Project Background

India's renewable energy programmes are written in gigawatts of electricity. The heat that industry actually runs on has been left largely untouched — and that is the gap this project works in.

Most Indian MSMEs raise process heat by burning something: coal, firewood, agricultural residue, furnace oil, diesel or piped natural gas. Drying, boiling, washing, sterilising, dyeing, pasteurising — almost every manufacturing process below 250 °C depends on it. Concentrated Solar Thermal (CST) technologies concentrate direct sunlight onto a receiver to produce hot water, thermic fluid or steam at those same temperatures, feeding the boiler and process lines an enterprise already operates.

The project's own market assessment put the technical potential for CST in Indian process heating and cooling at 6.5 GWth. Cumulative installed capacity at the time of assessment was in the range of 50 MWth — under 0.1% of that potential. The technology works; the market had not formed.

Why the market had not formed

Four stakeholder consultations were held with industry associations during project preparation — in Coimbatore, Ahmedabad, Baddi and Pune, between October and December 2012. Industrial unit owners identified three critical barriers, and they have proved durable:

• Lack of awareness. Too few working installations for an owner to visit, and widespread confusion between solar thermal and solar PV.
• Lack of technical confidence. No standards, few qualified suppliers, and little evidence on how systems perform over years rather than months.
• Unattractive payback. MSMEs typically expect a two- to three-year return on capital. Unsupported CST projects were returning in eight to ten.

How the project has evolved

• Nov 2013 GEF CEO endorsementApproved under the GEF-5 Climate Change focal area, with UNIDO as Implementing Agency.
• 2015–2021 First phase, with MNREExecuted with the Ministry of New and Renewable Energy alongside the Jawaharlal Nehru National Solar Mission. Policy work, knowledge products and early demonstrations in silk reeling, pharmaceuticals and leather effluent treatment.
• 2021 Pause and independent evaluationMNRE withdrew in January 2021. An independent Terminal Evaluation rated the project moderately unsatisfactory, citing limited conversion of enabling work into installed capacity, and recommended a no-cost extension and an alternative executing arrangement.
• Dec 2021 Transfer to the Ministry of MSMEExecution moved to MoMSME, refocusing the project on process heat in defined MSME clusters rather than the sector at large.
• 2025 Course correction on viabilityStakeholder consultation chaired by MoMSME confirmed that a 30% incentive was not closing the viability gap. The Project Steering Committee approved an increase to 50%, widened eligible costs to include thermal storage, piping and heat pumps, and admitted BOOT delivery models.
• 2026–27 Build-out and closeSeven lighthouse installations in construction, a 32-event national capacity-building programme, and Terminal Evaluation in the final quarter.