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India's Renewable Energy Renaissance

Written by Brian Hicks
Posted January 27, 2015

President Obama just offered his support to India — the country with the third-highest carbon emissions behind China and the United States — for a $160 billion solar push.

This bodes well for the solar industry, which grew 25% in 2014 to $149.6 billion.

Indian Prime Minister Narendra Modi, the original supporter of India’s first solar incentives back when he was Chief Minister of the Indian state of Gujarat, spearheaded the nationwide solar expansion.

With pronounced vagueness, Obama stated at a press conference on Sunday in New Delhi that the U.S. will provide supplemental financing for this ambitious project when necessary.

Following Obama's announcement, Modi reaffirmed his goal for India to install five times as many photovoltaics as the U.S. has now by 2022. Whether or not Modi will be able to make good on his claim is almost entirely a question of money.

The project calls for solar panels to be built across an area three times the size of India’s biggest city and demands that the government cut back on restrictive red tape to avoid wading through the bureaucracy at great cost.

In order for the project to achieve its maximum potential, India will need to expand the transmission capacity of its electrical networks so it can absorb all the energy from its upcoming photovoltaics.

Solar Rise

Since he took office in May, Modi has moved renewable energy — particularly solar — up on the national agenda, continuing policies from his time as Chief Minister of Gujarat.

Primarily an industrial area, Gujarat made an ideal proving ground for the environmentally minded Modi. It was there that he implemented India’s first incentives for photovoltaics in 2009, a full year before the national government recognized the far-reaching benefits of the technology.

This past November, China joined the U.S. in pledging to cap emissions, which has turned the world's attention to the third-largest producer, India.

In 2014, Modi quintupled the nation's solar plan, which has now arrived at 100 gigawatts by 2022 — the same amount China is targeting for 2020. If India intends to come anywhere near its goal, Modi surely has his work cut out for him.

China currently has 33.4 gigawatts of photovoltaic capacity installed and owns significant shares of most of the top 10 solar panel makers in the world, while India only has 3.3 gigawatts of capacity and doesn't have any major photovoltaic manufacturers within its borders.

India will inevitably struggle to achieve its mark, but our government's stated support might just be enough to see the project to a timely completion. India's overall success aside, the country's ambition makes it an attractive opportunity, according to spokesmen for solar panel manufacturers JA Solar Holdings Co. (NASDAQ: JASO) and Canadian Solar Inc. (NASDAQ: CSIQ).

The spokesmen stated that they anticipate India to develop into a “key market” and “one of the fastest-growing solar markets in the world.”

As of now, India is only attracting a fraction of the funds that are bound for China, the U.S., and Japan, the largest solar markets of last year.

However, with the say-so of industry insiders, expect a snowball effect to occur as financiers get more comfortable with investing in an Indian solar project. As the country's solar industry gains experience and prices get even cheaper, this trend will really take off.

Moving Up in the World

India's solar is going to make fourth place in the world by the end of the year, up four places from 2013. Renewable energy investment in India increased to $7.9 billion last year and is expected to top $10 billion in 2015, while China saw $89.5 billion in clean energy investments in 2014 and the U.S. brought in $51.8 billion.

Modi also faces the task of tapering off India's coal appetite. The fossil fuel currently provides almost 60% of the electricity the nation produces, whereas solar and wind only account for 12%.

As Asia’s second-biggest energy producer, India has generally relied on coal for its energy needs, building massive stations to meet peak demand and end the blackouts that can last up to 10 hours a day in the more tucked-away regions of the country.

Of course, not all of the capacity will come from sprawling solar plants. While almost all of India’s PV installations to date are ground-mounted farms, Modi’s ambitions will need to rely heavily on rooftop solar, as your typical 20-megawatt plant takes up about 100 acres of land, and Modi's plan calls for over 480,000 acres.

In spite the county's real estate limitations, Modi’s drive hasn’t gone unnoticed by companies vying for the majority share as India shapes up to be one of the next big renewable plays. SunEdison Inc. (NYSE: SUNE) has announced plans to invest $4 billion to build the biggest solar panel factory in India.

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