The Role of Policy in Scaling India’s Solar Capacity: Key Lessons from Global Markets – EQ

By Bhavesh Patidar
Founder & Group CEO, Nevron
Founder & Director, Solarsure

India’s solar journey over the past decade has been one of the most ambitious energy transitions undertaken by any developing economy. From less than 3 GW of installed solar capacity in 2014 to over 73 GW by 2023, India has demonstrated how policy direction, institutional clarity, and execution discipline can accelerate clean energy deployment at scale.

Yet, as India now moves toward its target of 500 GW of non-fossil fuel capacity by 2030 (as announced at COP26), the next phase of growth will depend less on ambition and more on policy precision.

Global markets offer important lessons.

Policy certainty is more powerful than subsidy volume

Germany’s Energiewende, China’s manufacturing-led expansion, and the United States’ Inflation Reduction Act (IRA) illustrate one common principle: long-term policy certainty reduces capital risk more effectively than short-term subsidies.

• Germany’s Feed-in Tariff (FIT) mechanism provided predictable returns for nearly two decades, catalyzing distributed solar adoption.
• The U.S. IRA (2022) offers multi-year tax credits extending to 2032, unlocking over $300 billion in climate-linked investments.
• China combined manufacturing incentives with deployment mandates, enabling it to account for nearly 40% of global solar capacity additions in 2023 (IEA, 2023).

In contrast, markets where tariff revisions, payment delays, or regulatory shifts are frequent tend to see financing costs rise.

For India, this underscores the importance of:

• Stable bidding frameworks
• Timely DISCOM payments
• Predictable net-metering and open access regulations

Investor confidence reduces the cost of capital – and in solar, the cost of capital directly determines tariff competitiveness.

Grid integration must evolve alongside capacity targets

According to the International Energy Agency (IEA), global renewable capacity additions crossed 440 GW in 2023 – nearly 75% of which was solar. However, grid congestion has emerged as a major bottleneck in several countries.

• In parts of Europe, curtailment rates have increased due to transmission constraints.
• In California, oversupply during peak solar hours has led to negative pricing events.
• China faced renewable curtailment challenges until ultra-high voltage (UHV) transmission corridors were expanded.

India faces similar structural realities:

• Transmission infrastructure expansion must keep pace with solar park development.
• Time-of-Day (ToD) pricing reforms are increasingly important.
• Storage integration and hybrid policies (solar + wind + BESS) will determine reliability outcomes.

The Green Energy Corridor initiative is a step in this direction, but grid modernization including forecasting, scheduling discipline, and storage mandates must accelerate.

Solar growth without grid reform creates stranded assets.

Decentralisation is critical for the next 100 GW

Utility-scale solar drove India’s first wave of growth. The next phase will rely significantly on:

• C&I (Commercial & Industrial) open access
• Rooftop solar
• Agricultural solarisation (PM-KUSUM)

Countries like Australia and Germany demonstrate that distributed generation enhances grid resilience and reduces transmission losses. In Australia, rooftop solar penetration exceeds 30% of households in some states.

India’s rooftop solar deployment, however, remains below potential despite policy support. Streamlined approvals, simplified subsidy disbursement, and uniform net-metering caps across states could accelerate adoption.

Decentralisation also reduces DISCOM exposure to peak procurement costs – if structured properly.

Manufacturing policy must align with deployment velocity

India’s Production Linked Incentive (PLI) scheme aims to strengthen domestic manufacturing across the solar value chain. As of 2023, India’s module manufacturing capacity exceeded 40 GW annually (MNRE data).

However, global lessons suggest:

• Manufacturing incentives must be accompanied by stable domestic demand.
• Sudden changes in import duties or Approved List of Models and Manufacturers (ALMM) policies can temporarily disrupt supply chains.
• Technology-neutral policy encourages innovation (TOPCon, HJT, perovskites).

China’s rise was not only subsidy-driven but scale-driven. Policy coherence across upstream (polysilicon), midstream (cells), and downstream (modules + EPC) segments ensured cost competitiveness.

India’s challenge is to avoid policy fragmentation between manufacturing protection and deployment speed.

Financing architecture determines scale

Solar is capital-intensive but operationally inexpensive. Therefore, access to low-cost, long-tenure capital is decisive.

Global best practices show:

• Green bonds (Europe, US)
• Sovereign guarantees for renewable auctions
• Blended finance mechanisms for emerging markets

India has made progress in green bond issuances and infrastructure investment trusts (InvITs). However, improving payment security mechanisms for DISCOM-linked PPAs and standardizing risk allocation in contracts can further reduce financing spreads.

As per IRENA (2023), every 1% reduction in weighted average cost of capital can reduce solar tariffs by 5-8%. Policy reform that reduces perceived risk is often more impactful than additional subsidy allocation.

Agricultural solarisation: A structural opportunity

India’s PM-KUSUM scheme is globally unique in scale. It attempts to transform farmers from energy consumers into energy producers.

Globally, few countries have integrated agricultural policy and renewable policy at this magnitude. If implemented efficiently, decentralized feeder-level solarisation can:

• Reduce DISCOM subsidy burdens
• Improve rural voltage stability
• Increase farmer income resilience

However, land aggregation, evacuation infrastructure, and tariff clarity remain critical implementation variables. The policy architecture exists. Execution discipline will determine outcomes.

The next phase: From capacity addition to system optimization

India is no longer in the early adoption phase of solar deployment. The conversation is shifting from:

“How many gigawatts can we install?” to “How intelligently can we integrate, finance, and distribute them?”

Global markets are moving toward:

• Storage-linked auctions
• Capacity markets
• Ancillary service monetisation
• Time-based pricing signals

India’s regulatory evolution in these areas will define whether 2030 targets are achieved sustainably or through stress on DISCOMs and transmission systems.

Conclusion: Policy as a risk-reduction instrument

The most important global lesson is this:

Solar does not scale because panels are cheap. Solar scales because risk is predictable.

India has demonstrated ambition and execution capability over the past decade. The coming decade will require regulatory maturity, grid modernization, and financial innovation to complement capacity expansion.

Policy is not merely an enabler of renewable energy – it is the architecture that determines whether ambition translates into durable infrastructure.

If India can combine scale, stability, and system intelligence, it will not only meet its 2030 targets but also redefine the global template for emerging economies transitioning to clean energy.