The solar thermal energy market in India faces significant barriers to development, according to analysis from Business Standard. Many industries currently rely on diesel and gas for heat generation in production processes, creating substantial operating cost advantages for solar thermal systems. However, the transition from traditional fossil fuels to solar thermal has not begun in India, representing what experts describe as a classic case of market failure. This challenge is particularly relevant given the dramatic decline in solar and wind costs globally, with the International Renewable Energy Agency reporting that the levelized cost of electricity (LCOE) for utility-scale solar power dropped 90% between 2010 and 2024, while onshore wind costs fell 70% during the same period.
Solar thermal systems provide heat directly using solar radiation energy, offering a viable and sustainable alternative to traditional heating methods. Industries that can utilize solar thermal energy include dairy, food processing, textiles, pharmaceuticals, and chemicals, with operating costs expected to be substantially lower due to the free nature of solar radiation compared to diesel and gas. As reported by Business Standard, coal usage should be discouraged or prohibited to reduce dangerous air pollution levels and improve public health, as research published in the British Medical Journal shows that an estimated 5.13 million excess deaths per year globally are attributable to ambient air pollution from fossil fuel use. The cost advantage is particularly significant given that solar and wind, often paired with storage, are the lowest-cost sources of new supply in many regions of the world, with solar standing out as the fastest to deploy, often within two years, compared to non-solar options that generally take 3-15 years to get online.
The analysis suggests a state agency could demonstrate solar thermal reliability and cost savings through pilot projects in dedicated industrial zones. A new unit in a textile park could be identified and persuaded to use solar thermal systems with guaranteed supply contracts and standard long-term take-or-pay agreements. Partnership with industrial park developers would be needed for modular installation as production and demand grow, with the government assuming only contingent liability through back-to-back contracts. This strategy aligns with global trends where more than 130 governments have policies that encourage the deployment of solar, wind and other renewables, ranging from subsidies and financial incentives to purchasing targets and carbon pricing policies that raise the cost of fossil generation. The International Monetary Fund estimated that in 2024, governments provided over $700 billion in explicit subsidies for fossil fuels, or 0.6% of global GDP, highlighting the need for policy support to overcome decades of supportive fossil fuel policies.
The government could incentivize solar thermal adoption by bringing these systems into the lowest goods and services tax rate and providing higher depreciation rates. Existing units may start switching over as confidence in reliability increases, with initial progress expected to be slow until critical mass is reached. The transition could be completed in the first half of the next decade if initiated now, according to the analysis. This timeline is supported by global projections, with the International Energy Agency estimating that renewable electricity will grow by about 1,000 TWh annually through 2030, or 8% per year, driven by cost decreases, supportive policies and corporate interest. Hundreds of firms have pledged and achieved the goal of using 100% renewable electricity through alliances such as RE100, with large buyers like Google, Meta, Amazon and Microsoft driving roughly half of corporate purchases of renewables, accounting for about 27 GW of new solar and wind capacity in 2025.
Solar thermal adoption would result in substantial decarbonization while increasing industrial competitiveness through lower production costs. Units using solar thermal energy would not attract import duties under the EU's Carbon Border Adjustment Mechanism (CBAM) regime if their carbon emissions meet prescribed standards. The government could steer this transition without providing budget subsidies, achieving a major milestone in the journey to net zero while reducing production costs in a large growing industrial segment. This environmental benefit is particularly significant given that renewable electricity can help reduce air pollutants such as particulate matter (PM2.5), sulfur dioxide (SO2) and nitrogen oxides (NOx) to improve public health, addressing concerns about the 5.13 million excess deaths per year globally attributable to ambient air pollution from fossil fuel use. The transition also supports energy security, as demonstrated by the European Union's REPowerEU plan following the Russian invasion of Ukraine, which recognized the security risk of dependence on Russian fossil fuels that supplied 45% of the E.U.'s natural gas, 27% of its crude oil, and 50% of its coal before the Ukraine war.
