India installed 1,080 MW of solar capacity in the first quarter (Q1) of 2020, a 43% decline quarter-over-quarter (QoQ), compared to 1,897 MW installed in Q4 2019. The findings were revealed in Mercom India Research’s newly released Q1 2020 India Solar Market Update.

The solar capacity addition in India in Q1 2020 was the lowest since Q4 2016. In comparison, solar installations were down by 39% YoY compared to 1,761 MW added in Q1 2019.

In Q1 2020, large-scale solar projects accounted for 82% of the installations at 886 MW, while rooftop solar made up the remaining 18%, adding a capacity of 194 MW.

After two consecutive years of negative growth, the domestic solar industry’s hopes were pinned on 2020; unfortunately, the COVID-19 outbreak has had a huge adverse impact on the solar industry in India and globally.


“The lockdown in the country disrupted the supply chain, lowered power demand, resulted in currency fluctuations making component costs unpredictable, and has exacerbated the liquidity issues. We are cutting our solar demand forecast by about 40% from our previous estimates based on the COVID effect on the market,” said Raj Prabhu, CEO of Mercom Capital Group.

The report forecasts solar installations of approximately 5 GW in 2020 as project timelines are extended and moved to 2021. The report goes into a detailed analysis of three different forecast scenarios.

Solar Installations by Quarter (MW)

The report identifies the lockdown imposed on the entire country due to the coronavirus pandemic since March 25, 2020, and the supply disruption caused by the shutdown in China as the reasons for solar installation declines in Q1 2020.

The disruption in India’s solar supply chain began with the work stoppage that started in China in February 2020. As a result of the supply shortage, construction activity was affected even before the lockdown was imposed in India.

The report noted that components shipping from China has yet to resume. Logistical issues are preventing goods from reaching project sites. Labor issues are also looming; most of the companies do not have the labor force to begin construction or production right away.

According to the report, cumulative solar installations reached 36.8 GW at the end of Q1 2020. Large-scale solar projects accounted for 32.2 GW (88%), whereas rooftop solar installations accounted for 4.6 GW (12%).

The large-scale solar project development pipeline stands at 36.9 GW, along with 38.8 GW of projects tendered and pending auction at the end of Q1 2020.

Solar component prices could initially rise as currently, there is a shortage of raw materials. Components have been stuck in ports for months, and shipping from China is yet to resume. Even if ports release consignments, there is no way to transport to the project sites due to logistical issues because of the lockdown. A labor shortage is also looming as a serious issue that the industry has to deal with, for both manufacturers and developers. Most companies do not have the labor force to begin construction or production right away. It may take 4-6 weeks to get these workers back from their towns and villages, according to some companies. A shortage of workforce could mean an increase in labor costs in the short-term.

“As the market gets ready to open back up, we can expect to see shortages resulting in an increase in labor and component costs in the near-term. The next couple of months is critical, and any further extensions could mean further reductions in our forecast,” said Prabhu.

Once the supply chain bottlenecks ease, we could see a situation of module oversupply and price declines again.

India Solar Installations and Demand Forecast (MW)

The lockdown due to the COVID-19 pandemic, policy uncertainty, and regulatory hurdles have slowed down the pace of rooftop installations. The commercial and industrial (C&I) sector together make up 96% of the rooftop solar market. But this is now the most significantly affected segment of the rooftop market as businesses and industries have been shut down. The market expects the government to focus and encourage the rooftop business while ensuring timely disbursal of subsidies to regain consumers’ confidence.

However, demand has started picking up, and some critical Industries like Textiles and Pharmaceuticals are ramping back up, in a positive sign for the industry.

Karnataka topped the list of states for cumulative large-scale solar installations accounting for about 23% of the total installed capacity in the country. Rajasthan was ranked second with 15% of installed capacity. Andhra Pradesh, Tamil Nadu, and Telangana rounded out the top 5 states for large-scale solar.

“The next phase, when the country opens back up in stages, is important to monitor. If the outbreak intensifies after re-opening, then all bets are off. But if things go as planned, the solar industry should be up and running fairly quickly,” Prabhu noted.

According to the report, despite a tough quarter, solar installations accounted for a whopping 65% of all power capacity added in Q1 2020. Renewables as a whole, including wind and hydro, made up for a record 95% of capacity additions in the quarter.

India Utility-scale Cumulative Solar Installations by States (MW)

Key Highlights from Mercom India Research’s Q1 2020 India Solar Market Update

  • In Q1 2020, India added 1,080 MW of solar installations, a decline of 43% compared to 1,897 MW installed in Q4 2019. YoY installations declined by 39% compared to 1,761 MW in Q1 2019
  • In Q1 2020, large-scale solar installations added up to 886 MW, while rooftop installations accounted for 194 MW
  • 194 MW of rooftop solar projects were installed in Q1 2020, a decline of 36% compared to 304 MW added in Q4 2019. YoY installs fell by 26%, compared to 263 MW installed in Q1 2019
  • Cumulative solar installed capacity in India was approximately 36.8 GW at the end of Q1 2020
  • The large-scale solar project pipeline in India stands at 36.9 GW with 38.8 GW tendered and pending auctions at the end of Q1 2020
  • Mercom forecasts installations of approximately 5 GW for CY 2020
  • In Q1 2020, investments in the India solar sector totaled over $970 million (~₹72.9 billion), 40% lower compared to Q4 2019
  • Solar now represents 9.8% of the total power installed capacity in India as of Q1 2020
  • Electricity generated from solar in FY 2019-20 accounted for 3.6% compared to 2.85% in FY 2018-19

For the complete report, visit: https://mercomindia.com/product/q1-2020-india-solar-market-update

 

Image Credit: ReNew Power