The problem of energy access in India is enormous. According to the International Energy Agency, some 237 million Indians (close to a fifth of the population) were living without electricity as of 2015.
Many more have only limited access, with some getting power for just a few hours per day. People often rely on diesel generators as a result, which are dirty, noisy and expensive — about the worst solution one can imagine from a public policy point of view.
To handle rising demand, India will have to add about 15 gigawatts of capacity per year for 30 years. Indian coal-fired plants, which currently provide 70 percent of the country’s electricity, are particularly dirty. Although cheap on a per-kilowatt-hour basis for now, the environmental costs of relying on coal would be disastrous.
According to MIT Technology Review, if India grew its power supply through conventional means, by 2050, it would be adding more new carbon to the atmosphere every year than total U.S. emissions in 2013.
Aside from coal, there are few other conventional options. About 15 percent of total capacity is from hydropower, but this is vulnerable to drought, and only a limited number of new dams can be built. About 3.2 percent of all electricity in India comes from nearly 6 GW of nuclear, but adding nuclear capacity is slow and carries its own significant risks. The country also has little in the way of natural-gas resources.
As such, renewables are seen as critical for the future. India is seeking to add 175 gigawatts of renewable capacity through 2022, up from its current 36 gigawatts. The government wants 100 gigawatts of that capacity to be solar.
Today, solar systems in India span a wide spectrum. Off-grid systems are mainly used in rural areas. These have an immediate impact on energy poverty and air pollution and have captured the imagination of many Western social impact investors. However, these systems can be very expensive if high availability is the goal.
On the other end are utility-scale installations, which are being bid at record lows as foreign players compete for projects. The challenge with centralized solar is that India’s distribution companies can barely transmit the power they have now, let alone large additions of variable solar energy. They suffer over 22.7 percent losses from transmission inefficiencies and theft, and have around $70 billion in collective debt. Debt relief and reforms are underway, but they will take time, especially because local governments control rate structures.
Between the two extremes of this solar generation spectrum, there is a critical gap in the middle.
This gap must be filled to help solve India’s generation and distribution problems. There is growing hope that grid connected rooftop solar will be the answer. The Indian government has recognized this and announced that of its 100-gigawatt solar target by 2022, 40 gigawatts should be rooftop.
However, strategies for promoting grid connected rooftop solar used in other parts of the world will not work as well in India. As mentioned, prices are distorted by politically-influenced low rate structures.