In the coming decades, India’s demand for energy will increase because of its large population and growth potential. India is committed to be net zero emissions by 2070 and 50% of electricity will be from renewable energy by 2030 which marks a major global climate milestone. Renewable Energy can be generated from solar, wind, hydro, biomass, green hydrogen etc. India places itself in fourth rank globally in wind power capacity, solar power capacity and overall renewable energy capacity as of FY25 and continues to maintain its position from FY24. States such as Rajasthan, Gujarat, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu are the hubs for renewable energy.

By 2030, India is committed to reach the goal of 500 GW (Gigawatt) of renewable energy. India has achieved a significant milestone in renewable energy – in FY25, India’s total installed capacity was 475 GW of which renewable energy contributed 220 GW – about 46% contribution, 5 years ahead of its 2030 under the Paris Agreement. From FY25 to FY30, the renewable energy sector in India is expected to grow at a CAGR of 17.8% during this period.

Key Growth Drivers

• Govt. Schemes and Incentives: Govt. has initiated many schemes and incentives to faster the adoption of renewable energy. In 2010, Govt. announced JNNSM with initial target of 20 GW by 2022 but later, the target had been pushed upward to 100 GW. Under the PM Surya Ghar Muft Bijli Yojana, where Govt. promotes rooftop installations of solar modules and also gives subsidies and incentives to households of up to 300 units of free electricity per month. Under this scheme, 25-30 GW residential rooftop installations are targeted in 3 years from 2024 to 2027 using DCR (Domestic Content Requirement) modules. Under the PM Kusum Scheme, Govt. supports the installations of solar pumps and grid connected solar power plants so that farmers can reduce their dependence from traditional energy sources and also the opportunity to sell the surplus amount of power. The scheme targets 34.8 GW capacity addition by March 2026 using domestic modules. Govt. also announced the tax incentives of 10 year tax holiday and also accelerated depreciation for solar projects.
• Cost Reduction in Renewable Energy Technology: Technological advancements and economies of scale leads to cost decline in renewable energy which make competitive to traditional source of energy. Solar modules costs has been reduced significantly to about 80% in the last decade and solar tariffs had reached to record low of ₹ 1.99 per kWh (Kilo Watt per hour) in 2020, which the globally lowest level. The average levelized cost of electricity (LCOE) in India for solar was ₹ 2.44 per kWh in 2023 which was lower than coal based electricity in some cases. Similarly the case with wind power where the cost and tariffs reduced in auction to ₹ 2.77 in late 2024.

Risks

• Raw Material Price Risk: Solar Cell manufacturing costs ~50% of the total raw material cost, i.e. fluctuation in solar cells raw materials lead to fluctuations in margins. For manufacturing solar modules or cells, wafers (made out of polysilicon) is required in that process. Predicting price of wafers is quite difficult. Moreover, the price of the wafers depend on many factors like general economic conditions, competition, commodity market fluctuations, the quality and availability of supply, currency fluctuations, consumer demand, manufacturing capacity, transportation costs, import duties and government policies & regulations. Any of these factors can inflate the price of wafers. On the other hand, the raw material prices were high in the past but over the years, it has decreased significantly and the margins have improved.
• Competition Risk:  Solar Industry faces intense competition from domestic as well as from international players. Till 2022, the 80 – 85% of the solar cells are imported, but after the implementation of BCD (Basic Customs Duty) on imported modules and cells (25%) along with the ALMM – 1 implementation, the indigenous modules have gained popularity. In future, any adverse or bad policy will directly hit the Indian solar industry’s top-line.