Solar energy is increasing in popularity around the world. India is emerging as a renewable energy superpower due to its deliberate shift towards using sustainable energy resources, the most visible of which is solar power. Given the unavoidable dangers of climate change, there is an urgent need to commercialise renewable solar energy for power generation.
Adopting solar energy in India to combat climate change
India has consistently demonstrated leadership in the fight against climate change. The country announced its objective to achieve Net Zero Emissions by 2070, in addition to meeting the following short-term goals:
- Integrating 500 GW of non-fossil fuel-based capacity by 2030;
- Meeting 50% of energy needs from renewables;
- Reducing cumulative emissions by one billion tonnes by 2030; and
- Reducing the emission intensity of India’s gross domestic product (GDP) by 45% by 2030.
India has decoupled economic growth from greenhouse gas emissions over time. For instance, the Indian Railways’ goal of Net Zero Emissions by 2030 will reduce annual emissions by 60 million tonnes. Similarly, India’s enormous UJALA LED bulb initiative decreased annual emissions by 40 million tonnes. India announced the National Hydrogen Mission in 2013 to become the world’s largest hydrogen hub, complementing its ongoing initiatives.
The National Solar Mission of India, launched on 11th January 2010 under the Ministry of New and Renewable Energy, declared the aim to generate 227 Gigawatt (GW) of power from rooftop solar energy by 2022. It has made tremendous progress in that endeavour.
In advocating and supporting the ambitious mission to fight climate change, the Government of India is facilitating individuals with several tax breaks and incentives to switch to solar energy as a primary energy resource.
Tax incentives
Some of the incentives offered by the government are as follows:
Tax benefits – The Government of India has given accelerated depreciation of fixed assets related to a solar power plant to stimulate the usage of solar energy in commercial and industrial sectors. Currently, the annual rate of acceleration that can be claimed is 40%. The government provides exemptions from sales tax, excise taxes, and customs duties. Additionally, project developers are exempt from paying income tax for the first ten years of the project’s existence.
Net metering incentives – Net metering is a process that enables residential or commercial customers who generate their electricity using solar panels or photovoltaic systems to export excess energy back to the grid. It enables utility consumers to create their own clean and efficient electricity. Most solar customers generate more electricity than they consume during the day; net metering allows them to export that power to the grid and lower their future electric bills.
Capital subsidies – Capital subsidies are encouraged by the government to boost residential rooftop installations in urban areas. The government executed plans like Sristi and Saubhagya in 2022 to install solar rooftops in rural areas that provide free and incentivised solar-power energy in multiple homes.
Assured Power Purchase Agreement (PPA) – PPAs are agreements among investors, regulatory agencies and distribution companies (DISCOM). Solar power produced on rooftops is supplied to the state grid, which the state regularly purchases through a PPA. It incentivises landowners and property owners to install solar power grids for electricity generation.
Thus, tax benefits can positively impact the adoption of solar energy. The Indian government has framed incentives to encourage solar power producers and consumers to transition to renewable energy sources.
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