Introduction:
The solar energy sector in India is moving at an ever-increasing pace. Recently, our PM Narendra Modi was awarded the "Champion of the Earth Award" by the United Nations, recognizing India's work in promoting new areas of cooperation on environmental action and championing the International Solar Alliance (ISA).
ISA is a platform for solar-rich countries to cooperate, and reduce the cost of finance and technology, and for mobilizing more than USD 1 trillion of investments by 2030.
However, India's regulatory and legal framework poses many problems and leaves grey areas, even with the government's decisions to focus on developing the solar energy sector. Meaning, the law appears to disincentivize investors and developers, rather that supporting them.
Problems being faced by the sector :
The Finance Ministry has, through a notification, imposed a safeguard duty, payable on the import of goods that are already being manufactured in India, on "solar cells, whether assembled in modules or panels", for a period of at least 2 years.
Even though this decision helps to protect the interests of domestic manufacturers, but on the other hand, it dissuades developers from continuing with their projects that are already under implementation, as the additional duties increase the cost. This is because most Indian solar power companies import their panels and modules from China or Malaysia.
Because of this safeguard duty, those solar projects which have tariffs fixed on the basis of power purchase agreements, keeping in mind the costs of the imported solar modules, will now become unviable. Therefore, it is necessary that the government keep this complexity into account and help correct the measures taken by it, so as to protect the interests of at least those developers who have projects already into implementation.
There are various other grey areas from a regulatory point of view, where the government and other authorities need to provide some clarity.
One of these areas is the lack of a clear mechanism for grants and subsidies- whether monetary or availability and trading of renewable energy certificates- to solar energy sector developers. As of now, beneficiaries, including solar power developers, need to go through a long procedure and time, to receive any such subsidies or grants. It is so inefficient that they do not even consider it while ascertaining the financial viability of solar projects.
One of the other critical issues faced by developers is the lack of a clear policy framework for net metering arrangements. Moreover, where there exist such policies, there is insufficient implementation from the side of distribution companies. The arrangement of net metering, which allows customers to generate their own solar power to feed unused electricity back into the grid, is believed to be a threat the their revenue by distribution companies. Hence, they are not willing to adopt or to effectively carry out such arrangements.
Due to this, solar power developers are discouraged from implementing any small-scale solar project that may require net metering. It is necessary that the government make clear and enforceable policies so that interests of customers as well as developers are protected.
Owing to the solar power sector's regulatory challenges, and the state of India's banking industry, it is extremely difficult for solar project developers to arrange for funding so as to undertake new solar projects. The government needs to act rapidly in addressing these issues and helping such developers to arrange funds in a competitive, yet easy manner.
Conclusion :
All such problems are increasingly hindering the solar energy sector of our country. Solar power, in a subtropical country like India, will do wonders to its electricity-related problems. It can turn out to be a major path towards development of the country as a whole. The state governments, in particular, need to act more positively and rapidly, so as to effectively deal with all such issues and address the solar project developers. The challenges may not end here, but if the governments help take effective measures towards the same, and reach its targets, it will not only benefit the people, but also advance technology, and help the economy reach higher on the international level.
