India's ambitious national solar program has catalyzed rapid growth in the solar market, driving prices for solar energy to impressive lows and demonstrating how government policy can stimulate clean energy markets, according to a report released by the Natural Resources Defense Council (NRDC) and the Council on Energy, Environment and Water (CEEW).

In only two years, competitive bidding under India's National Solar Mission drove prices for grid-connected solar energy to nearly the price of electricity from fossil fuels, at Rs. 7.49/kWh ($0.15/kWh). During that same period, cumulative installed solar capacity in India surged from 17.8 MW to over 500 MW, as discussed in "Laying the Foundation for a Bright Future: Assessing Progress Under Phase 1 of India's National Solar Mission."

"As the world's second-fastest growing economy, India has sparked a powerful solar market in only two years," said Anjali Jaiswal, Senior Attorney for the Natural Resources Defense Council's India Initiative.

"While the National Solar Mission still faces significant hurdles, India has already made important strides to attract new domestic and international players into the market, and lower the price of solar energy faster than most anticipated."

The report from NRDC and CEEW provides recommendations to aid the Indian government, private sector and other stakeholders in overcoming obstacles to achieving the Mission's goal of 20 GW of installed solar capacity by 2022, equivalent in energy capacity to 40 mid-sized coal-fired power plants. These recommendations include:

Encourage Financing: To bolster confidence among financiers and overcome high interest rates in India, the Indian government should diligently enforce Renewables Purchase Obligations, support further development of the Renewable Energy Certificate (REC) market, and share additional information on the Payment Security Mechanism, which covers potential defaults on payments.

The Reserve Bank of India and the Finance Ministry should work with the Ministry of New and Renewable Energy (MNRE) to support solar energy investment, and the private sector should lead by syndicating loans and sharing experiences in India's solar market.

Boost Domestic Manufacturing: India's domestic content requirement (DCR), which was intended to nurture domestic manufacturing for silicon photovoltaic (PV) technology, has instead shifted the market toward thin-film PV, which does not fall under domestic manufacturing mandates and can therefore be imported at a lower cost.

The Indian government should consider modifying the domestic content requirement to apply uniformly across all PV technologies or a percentage of PV components, as well as, adopting a different incentive to promote domestic manufacturing without restricting foreign imports. Simultaneously, manufacturers should strengthen existing networks to develop policy solutions that would ease barriers to manufacturing in India.

Create a Conducive Environment: The Indian government urgently needs to increase the information available on the Mission's progress, from requiring solar projects to give periodic updates on their progress, to building confidence among investors with more transparency around technologies and commissioning processes.

The central government should also work closely with state governments to facilitate land allocation for solar projects. The solar industry should create a network of solar energy groups, focused on resolving common industry concerns and interacting with government agencies to develop solutions for the entire supply chain.

"As nations race to become clean energy leaders, governments around the world will be closely following the progress of India's National Solar Mission," said Dr. Arunabha Ghosh, CEO for the Council on Energy, Environment and Water, an independent think-tank based in New Delhi.

"It's essential that the Indian government adapt its strategies under Phase 2 of the Mission to boost confidence in projects and spur investment from a variety of funding sources and financial institutions."

NRDC and CEEW's report is the first independent, external analysis of the opportunities and hurdles faced by India's National Solar Mission. The report draws from extensive discussions with stakeholders, and research and analysis of national, state and international programs.