India installed 3,239 MW of solar capacity in the calendar year (CY) 2020, a 56% decline, compared to 7,346 MW in 2019, according to the latest 2020 Q4 & Annual India Solar Market Update released by Mercom India Research.

By the end of 2020, large-scale solar installations accounted for 78% of the total installations with 2,520 MW. The figure saw a 60% decline compared to the last year. Rooftop solar installations accounted for 22% of the installations with 719 MW, a 35% drop YoY.

Among the states, Andhra Pradesh, Rajasthan, and Gujarat were the top three states in large-scale solar installations accounting for 51 % of the total installations.

The Indian solar market added nearly 1,505 MW in Q4 2020, a 244% increase compared to 438 MW installed in Q3 2020. However, the installations saw a decrease of 21% compared to 1,897 MW installed in Q4 2019. In Q4 2020, large-scale installations accounted for 1,220 MW, a 331% increase compared to 283 MW added in Q3 2020. Rooftop solar installations in Q4 2020 accounted for 285 MW, an increase of 155 MW compared to Q3 2020.

The COVID-19 pandemic was a major reason for the decline in installations. Another issue that affected the numbers was the difficulty government agencies faced in getting distribution companies to sign power sale agreements (PSAs) in the wake of the steep fall in tariffs in most auctions. Nearly 17-18 GW of projects are languishing without a PSA in place.

“India’s solar installations in 2020 were the lowest in five years. While other top solar markets in the world have experienced positive growth, India, which had one of the most stringent lockdowns in response to the pandemic, took a while to get back up and running. We expect the industry to experience significant positive growth in 2021,” said Raj Prabhu, CEO of Mercom Capital Group.

The report highlights other short-term challenges such as the rise in module prices, increased shipping and freight charges in the range of 500%-800%, and a surge in raw material costs. As a result, the average large-scale solar project costs increased slightly by 2% quarter-over-quarter in Q4 2020. However, project costs were 2.5% lower compared to the same quarter in 2019, according to the report

The government is taking steps to promote domestic manufacturing and limit the imports of solar components from countries like China, Vietnam, and Malaysia. The production-linked incentive announcement was one such move to spur the domestic market to manufacture high-efficiency solar modules. But the industry is still waiting for clarity on the implementation part and the actual budget allocation for solar.

“The solar industry has shown incredible resilience amid all the chaos brought on by the pandemic. The market is on the verge of experiencing two of its best years-to-date unless further disruptions in the form of ill-conceived policies hurt growth,” said Prabhu.

The rooftop solar segment is experiencing a turnaround, with installations showing significant growth in the second half of the year. Q4 2020 was the strongest in terms of rooftop solar installations, and the report predicts the momentum to continue into Q1 2021.

According to the report, the biggest hindrance to the growth of the rooftop solar market is the new net metering policy, which restricts net metering to rooftop solar systems of up to 10 kW and mandates gross-metering for systems above 10 kW. Stakeholders feel this decision may hurt the Indian rooftop solar segment. The Ministry of Power has assured the industry that the government would review the gross metering policy for installations over 10 kW capacity.

Mercom India Research is forecasting over 10 GW of solar installations in 2021, as most of the projects scheduled for 2020 were moved to 2021.

The adoption of renewable energy sources is moving in the right direction in the country, with renewable energy sources accounting for 78% of total installations in 2020, with solar representing 48% of new capacity additions and wind accounting for 17.4%. Coal accounted for just 21% of new capacity. The share of solar in India’s power mix reached 10.3%, exceeding that of wind-based power sources (10.25%) for the first time.

Key Highlights from Mercom India Research’s 2020 Q4 and Annual India Solar Market Update:

• India added 3.2 GW of solar in CY 2020, a 56% decline compared to 7.3 GW installed in CY 2019
• Large-scale solar installations in CY 2020 accounted for 78% with 2.5 GW, and rooftop solar made up the remaining 22% adding 719 MW
• Cumulative solar installed capacity in India was approximately 39 GW at the end of Q4 2020
• The large-scale solar project pipeline in India stood at 47.5 GW, with another 24.5 GW of tendered capacity pending auctions at the end of Q4 2020
• Solar accounted for 48% of new power capacity additions in CY 2020
• In CY 2020, investments in the Indian solar sector were 66% lower compared to CY 2019
• Electricity generated from solar in CY 2020 crossed 58.2 billion units

For the complete report, visit:  https://mercomindia.com/product/2020-q4-annual-india-solar-market-update

On March 5th, 2021, Mercom will host a webinar on “India Solar Market Update – The Year That Was and What Lies Ahead” that will discuss the findings of the report in detail.