Top 12 Trends Of 2023 That Created Ripples In Indian Renewable Sector

Highlights :

2023 began as a year of promise for India’s solar sector, on the back of a strong recovery of sorts in 2022. Even as Solar clocked over 13 GW of capacity additions in the year, Wind energy crossed the 3 GW capacity mark with a promise of much more to come. So what really stood out in the year? In a year that was bookended by a ‘business as usual’ budget for 2023 with no major new announcements, and the COP28 summit in Abu Dhabi that promises much without any guarantees, 2023 did manage to pack in some real changes, and achievements.

Top 12 Trends Of 2023 That Created Ripples In Indian Renewable Sector

For India, forming a backdrop to the whole year was the softening in global module prices, continuation of ALMM exemptions, and of course, the noise around carbon credits and green hydrogen. Which events actually made an impact? Which ones stood out and are most likely to make a real impact, and soon? We present below a compilation of the twelve that we believe made a real difference to how markets behaved, firms ran their business, and forced a reevaluation of future plans.

1. Solar Exports Saw Dramatic Rise

One of the biggest trends that emerged this year was the exponential rise in solar exports as India’s domestic production also surged. As per the All India Solar Manufacturers Association (AISMA), the total solar module manufacturing capacity of India touched 60 Gigawatt (GW) and the country exported around 3,900 MW of solar modules.

Future India PV Export Trends to the U.S. and Europe

Source: IEEFA and JMK Research Report

Government export data revealed that between April and July of this year, India reported a total solar exports (solar cells and modules) to $1.5 billion from its exports values to $191 million in 2022, thus showcasing a 1062% rise in exports. India’s exports of solar modules are on the upward trend since 2021. A report from ICRA said that in FY23 India witnessed a 364% rise in solar exports.

India’s exports of solar modules

On the other hand, a joint report by IEEFA and JMK Research said that in FY2023, India exported nearly US$1 billion worth of PV modules to the U.S., a share of around 97% of the entire global module exports out of India. A trend that has picked up pace in FY2023-24

The report attributed this growth of Indian exports to the US market due to the trade barriers imposed by the US against Chinese imports of cheap modules, opportunities paved for Indian solar makers with the advent of historic Inflation Reduction Act (IRA) and others. The IRA in fact has been attractive enough to get commtments worth at least 5 GW and more from leading Indian manufacturers like Waaree, Vikram Solar and others to make plans for ‘make in US’.

2. Solar Cost trends

The year 2023 was marked by substantial price decline of solar cells and modules globally, opening new avenues for cheap solar panel imports to countries like India. Even as the additional Basic Customs Duty (BCD) on imports of Chinese solar cells and modules continued, the exemption on ALMM requirements till March next year paved the way for developers to benefit from the lower prices. While utility scale developers with a longer ordering cycles benefited more, developers and EPC players in the C&I segment could not benefit as much, as they build smaller projects, quicker. In most cases, they even start the buildout before selling the projected generation to corporate buyers, forcing many to confront a market that expected prices to keep dropping.

solar cost trends

As per CRISIL Ratings research (as shown in the graph), the module prices during HY24 witnessed a negative 24 percent growth with lower module prices. The prices of solar modules went to around as low as Rs 12-Rs 14 cents per watt-peak. Thus, for several Indian importers even with an additional BCD on cheaper Chinese solar modules proved more fruitful than buying India solar modules at higher prices. This created new disruptions in the solar market.

The module price decline has been caused by a number of factors, not least of which was the drop in polysilicon prices in China. Rising Polysilicon prices ironically, had caused the price spike that hurt so many players in 2021-22. The price of mono-grade dense polysilicon dropped below the highs of RMB275/kg seen in 2022, with last week’s prices down to  between RMB59-65/kg.

Module price movement over the years

Source: CRISL Ratings Report

At the time of going to press, module prices remained soft, with large developers the only ones happy with the state of affairs. With margins in the low single digits and major capacities coming up across China, India, US and even Europe in that order, it will be a brave analyst that predicts a significant price rebound in 2024-25. That should mean the pace of record capacity expansions should sustain, particularly in China, now India and the US and Europe to an extent. The latter two have had standout 2023 with 33 GW in the US and 56 GW capacity additions in Europe, respectively.

India’s Grid-scale ESS Market Leaders, by Capacity Awarded (as of November 2023)

Source: JMK Research.

3. Energy Storage Tenders

Energy storage energy systems are gaining traction in India and got a momentum in 2023. A latest IEEFA report said that as of November 2023, more than 8GW of ESS tenders have been awarded in India, with more than 60% of this capacity allocated in 2023 alone.

This comes at a time when the Central Electricity Authority’s (CEA) latest optimal generation mix report indicates that India will need at least 41.7 gigawatt (GW)/208.3 gigawatt-hour (GWh) of BESS and 18.9GW of PHS in the fiscal year (FY) 2029-30. This growth could also be attributed to the government’s 2022 order, mandating year-wise energy storage obligations (ESO).

A report by ICRA estimates a strong rise in renewable energy Round-the-clock (RTC) tenders. The tariffs discovered in the RTC RE tenders have been highly competitive against conventional sources like thermal, with the recent bid tariffs falling between Rs 4 and Rs 4.5 per unit. In December, India also joined the Battery Energy Storage Systems (BESS) Consortium at the Conference of Parties (COP28) Summit in Dubai.

The current fiscal year has already seen significant buzz around these RTC tenders, following the MNRE mandate earlier that SECI and NTPC are to issue 12.5 GW of tenders while NHPC and SJVN will issue 7.5 GW tenders, including RTC tenders.

Energy storage energy systems

Some significant RTC RE/ peak power tenders released this year include 750 MW from REMCL, 90 million units (KWhr) of Round Clock renewable energy per year (BHEL), 800 MW (SECI), 500 MW (KSEBL), a tender for 2250 MW RTC Power from RE Projects, among others.

For peak power, the year also saw SJVN release a 1500 MW peak power tender and another such tender from RUVNL for 1200 MW. AN RfS from SECI for another 1200 MW was also issued for peak power renewable energy. NTPC REL announced a heavyweight tender making prominent the need for storage for the selection of developers for ISTS Connected Energy Storage Solutions of 9000 MWh with 1500 MW (Min) Capacity (anywhere in India).

4. Push to PSPs

Pumped hydro remains the mainstay of key storage plans worldwide, as the oldest, most dependable and well understood energy storage option. Projects linked to it accounted for more than half of grid-scale tender capacity awarded in India in 2023. In April this year,  the Ministry of Power issued a policy for this segment. “The policy recognises that PHP is a vital ESS technology that provides low-cost, long-duration storage (more than six hours).Hence, to fulfil the PHS potential of more than 100GW, the policy provides a framework for bidding and allotment of PHS sites to developers. The policy also offers incentives in the form of relaxation of land stamp duty and registration fees for land procured for the project,” a recent IEEFA Report said.

Storage project

The Ministry of Power meanwhile has also waived ISTS and other transmission charges for PHS projects awarded until June 2025.

Various public sector companies, state gencos and private energy players are announcing mega PSPs, and the government has announced major policy interventions.

A noteworthy announcement coming in January this year was by Hyderabad-based clean energy firm Greenko Group, which aspired to invest INR 10,000 crores in a Pumped Storage Project (PSP) in Madhya Pradesh. Quite simply, for decarbonisation of industry at scale, especially energy intensive sectors like metals, mining and autos, PSP will be playing a critical role.

5. TOPCon’s Surge

As per AISMA, India has achieved 60 GW of high-wattage and technologically advanced Mono-PERC, TOPCon, and HJT module manufacturing capacity during the year.

Most industry experts that Saur Energy has spoken to in the recent past have estimated that in the time window of seven to eight months, almost 70% of the market will be captured by n-type technology, mostly TOPCon, and p-type is going to transition out. Further, by the next mid-year, more than 50% of products globally or in India will be TOPCOn.

globally or in India will be TOPCOn

The experts said that the solar module manufacturers working with mono-PERC would need a minor capital to shift to TOPCon with the existing facilities. Meanwhile, shifting from mono-PERC to HJT would demand higher CAPEX. Indian solar panel makers also said that there is small efficiency difference between HJT and TOPCon. IBC panels remain in the frame, subject to smooth technology transfer from China, where barriers might be coming up.

6. States roll out Green Energy Open Access Rules

Perhaps one of the most significant policy changes during the year was the the Ministry of Power notifying its Green Energy Open Access Rules in 2022. The ministry also brought new amendments to these rules, once in January this year and another in May 2023. With the push from the ministry, several states also rolled out its Green Energy Open Access Rules (GEOAR). At least four states spearheaded in notifying their GEOARs. This includes Uttarakhand (In November), Karnataka (in August) and Haryana. Meanwhile, Gujarat released its draft GEOA rules.

However, the interesting cases came from Maharashtra and Karnataka. Karnataka, which notified its GEOA rules in 2022, also brought new amendments to its GEOA rules after the Ministry of Power brought some changes to bring more clarity on the eligibility of such consumers. The talk of the town, however, was the Maharashtra Electricity Regulatory Commission (MERC). The state commission, while hearing a petition, asked the authorities in the state to roll out the benefits of the GEOA as per the Centre’s role. This was at a time when the state was yet to notify a state of GEOA rules.

wind energy project

In a latest written reply, given by Union Power Minister RK Singh, the country received a total of 16,520 applications for availing green energy open access from November 2022 to October 2023, whereas the government granted approval to around 3,595 applicants during the period.

The rules promise to make green power accessible to a much wider segment of industries, allowing for a clear projectory of more installed capacities and investments into storage that will be required to handle the larger load in the future.

7. Indian Carbon Credit Market Takes Shape

A lot of movement took place in India’s proposed carbon credit market. While the journey of India’s carbon emissions took place in 2022 with the Parliament’s passing of the Energy Conservation (Amendment) Bill 2022, more path-breaking foundation works happened in 2023. In June this year, the Ministry of Power notified the domestic carbon credit scheme.

Carbon Credit Market

The notification entrusted the Bureau of Energy Efficiency (BEE) with the task of developing and acting as the nodal agency to make rules governing India’s local carbon credit market.

Renewable energy financeLater during the last week of November this year, the BEE issued a draft notification about the procedure for the Compliance Carbon Credit Market in the country. The notification was pertinent because it talked about the Greenhouse Gas Emission Intensity targets for the first time and who will frame rules for them. It also talked about verifying carbon credits, the role of different institutions in the Indian carbon credit market.

In its latest intervention, the Ministry of Power in its notification proposed ‘voluntary carbon credit market’ where even the non-obligated entities can participate for offsetting carbon emissions under India’s proposed Carbon Credit Trading Mechanism. Expect these carbon markets to finally start taking shape in 2024, opening up a whole new world of carbon markets that will create multiple opportunities for entrepreneurs as well financing of greener assets.

8. Renewable IPOs And Stocks Enjoy Day In the Sun

While the year ended with blockbuster IPO of the government-owned Indian Renewable Energy Development Agency Ltd (IREDA) that listed at a 300% premium to its issue price, the market  has already been rewarding green energy firms handsomely. From Adani Green Energy to Waaree Renewable Technologies, be it Borosil Renewables or Inox Wind, firms in the sector are enjoying a hefty valuation premium today. Mega power players like NTPC Limited and Tata Power have never been valued higher, as their green energy ventures attract investors. The Indian markets mirrored international markets where solar tracker firm Nextracker had a successful IPO with a valuation of $3.5 billion. Meanwhile, Vikram Solar also received SEBI’s nod to launch its IPO. Amidst all this, Chinese firms listed in China as well as foreign markets continued to ride new highs.

renewable stocks

Much more is on the way, as Indian solar module manufacturer Waaree Group also announced opting for IPO even as it aims to venture into cell manufacturing for EVs, electrolyser for Green Hydrogen and to work towards establishing its 3GW solar module plant in the US. The BSE SME board has also served to provide market access to smaller firms in the sector, with most making successful debuts, and many more in the winds eyeing a listing as well. While some froth is understandable, it does seem that in the long term, this pack of firms will continue to deliver handsomely to investors.

9. EV Charging gains, subsidies under cloud

According to a report by EMR, the global market size of Electric Vehicle Charging stations reached a volume of approximately 1.28 million units in 2023. It also said that it is likely to rise with a CAGR of 22 percent from 2024-2026. According to the government, India hosted around 7,823 public charging stations around July this year. The country continues to play catch up aggressively, with charging stations expected to close well above 10,000 this year.

ev charging

However, the rise of EV charging infrastructure is not in line with the hopes of some EV manufacturers in India. First the noose on collection of wrongful subsidies claimed by some EV makers continued to create discord among the EV makers and the government. And now with the talk of  closure of FAME-II scheme subsidies in the near future, uncertainty lies ahead for the sector. What we do know for sure is that quality EV offerings at the right price will continue to attract customers and grow the market, with or without subsidies as seen in the last two quarters.

10. Solar manufacturing in India rises

The manufacturing of solar modules in India rose in 2023, hinting at better avenues in the country. According to a report from CAREdge Ratings, by the end of March 2023, India had a total module and cell manufacturing capacity at 38 GW and 6 GW respectively. However, the total module manufacturing capacity in India touched 60 GW in 2023, as per the indications given by AISMA. Several solar makers in India have now increased their production lines and capacities and also diversified into new solar technologies, with the quick adoption of TOPCon being particularly impressive as mentioned above.

11. Green Corridor action gets momentum

In October this year, the Cabinet Committee on Economic Affairs of India approved the Green Energy Corridor Phase-II for the Inter-State Transmission System for 13 Gigawatt (GW) renewable energy projects in Ladakh. The ambitious project is expected to be complete by 2029-30, costing Rs 20.773 crore.

Cumulative manufacturing capacity (GW) allocated under PLI Schemes

The Centre planned to fund 40 percent of its cost with the Central Financial Assistance (CFA). Even green energy corridors for agriculture, powered completely by solar and some wind in some cases, are making fast progress across key states like Maharashtra and even Punjab, opening up a whole new avenue for adding renewable capacity at state level. The idea here is to guarantee 8 hours of power in the daytime to farmers, to be met mostly using solar power.

12. Finance for Green Energy

A standout feature of the growth in renewable energy market has been the heavy influence of private sector players, Industry and the government has also acknowledged the role of risk financing, in the shape of equity financing or corporate bonds that have allowed many firms to find a footing. In 2023, we finally found large financial institutions open up their debt taps for major renewable players, with the sector seen as a safe bet for the next decade and more. The big shift was seen in domestic institutions, as REC Limited, PFC and others finally shifted focus to what they see as the future of the energy sector financing. REC Limited, which has set itself a target of RS 3 lac crores of green financing by 2030, signed MoUs for almost the full amount during the year with major players, even as it hosted the green financing summit on the sidelines of the G20 meet in India. At a country level, India signed multiple partnerships with the US and other countries for RE Infrastructure funds. Tata Power snagged USD 425 million from the US backed Development Finance Corporation for its module and cell making plant in Tamil Nadu.

REC Limited

Perhaps the only missing piece is the relatively little action in the startup space in this sector, with the few deals that we saw being mostly seed, or series A state deals upto $5 million. But expect things to change soon especially in the rooftop space as a new pack of domestic startups seek larger markets with investor backing.

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