The government of India’s ambitious plan to generate 100 GW electricity from solar power by 2022 is attracting huge investment in the sector in past few years.

The lucrative offers and attractive policies made by the government to attract domestic and foreign investors in this segment of renewable energy sector is making the 100 GW goal tangible. Due to government’s effort, the country is producing over 12 GW electricity from solar power at present which (solar power) accounted for less than 5 GW in 2015.

The policies—100% FDI under automatic route, tax exemption for 10 years and the provision of 74% foreign equity participation in a joint venture—brought by Indian government has attracted foreign investments in the solar sector. This policy ensures up to 15% return on equity investment for utility companies.

The geographic location of the country near equatorial line where more than 300 days are sunny is another key reason for investors to select India for investment in solar sector.

To harness growing opportunity exposed by renewable energy sector in the country, more than 290 companies (foreign and domestic) have made investment commitment of around US $350 billion of which solar sector is projected to bring US $100 billion in near future.

The government’s program called ‘Power for All’ is pushing for capacity addition in the country. And investment in solar sector is helping to meet the goal of the program in relatively short span of time. The program has already illuminated more than 12,000 villages in the country.

The rooftop project (viability gap funding policy), on the other hand, is also bringing foreign investment in solar sector. In order to connect rooftop solar photovoltaic with the grid, The World Bank signed agreement with State Bank of India for credit facility worth US $626 million. The rooftop project is expected to generate more than 6 MW electricity in short run.

Moreover, the innovation in technology has lowered the price of solar modules as a result generating electricity from solar power is comparatively inexpensive than other conventional modes of energy production like coal or thermal. This will ultimately benefit the customers with low tariffs rate.

According to a report by National Institute of Solar Energy, the solar sector of India has the potential of 750 GW and this is just 39 GW less than what India requires by 2030. It means solar sector is likely to grow exponentially in coming years as investors are eyeing the sector as one of the promising segments of renewable energy in India.


Subarna Poudel is a researcher with Frost & Sullivan. He can be reached at subarna.poudel@frost.com


Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at sapan.agarwal@frost.com | +603 6204 5830