 1,000 MWp of grid connected solar by 2013, 4,000 MWp by 2017 and 20,000 MW by 2022. In addition to these central Government targets, various state governments have also announced policies aimed at promoting solar power generation. Currently India has approx. 1,000 MWp of grid connected solar power generation capacity, with the great majority of this capacity being in the states of Gujarat and Rajasthan.
Despite the huge opportunity for solar power in India, the country currently produces a negligible amount, circa 0.2% of its energy from solar PV.
"Despite the various challenges to be addressed, it is also clear that there is significant appetite [to invest in Indian solar projects]. Sarus Solar, a consortium of three Canadian firms, plans to invest about US$1b in a 500MW solar park and PV panel production unit in the state of Odisha. The Tamil Nadu state government is targeting 3.4GW of solar capacity with 700MW operational this year, and Solar Energy Corporation of India (SECI) is planning to construct a 1GW solar complex in Andhra Pradesh as part of its goal to install 10GW of solar capacity by 2017.
Meanwhile, GE has invested US$24m in Welspun Energy’s 151MW solar plant in Madhya Pradesh, now India’s largest solar PV project following its commissioning in February…Market forecasts project an additional 15GW of solar capacity by the end of 2018, up from around 2.2GW at the end of 2013."
Ernst & Young, Renewable Energy Country Attractiveness Index, June 2014