Cost deflation is likely to remain a medium-term trend as economies of scale are achieved, spurred in part by India's development of the world' largest solar project, the 2.2-GW Bhadla project in Rajasthan that is set to come online in 2019, said the assessment compiled by IEEFA's Director of Energy Finance Studies, Australasia, Tim Buckley and Research Associate Kashish Shah.
According to it, the 10 GW of solar installed in 2017-18 represents most of the 12.1 GW of new renewable capacity commissioned over the past 12 months. Renewables now account for 20 per cent of total installed capacity in India and 7.7 per cent of electricity generation.
While the surge in new renewable generation has increased concerns about grid constraints, the right level of ongoing investment will make those issues manageable even as renewable energy installs double to more than 20 GW annually by 2020, the IEEFA said.
The faster that India invests in renewables infrastructure the faster it can decarbonize its economy, but without the proper alignment of investment and domestic employment, the government will face political resistance to the upfront $300 billion investment required over the coming decade, it added.
Tying new solar tenders to domestic manufacturing investment aligns both strategies, with the likely outcome that the world's leading solar module manufacturers will set up operations in India, bringing employment opportunities and, more important, world-leading solar technology at scale, the analysis said.
Indeed, in April, Japan's SoftBank and China's GCL System Integration Technology Co. announced a $930m 60-40 joint venture to build a major solar module manufacturing plant, with two phases each of 2 GW of annual production capacity, it said, adding that SoftBank brings the capital and GCL brings the world's latest solar technology and management expertise.
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