The global energy crisis is driving renewable installations worldwide, with total capacity growth set to almost double in the next five years, overtaking coal as the largest source of electricity generation. Some of the key drivers for this shift are reducing RE generation costs, favourable policies, improved emphasis on energy security and access, and socio-economic benefits.
The last decade saw a remarkable evolution in solar PV industries, including higher installations, signification reductions in tariffs, and technological advancements. Globally, 347 GW of solar PV capacity was added in 2023, taking the installed capacity to 1,412 GW, which is a 34% increase over the previous year.
Understanding the opportunity, emerging economies are offering a number of advantages, including lower labour costs, favourable government policies, and access to new markets. India is one of the potential destinations for solar manufacturing due to its low labour cost as well as favourable political and regulatory environment for manufacturing. India’s installed capacity of solar power increased steadily to reach 82 GW in March this year; up from 0.9 GW in March 2012.
Policy with purpose
Policies and regulatory frameworks have played a crucial role in driving the adoption of solar energy in several economies. India, for instance, has successfully leveraged schemes like Basic Customs Duty (BCD), Domestic Content Requirement (DCR) and Production-Linked Incentive (PLI) to stimulate domestic manufacturing and reduce reliance on imports.
Conversely, emerging economies have adopted the Feed-in-Tariff (FiT) model, a proven strategy employed by developed nations like the US, China, and Japan, to incentivize renewable energy production. These initiatives not only contribute to a reduction in fossil fuel dependence but also accelerate the transition towards a more sustainable energy landscape.
India is also banking on the success of its strategy to popularise rooftop solar. The PM Surya Ghar Muft Bijli Yojana program itself aims to equip 10 million homes in India with rooftop solar systems by providing up to 300 units of free electricity every month.
Technology to reduce costs
The traditional photovoltaic (PV) cells have seen technological improvements in the form of bifacial solar panels that capture sunlight on both sides. High-efficiency TOPCon and PERC (Passivated Emitter and Rear Contact) cells have also increased energy generation, thereby reducing unit costs. As a result, solar energy has found more takers in the cost-sensitive markets of emerging economies.
Localised manufacturing capabilities
To reduce dependency on imports and become self-reliant in solar technology, these emerging markets are investing in localised manufacturing capabilities. The ‘Make in India’ programme is a fine example of how to encourage the domestic production of solar modules and cells. Under the Production Linked Incentives (PLI) scheme for National Programme on High Efficiency Solar PV Modules, the Indian government has provided an outlay of INR 24,000 crore and selected bidders with 8.7 GW and 39.6 GW of solar PV Module manufacturing capacity under two tranches.
Infrastructure and grid integration: Challenges and opportunities
While the progress in generation of solar energy is encouraging, infrastructure and grid integration challenges persist. Many of these countries are working with aging grid infrastructure, making it difficult to handle the intermittent nature of solar energy.
Clearly, investment in grid modernisation and energy storage solutions is crucial to unlock the next level of sustainable solar integration. Emerging markets, with their increasing presence in solar energy, will have to play a pivotal role in development and deployment of storage solutions.
Investing in the future
To tap solar’s full potential, governments, in conjunction with the private sector, need to invest heavily in creating infrastructure. India is seeing progress in mobilising funds for developing the solar energy ecosystem. A proposal for viability gap funding with an outlay of INR 35 billion for battery storage with capacity of 4,000 MWh was included in the Union Budget for fiscal 2024.
International cooperation and financing can support infrastructure development in the emerging markets and ease the transition to a renewable energy-driven future. With continued policy support, technological advancements, and investments in infrastructure, emerging markets are set to lead the global transition to renewable energy through solar power.
Vikram Solar Ltd is proposing, subject to receipt of requisite approvals, market conditions and other considerations, to make an initial public offer of its equity shares and has filed a draft red herring prospectus (DRHP) with Securities and Exchange Board of India (“SEBI”) and the stock exchanges.
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