Solar Energy: Opportunities, Challenges and Policies in India
- Aequitas Victoria
- Jul 21
- 17 min read
Paper Details
Paper Code: RP-CLA-V2-21
Category: Research Paper
Date of Submission for First Review: March 28, 2022
Date of Acceptance: July 6, 2022
Citation: Dr. Rangaswamy D & Ms. Savitha H.M, “Cultural Identity of Indigenous People vis- a vis Absolute Development in India: A Legal Analysis”, 2, AIJACLA, 209, 209-220 (2022)
Author Details:
Dr. Rangaswamy D., Assistant Professor in Law, KSLU, Hubballi
Ms. Savitha H.M, 1st Year LL.M, DOS in Law, University of Mysore, Mysore
ABSTRACT
India, endowed with abundant solar potential, has emerged as one of the leading nations in adopting solar power as a key component of its renewable energy strategy. Despite notable progress driven by initiatives such as the National Solar Mission and various state-level policies, the solar energy sector continues to face several critical challenges. These include high initial installation costs, land acquisition difficulties, intermittency in power generation, inadequate grid infrastructure, and regulatory and policy inconsistencies across states. Furthermore, financial constraints, delays in subsidy disbursement, and the lack of advanced storage technologies and skilled manpower hinder the sector’s sustainable growth. Environmental concerns related to the lifecycle management of solar panels are also gaining prominence. To overcome these challenges, India has adopted a range of policy measures focusing on capacity building, financial incentives, decentralized solar deployment, and international collaborations. However, there is a pressing need for more coherent, long-term, and inclusive policies that ensure equitable access, grid modernization, and effective integration of solar power into the national energy mix. This paper critically examines the current issues, challenges, and policy landscape of solar power in India, offering insights into strengthening its role in achieving sustainable energy security.
Key Words: Energy, Solar Power, Issues, Challenges, Opportunities, Policies
INTRODUCTION
Energy is an essential and material basis for human survival [1] economic[2] and sustainable[3] development, agriculture and transportation.[4] Over the entire history of mankind, each and every significant step in the progress of human civilization has been accompanied by energy innovations and substitutions. The development and utilization of energy has enormously boosted the development of the world economy and human society.[5] UN emphasis that universal access to affordable, reliable, sustainable and modern energy for all is an integral part of poverty eradication and the achievement of the 2030.[6] Much importantly, over more than 100 years in the past, developed countries have completed their industrialization, consuming an enormous quantity of natural resources, especially energy resources.[7] Today, some developing countries are ushering in their own era of industrialization and an increase of energy consumption is inevitable for their economic and social development.[8] India’s energy consumption has increased with a Compound Annual Growth Rate (CAGR) of 4.11 percent. The total electricity production increased annually with a CAGR of 5.63 percent during the last decade.[9]
In recent years, the global demand for energy has been growing at an unprecedented pace, while conventional energy resources continue to deplete. One of the most pressing challenges facing the world today is how to meet this increasing energy demand sustainably. Given the limitations and environmental impact of traditional energy sources, there is an urgent need to explore and invest in alternative energy solutions.[10] It is evident that both developed and developing nations are undergoing a transition toward low-carbon energy, albeit at different paces. Solar Energy could be a potential alternative to fulfil expectations of both developed and developing countries.[11] India is the largest developing nation in the world, and for the foreseeable future, its primary focus will remain on advancing economic development and eradicating poverty. Over the past few decades, India has demonstrated remarkable growth as one of the fastest emerging economies, achieving notable progress in both economic and social spheres. Owing to rapid technological advancements and proactive governmental policies,[12] the solar industry has witnessed significant growth in recent years.
Solar photovoltaic energy plays a vital role in meeting the electricity needs of rural areas across various regions of the country. Additionally, solar energy is essential for a wide range of applications in the domestic, agricultural, industrial, and commercial sectors. India is steadily advancing toward large-scale adoption of solar energy. As of June 2011, the country's cumulative solar power generation capacity had reached approximately 39.6 MW, marking a significant step in its renewable energy journey.[13] India, being home to the second-largest population in the world, is experiencing a rapidly increasing demand for energy. A significant share of this demand is met through electricity, which plays a crucial role in supporting the country's socioeconomic development. With the economy growing at a rate of 8%, ensuring a reliable and sustainable energy supply has become more important than ever.[14]
In this background, solar energy-based power generation systems have the potential to play a significant role in meeting the energy needs of the system. This paper is structured to explore the availability and current status of solar energy in India, examine strategic approaches and policy frameworks, highlight key achievements, and assess future potential.
OBJECTIVES
The core objectives of the paper are as follows: (1) To identify the major technical, financial, infrastructural, and policy-related challenges hindering the widespread adoption of solar energy in India; (2) To analyse existing national and state-level policies related to solar energy, such as the National Solar Mission and related subsidy schemes; (3) To evaluate the effectiveness of current regulatory frameworks and institutional mechanisms in promoting solar energy development; (4) To suggest policy recommendations and strategic interventions for overcoming existing barriers and achieving long-term energy sustainability through solar power.
OPPORTUNITIES
Solar Energy in India is one of the most exciting growth industries in the world. Solar Energy in the country is poised to take off in an exponential manner because of a unique confluence of favorable supply and demand factors. Here is a list of factors that will make Solar Power one of the fastest growing energy sectors in the world.
India is extremely rich in terms of solar energy resource due to its geographic position in the equatorial Sun Belt of the earth.[15] This could reduce solar energy much cheaper to produce in India compared to other countries. One key factor contributing to the wide productivity gap between developed and developing countries is poor-quality infrastructure. A striking example of such infrastructure challenges is the unreliable electricity supply in India.[16] Despite the implementation of various power sector reforms, India continues to face a significant gap between electricity demand and supply. The recent additions to power generation capacity have not been sufficient to match the country’s rapid economic growth.[17] Large parts of India regularly face blackouts for lack of electricity supply leading to huge monetary losses. Status of micro-grids is another disturbing facet of India. Micro-grids can effectively integrate intermittent renewable sources like photovoltaics without compromising the reliability of the local electricity supply.[18] They are considered as a reliable alternative to an erratic central power grid supply. Solar energy is particularly well-suited for supplying electricity to areas without access to power lines. In many regions of India where grid connectivity is lacking, using solar power is a more cost-effective solution than extending traditional power lines. Over the past two years, the cost of solar energy has declined significantly and has reached retail grid parity in other regions of the world.
Hydroelectric plants contribute approximately 14 percent of total electricity generation, while the remaining share comes from nuclear energy, wind, and other renewable sources.[19] Electricity prices are rising rapidly each year, driven by factors such as the increasing cost of fossil fuels, growing capital expenditures by utility companies, and the ongoing privatization of the power sector. Unpaid Bills and subsidised electricity prices are also diluting the spirit of the electricity system of the country. [20] Indian electricity system is also facing regulatory and governance challenges.[21]Among the various non-conventional renewable energy sources, solar energy holds significant potential for conversion into electricity. Enhancing power output from a solar system is essential to improve its overall efficiency.[22]
Guided by the scientific outlook on development, the government of India is accelerating its development of a modern energy industry, taking resource conservation and environmental protection as two basic state policies. The country has also given prominence to building a resource-conserving and environment-friendly society in the course of its industrialization and modernization, striving to enhance its capability for sustainable development. Given the significant reduction in the cost of producing electricity from solar energy, this source has the potential to become a major contributor to future energy supply.[23]
CHALLENGES
Various economic, institutional, technical, and socio-cultural barriers prevent countries from transitioning from a high to the low emission pathway.[24] Several factors that limit performance are within the control of utilities themselves—such as under-pricing, high physical losses, and inefficient bill collection. This highlights the need to reduce excessive government involvement, enhance regulatory oversight, and promote competition, ensuring that utilities are both incentivized to operate efficiently and allowed to function on commercial principles.[25] This part of paper briefly summarises the challenges plagued with solar energy sector of the nation.
Statistical Barrier
Energy System Modelling is the cornerstone of the sustainable energy system. Energy system modelling is the process of creating mathematical representations of energy systems to analyse, simulate, and optimize the production, distribution, and consumption of energy. These models help researchers, policymakers, and planners make informed decisions about energy policy, investment, and technology deployment. Uncertainty in modelling can generally be classified into two main types: (a) epistemic and (b) aleatory. The distinction between them often depends on the modeler's judgment. Uncertainty is considered epistemic if it is believed that improved data or more accurate models could reduce it. In contrast, it is classified as aleatory when the uncertainty is inherent and cannot be reduced further. While epistemic uncertainty cannot be effectively addressed without better data or models, there are formal techniques available to manage and analyse aleatory uncertainty.[26] Despite the global expansion of ground station networks, the availability of solar radiation data remains limited for many applications, particularly in terms of spatial coverage and data completeness.[27] Besides, most developers believed that India must establish its own solar radiation data collection stations to accelerate the development of solar power projects. It is widely acknowledged that the success of such projects heavily depends on accurate radiation data, which is crucial for achieving financial closure.
Policy and Regulatory Barriers
While commenting on Electricity Act, 2003, it is observed that “…poor performance of utilities reflected internal and external shortfalls in governance.”[28] The study further reveals that “In regulatory governance, state electricity regulatory commissions (SERCs) have struggled to achieve true autonomy from state governments, partly because of relationships built into the Electricity Act. Many SERCs appear to fall short on the resources needed to carry out their functions—most notably, professional staff and appropriate information technology systems. And despite some innovations, most SERCs have yet to implement adequate transparency measures or create frameworks for meaningful public input to the regulatory process. Furthermore, there is no clear accountability mechanism to govern the SERCs themselves.”[29] In fact, though the report explores governance on electricity, the close nexuses between Electricity Management and Solar Energy requires strong policy and regulatory mechanism free from above mentioned drawbacks. The sustainable energy sector also necessitated corporate governance as sine quo non for the efficient energy system. [30] The correlation between each of the two indexes of regulatory governance and measures of utility financial performance is positive and significantly different from zero at the 1 percent level, underlining the importance of regulatory governance to utility functioning.[31]
Infrastructure Barriers
Infrastructure is the most critical of all the barriers. To significantly contribute to global energy consumption, the development of large-scale renewable energy plants is essential. However, this demands extensive land areas, often requiring the conversion of vast stretches of countryside, including farmland, into infrastructure such as buildings, roads, and facilities to support renewable energy projects.[32] The approval processes and inability of the State Governments to provide single window clearance to developers made infrastructure the most important barrier. Another study reveals that from the beginning, land use changes and concerns related to sociocultural identities emerged as major points of contention surrounding the infrastructural intervention.[33]
Financial Barriers
Finance plays a crucial role in the growth and sustainability of solar energy systems.
As solar power continues to emerge as a key solution for clean and renewable energy, the availability and management of financial resources significantly influence its adoption, implementation, and scalability. Without adequate financing mechanisms, even the best solar technologies may remain underutilized. Finance not only unlocks potential but also ensures long-term sustainability, reliability, and inclusiveness in the transition toward a clean energy future. Analysis of various factors revealed that the key global challenges to the development of solar energy are climate-related issues, technical limitations, and a lack of willingness to invest.[34] Financial institutions often perceive the installation of solar PV plants as a higher risk due to their limited experience with such projects, which impacts their ability to accurately assess the creditworthiness of developers.[35] In developing countries, the primary obstacles are the high upfront installation costs and the lack of adequate financial support from the banking sector.[36] Economic and financial barriers are influenced by several factors, including high initial capital requirements, limited presence of financial institutions, lack of investor interest, strong competition from fossil fuels, and lower subsidies compared to conventional energy sources.[37]
Technology Barriers
Driven by concerns over energy security, climate change, and volatile, rising oil prices, many countries around the world are adopting energy policies that prioritize energy efficiency and aim to increase the share of renewable energy sources. Technology barriers are the serious concerns of the energy security of the nation. As market demand, typically leads to a reduction in technology costs and makes financing more accessible over time. Integrating a large proportion of electricity from non-dispatchable renewable energy sources into a power system presents significant challenges. A commonly explored solution in studies of future power systems is the use of energy storage devices to help balance the fluctuations in renewable power generation.[38] Technology is prerequisite for the same.
One of the major drawbacks of solar energy systems is their high initial installation cost connected with technology.[39] Performance limitations of components like batteries and inverters remain key areas for improvement in solar energy systems. Short battery lifespans and the challenge of safely disposing of used batteries are significant concerns. Additionally, batteries are often bulky and heavy, requiring substantial storage space.[40]
LAWS/POLICIES/SCHEMES IN INDIA
Realising the immense importance of renewable energy in progress and prosperity of the nation, the countries across the globe have come out with structured and sustained policies and legal measures on renewable energy. In response to the continuously growing energy demand, over 100 countries, including India, have implemented policies and programs to harness solar energy.[41] Legal and policy framework structured for solar energy in India reflects a holistic approach that integrates legislation, fiscal incentives, institutional support, and market-based mechanisms. These efforts are aligned with national goals such as the self-sufficiency, self-reliance, institutional framework, financial support, capacity building, risk mitigation and participatory mechanism. This part of the paper explores current legal and policy regime of the country on solar energy.
Policy/Law | Year | Key Feature | Targeted stake holder | Implementing authority |
National Solar Mission[42] | 2010 | Aims to deploy 100 GW solar capacity by 2022; provides incentives & RPO targets | Central & State Governments, Developers | MNRE (Ministry of New and Renewable Energy) |
Electricity Act[43] | 2003 | Promotes renewable generation, open access, and renewable purchase obligations | Utilities, Distributive Companies (DISCOMs) Generators | Ministry of Power, Central Electricity Regulatory Company) CERC, State Electricity Regulatory Companies (SERCs) |
Income Tax Act | 1961 | The 40% accelerated depreciation for solar energy projects Tax holiday for infrastructure projects including solar energy. Investment-Linked Deductions (Section 35AD) |
Developers DISCOMs
Generators | Ministry of Fiancé,
Central Board of Direct Taxes |
Energy Conservation Act | 2001 | Promotes energy efficiency and supports market-based mechanisms like PAT and carbon trading, indirectly benefiting solar. | Developers, DISCOMs, Transmitters |
|
Indian Renewable Energy Development Agency Limited (IREDA)[44] | 1987 | To promote, develop, and extend financial assistance for renewable energy and energy efficiency projects. | Developers, DISCOMS and Generators | MNRE |
Tariff Policy | 2016 | Mandates solar RPOs; promotes solar parks, rooftop solar, and grid connectivity | DISCOMs, Power Generators, Regulators | Ministry of Power, CERC |
Renewable Energy Development Act (State-specific) | Varies by State | Facilitates policy framework for promoting renewable energy | State utilities, developers, local bodies | State Governments, SERCs |
PM-KUSUM Scheme | 2019 | Subsidies for solar pumps and grid-connected solar power in agriculture | Farmers, Cooperatives | MNRE, State Nodal Agencies |
Rooftop Solar Programme (Phase II) |
| Capital subsidy up to 40% for residential solar rooftop system | Residential Consumers | MNRE, DISCOMs |
Basic Customs Duty (BCD) Polic | 2022 | Imposes duty on imported solar modules (40%) and cells (25%) to boost domestic manufacturing | Solar Developers, Importers | Ministry of Finance, MNRE |
The objective of the National Solar Mission is to establish a policy and regulatory framework that offers a stable and predictable incentive structure, promoting rapid and large-scale capital investment in solar energy applications while fostering technological innovation and driving down costs. The Electricity Act, 2003 is a landmark legislation that restructured India's power sector. It plays a pivotal role in the development and promotion of solar energy by enabling competition, private participation, and regulatory support for renewable energy integration. The Act provides legitimacy to licensing, open access, regulatory authorities, Renewable Purchase Obligations and development of marketing of renewable energy.
Solar energy projects in India enjoy several income tax benefits designed to promote investment in clean and renewable sources of power. These incentives are primarily provided under the Income Tax Act, 1961, and aim to reduce the cost burden and improve project viability. Income tax incentives like accelerated depreciation and tax holidays play a crucial role in making solar energy projects financially attractive. They not only enhance the Internal Rate of Return (IRR) but also reduce the payback period, thus accelerating India's transition to a clean energy economy. The Energy Conservation Act, 2001 applies to a specific set of persons and entities involved in energy consumption, generation, transmission, distribution, and utilization. The Act aims to promote energy efficiency and conservation across sectors by regulating these stakeholders. It ensures a structured framework to monitor, enforce, and promote energy efficiency and thereby support national energy conservation goals. IREDA’s mission is “Be a pioneering participant friendly and competitive institution for financing and promoting generation from Renewable Sources.[45] IREDA acts as development finance institution (DFI) for renewable energy, a policy enabler and a financial backbone for achieving India’s renewable energy targets.
CONCLUSION AND SUGGESTIONS
The rising global demand for energy, the steady depletion of fossil fuel reserves, and increasing environmental concerns have driven the search for cleaner, more sustainable energy technologies. Renewable sources such as solar and wind energy have emerged as promising alternatives for generating electricity. Among these, solar energy stands out for its vast potential to meet a significant share of the world’s electricity needs. It is a clean, free, and virtually inexhaustible resource that produces no harmful emissions or pollutants, making it a key solution for a sustainable energy future.
India has launched a massive programme of renewable energy utilization. A significant thrust has been given to the research, development and induction of renewable energy technologies in different sectors. However, in order to accelerate progress and attract investments, policy support and creation of a conducive regulatory and legislative framework are critical. The existing laws and policies have made it easier for this sector to flourish. A developed India fuelled on solar power will be a model state for the world community. Majority states in India receive a considerable amount of solar radiation; therefore, there is a scope for tapping solar energy at the commercial level. Howsoever, a dedicated uniform policy like that of Gujarat for the solar power generation can really help in harnessing solar energy at massive scale. Thus, there is a need to have a uniform national policy for the setting up of solar power plants in India.
Indian legal regime consisting of laws, policies, fiscal incentives, tariff regulations, and market-based mechanisms — covering a wide array of stakeholders such as developers, households, industries, farmers. The National Solar Mission (NSM) and associated schemes show a clear long-term commitment to solar power development and reaching out the targets. There is a need of development of a model solar policy and to promote inter-state coordination to streamline procedures and promote uniform growth. While central tax policies represent an initial step in the right direction, enhancing consistency across states—particularly in setting renewable energy targets and providing financial incentives—could serve as a major stabilizing force for the renewable energy industry. Establishment of a centralised system for radiation data, pricing, and policy status to aid developers and consumers will be elevating the stature of renewable energy to the greater height. Research, Development and innovation is critical to invest in solar storage, hybrid systems, and grid management technologies to boost long-term sustainability.
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[3] Toman, Michael A., and Barbora Jemelkova. "Energy and Economic Development: An Assessment of the State of Knowledge." The Energy Journal Vol.24, No. 4 (2003): 93-112.
[4] Archita, Kanti Paul Nayak, and K. K. Bagchi. "Demand-Supply Gap in Energy Use in BRICS Countries with Special Reference to India-Emerging Challenges and Policies." Regional Economic Development Research (2022): 267-287, p.268.
[5] See, Mihajlović, Ljiljana Stošić, and Svetlana Trajković. "The Importance of Energy for the Economy, Sustainable Development and Environmental Protection-an Economic Aspect." Journal of Process Management and New Technologies Vol.6, No. 1 (2018).
[6] GA 76/210, Ensuring Access to Affordable, Reliable, Sustainable and Modern Energy for All, Resolution adopted by the General Assembly on 17 December 2021,
[7] Renuka Mahadevan, and John Asafu-Adjaye. "Energy consumption, economic growth and prices: A reassessment using panel VECM for developed and developing countries." Energy policy Vol.35, No.4 (2007): 2481-2490.
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[9] Archita, Kanti Paul Nayak, supra note 4, p.275.
[10] Santosh Kumar Suman, and Jameel Ahamad. "Solar Energy Potential and Future Energy of India: An Overview." International Journal of Engineering Science Vol.8, No.5 (2018): 17575-79, p.17575.
[11] Ehsanul Kabir at el. "Solar energy: Potential and Future Prospects." Renewable and Sustainable Energy Reviews Vol.82 (2018): 894-900.
[12] For example, India has exhibited its exceptional interest by constituting a separate ministry i.e., The Ministry of New and Renewable Energy (MNRE) in the year 1980.
[13] Naveen Kumar Sharma, Prashant Kumar Tiwari, and Yog Raj Sood. "Solar Energy in India: Strategies, Policies, Perspectives and Future potential." Renewable and Sustainable Energy Reviews Vol.16, No.1 (2012): 933-941, p.934.
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[18] Numminen, Sini, Peter D. Lund, Semee Yoon, and Johannes Urpelainen. "Power Availability and Reliability of Solar pico-grids in Rural Areas: A Case Study from Northern India." Sustainable Energy Technologies and Assessments Vol.29 (2018): 147-154, p.147.
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[20] See, Pierre Audinet. "Electricity prices in India." Energy Prices and Taxes Vol.2, No. 2 (2002): 11-21.
[21] Bhattacharyya, Subhes C. Bhattacharyya. "Investments to Promote Electricity Supply in India: Regulatory and Governance Challenges and Options." Journal of World Energy Law & Business Vol.1, No. 3 (2008): 201-223.
[22] Keskar Vinaya, N. "Electricity Generation Using Solar Power." International Journal of Engineering Research & Technology (IJERT) Vol.2, No.2 (2013): 1-5, p.1.
[23] Zhenling Liu. "What is the Future of Solar Energy? Economic and Policy Barriers." Energy Sources, Part B: Economics, Planning, and Policy Vol.13, No.3 (2018): 169-172, p.169.
[24] Krishna Moorthy, Nitin Patwa, and Yash Gupta. "Breaking Barriers in Deployment of Renewable Energy." Heliyon Vol.5, No.1 (2019): 1-23, p.1.
[25] Sheoli Pargal and Sudeshna Ghosh Banerje, More Power to India The Challenge of Electricity Distribution, World Bank: Washington D.C, 2014, p.xiii
[26] Pfenninger, Stefan, Adam Hawkes, and James Keirstead. "Energy Systems Modeling for Twenty-first Century Energy Challenges." Renewable and sustainable energy reviews 33 (2014): 74-86, p.80.
[27] Polo, J., supra note 15, p.2395.
[28]Sheoli Pargal and Sudeshna Ghosh Banerje, supra note 25, p.105.
[29] Ibid, p.106
[30] Ibid, p.107
[31] Ibid, p.120-121
[32]Krishna Moorthy, Nitin Patwa, and Yash Gupta, supra note 24, p.3.
[33] Luís Silva, and Siddharth Sareen. "Solar Photovoltaic Energy Infrastructures, Land use and Sociocultural Context in Portugal." Local Environment Vol.26, No.3 (2021): 347-363, p.54.
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[36] Ibid.
[37] Raza, Waseem, S. Hammad, U. Shams, A. Maryam, S. Mahmood, and R. Nadeem. "Renewable energy resources current status and barriers in their adaptation for Pakistan." J. Bioprocess. Chem. Eng 3, no. 3 (2015): 1-9, p.7.
[38] Stefan Weitemeyer, David Kleinhans, Thomas Vogt, and Carsten Agert. "Integration of Renewable Energy Sources in future power systems: The role of storage." Renewable Energy 75 (2015): 14-20, p.14.
[39] Kabir, Ehsanul, Pawan Kumar, Sandeep Kumar, Adedeji A. Adelodun, and Ki-Hyun Kim. "Solar energy: Potential and future prospects." Renewable and Sustainable Energy Reviews 82 (2018): 894-900, p.897.
[40] Ibid
[41] Shreemat Pandey, et al., "Determinants of Success for Promoting Solar Energy in Rajasthan, India." Renewable and Sustainable Energy Reviews 16, no. 6 (2012): 3593-3598, p.3594.
[42] This policy was adopted by the government of India as part of compliance of the assurance given while launching National Action Plan on Climate Change on June 30, 2008, by the Prime Minister of India, Dr. Manmohan Singh.
[43] No.36 of 2003.
[44] IREDA is a public Limited Government Company established as a Non-Banking Financial Institution in 1987 with the moto “ENERGY FOR EVER”.
[45] For more details see, https://www.ireda.in/home