Higher GST and Land Issues Slow Solar PV Expansion in India: Key Barriers and Growth Insights
India’s solar PV deployment faces significant barriers, including increased GST on solar components and land acquisition challenges, according to the International Solar Alliance (ISA) report. The GST on solar project essentials rose from 5% to 12% in 2021, with total project taxes approaching 30% due to additional 40% customs duty on imported solar modules.
Key Barriers:
- High GST Rates: Taxes on essential components are reducing cost-competitiveness.
- Land Acquisition Issues: The small average land holding size (1.16 hectares) slows down large-scale project expansion.
- Regulatory Hurdles: Inconsistent net metering policies across states and insufficient local support are impacting rooftop solar.
Financing Challenges:
High-Risk Perception: Lenders view rooftop solar as high-risk, resulting in higher interest rates and prolonged approval processes, which diminish financial gains.
Growth and Cost Reduction:
Despite these obstacles, India led in global auction price reductions in H1 2024, achieving a record-low $34 per MWh, reflecting a 23% decrease. Globally, renewable energy capacity awarded through auctions surged to 82 GW in the first half of 2024, with India and Germany contributing over half.
If current trends continue, total auctioned capacity could exceed 200 GW by year-end, doubling 2023 levels and underscoring India’s role as a leader in renewable energy expansion.
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