Where India Fits in the Solar Rush

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Where India Fits in the Solar Rush

Kotak Insights | Date 01/06/2024

US President Joe Biden recently criticised China's government subsidies, which he argues give Chinese companies an unfair advantage in international trade.

That’s why he implemented substantial tariff increases on various Chinese goods last week to level the playing field.

These new tariffs include more than a 100% increase on electric vehicle (EV) batteries, a 50% increase on semiconductors, and a doubling of tariffs on photovoltaic cells used in solar panels.

This move is a big positive for Indian solar players. They are already getting ready to fill in the potential gap created by such trade wars.

Let’s examine the situation from the top to understand how solar players have shined along with the sun in the past year and what lies ahead for them.

Recent data suggests that India’s rapid solar energy deployment has pushed it past Japan to become the third-largest solar power generator in the world in 2023.

To put things into context, India was ranked ninth on this list in 2015.

In the past, severe energy constraints hindered India's industrial expansion and economic advancement. Consequently, installing new power plants requires importing extremely risky fossil fuels.

However, this segment has grown since the government of India began to realise the importance of solar power.

Investments are encouraged by programs such as the Production Linked Incentive (PLI) schemes and concessional financing options.

The Indian government has expanded the financial allotment for 'off-grid' solar projects in the Union Budget 2023.

The Solar Park Scheme is also India’s big push towards solar. This scheme aims to build 50 solar parks of 500 MW and above by 2025-26.

Meanwhile, the Indian agricultural industry also ensures it plays a crucial role. The PM-KUSUM scheme aims to add 30.8 GW of solar power capacity by March 2026. This includes constructing decentralised solar power plants, replacing agricultural diesel pumps with solar agricultural water pumps, and solarising already-existing grid-connected agricultural pumps.

The government is also helping curb imports from China.

Indian solar module manufacturers have benefited from the healthy export demand growth, mainly from the US, over the past 18 months. Data shows that exports increased by over 364% in the financial year 2023 over 2022 and 748% in the first five months of 2024. This is owing to the healthy demand from the US and restrictions imposed by that country on module sourcing from China.

The solar sector is witnessing some interesting developments after the government’s announcement of a solar roof-top scheme for one crore households.

Installation of solar rooftops in India saw a 78% spike in the last year, with capacities crossing the 12 GW mark in April 2024.

While the future of the solar sector seems bright, with the potential for a self-sustaining ecosystem, there's still work to be done.

The existing grid infrastructure needs improvement to integrate large-scale solar power efficiently. Affordable financing options for rooftop solar projects are still crucial.

The shadow of Chinese dominance still lingers, which means we haven't reached the point of complete independence yet.

However, India's 2030 vision is a patchwork of dominance in renewable energy and strongly emphasises solar energy to combat climate change.

The Indian solar industry is expected to grow as costs decline, companies build enhanced energy storage solutions, and solar grid advancements take centre stage.

That’s it for today!

Sources and References:

Disclaimer: The content of this blog is intended solely for educational purposes and should not be regarded as financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The securities and assets mentioned serve purely as illustrations only and should not be taken as recommendations for investment. Please note that the information presented is compiled from several secondary sources available on the internet and may change over time. We strongly advise consulting with a qualified financial advisor prior to making any investment decisions. Read the full disclaimer here.

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