Indian Electricity Sector on Cusp of a Solar Powered Revolution: IEA

Solar power is set for explosive growth in India, matching coal’s share in the Indian power generation mix within two decades.

Solar in India

According to the latest International Energy Agency (IEA) report, solar power is set for explosive growth in India, matching coal’s share in the Indian power generation mix within two decades in the STEPS – or even sooner in the Sustainable Development Scenario.

The report ‘India Energy Outlook 2021’ found that as things stand, solar accounts for less than 4 percent of India’s electricity generation, and coal close to 70 percent. By 2040, they converge in the low 30 percent in the STEPS, and this switch is even more rapid in other scenarios. This dramatic turnaround is driven by India’s policy ambitions, notably the target to reach 450 GW of renewable capacity by 2030, and the extraordinary cost-competitiveness of solar, which out-competes existing coal-fired power by 2030 even when paired with battery storage.

Solar in India

IEA

Further, the rise of utility-scale renewable projects is underpinned by some innovative regulatory approaches that encourage pairing solar with other generation technologies, and with storage, to offer “round the clock” supply. 

Keeping up momentum behind investments in renewables also means tackling risks relating to delayed payments to generators, land acquisition, and regulatory and contract uncertainty. However, the projections in the STEPS do not come close to exhausting the scope for solar to meet India’s energy needs, especially for other applications such as rooftop solar, solar thermal heating, and water pumps.

The report also found that India’s electricity demand is set to increase much more rapidly than its overall energy demand. But a defining feature of the outlook is a sharp rise in variability – both in electricity output, from solar PV and wind, and in daily consumption. On the supply side, output from renewables in some Indian states is set to exceed demand on a regular basis (typically around the middle of the day) before 2030. On the demand side, the key contributor to variability comes from rapid growth in ownership of air-conditioning units. Energy efficiency measures targeting both cooling appliances and buildings avoid around a quarter of the potential growth in consumption in the STEPS, but electricity demand for cooling still increases six-fold by 2040, creating a major early evening peak in electricity use.

As solar takes power, the focus for coal switches to the industry. The report highlights that with Coal’s hold over India’s power sector loosening, and with industry accounting for most of the increase in coal demand to 2040 in the STEPS. Once the coal-fired power plants currently under construction are completed over the next few years, there is no net growth at all in India’s coal fleet. Coal-fired generation was most exposed to the dip in electricity consumption in 2020. It picks up slightly in the STEPS as demand recovers, since renewables do not cover all of the projected increase in electricity demand. However, coal suppliers looking for growth increasingly have to turn to India’s industrial consumers rather than the power sector. The share of coal in the overall energy mix steadily declines in the STEPS, from 44 percent in 2019 to 34 percent in 2040, and more rapidly in other scenarios.

Also read: India to see Largest Increase in Energy Demand in the World by 2040: IEA

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Ayush Verma

Ayush Verma

Ayush is a staff writer at saurenergy.com and writes on renewable energy with a special focus on solar and wind. Prior to this, as an engineering graduate trying to find his niche in the energy journalism segment, he worked as a correspondent for iamrenew.com.

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