Europe, the U.S., Japan, and China have been the stars of the solar industry for the past decade. In the early 2000s, Europe's feed-in tariffs gave birth to the industry as we know it. China brought low-cost manufacturing and billions of dollars in capacity expansions at a rapid rate. Now, the U.S. and Japan are growing demand based on market forces, not subsidies or government mandates.
But the biggest prize in the solar industry could be India. The country has an underserved population that solar energy could help to power, and its population of over 1 billion provides an opportunity for growth that could last for decades.
India's big solar plans
India actually has two distinct potential solar markets, utility scale and small distributed solar on rooftops in rural areas . First, the government is pushing massive 500-plus megawatt solar power plants in a bid to build 100 gigawatts of solar by 2022. SunEdison (NASDAQOTH:SUNEQ) has been an early mover in this market, saying recently it will build over 15 GW of wind and solar in the next seven years. First Solar (NASDAQ:FSLR) is also moving into the market with a plan for 5 GW of solar projects.
The U.S. has said it is ready to help cover the estimated $160 billion investment needed to build that much solar energy, a potential financial lifeline for India's unstable energy industry.
To put this investment into perspective, China is the world's largest solar energy producer, with 33.4 GW installed, according to Bloomberg New Energy Finance, while India has just 3.3 GW of solar. To hit 100 GW by 2022, India would have to install on average 13.8 GW of solar every year, more than any country has ever installed and double what the U.S. installed in 2014.
The smaller, and potentially more important Indian solar market
Mega-solar projects aren't the only kind of solar energy India will build in the next few years. Distributed solar, installed on rooftops or in fields close to demand sources, will play a large role in powering the country's rural populations.
The central grid does a poor job of reaching some of India's most remote locations, and there's little hope they'll be connected anytime soon. The best option is for communities to build their own microgrids, powered by locally produced energy from wind, solar, and other sources and including new technologies such as energy storage and demand response.
Why the industry will grow for decades
India has a couple things going for it that other countries investing in solar don't. The nation is expected to be the world's most populous country by 2030. This rapid population growth will be one of the drivers of India doubling the amount of energy it consumes by that time, according to the International Renewable Energy Agency.
As you can see above, India also has strong solar resources, particularly in the western part of the country. In the map above, the region that gets 5.0 to 6.0 kW-hrs/m2/day gets a similar amount of sunlight as the southwestern U.S. in terms of intensity. For some perspective, nearly all of the country gets more solar energy than northeastern U.S. states such as New York, New Jersey, and Massachusetts.
Germany, China, the U.S., and other nations have also done much of the dirty work in proving out solar energy's feasibility and lowering costs to prices competitive with fossil fuels. India can now install large-scale solar plants for $1.60 per watt or less, which is a fraction of what it cost Germany to install most of its solar capacity.
These strong growth factors and a government that is putting its weight behind solar energy make India one of the world's most important solar markets. Companies that can gain market share and win projects there should reap billions of dollars in profits for investors. It's just a race to see who will get there first.