In the first nine months (9M) of 2023, India has installed 5.6 GW of solar power capacity, marking a ~47% year-over-year (YoY) decrease from 10.5 GW.

The utility-scale solar project installations totaled 4.2 GW, a 54% YoY decline.

The numbers were reported in Mercom India Research’s recently published Q3 2023 India Solar Market Update.

Managing Director of Mercom India, Priya Sanjay, said, “Many projects have been granted extensions, with deadlines stretching until March 2024 and beyond, reducing the immediate urgency for installation.”

According to Priya Sanjay, healthier numbers are expected in Q1 of 2024.

In Q3 2023, India added 1.9 GW of solar capacity, up by approximately 6% QoQ but down by over 34% YoY. Large-scale solar projects constituted nearly 77% of additions, with over 1.4 GW of new capacity, down nearly 43% YoY.

Cumulative solar capacity, including rooftop installations, exceeded 69 GW by September 2023.

The utility-scale solar project development pipeline reached nearly 77 GW, with over 68 GW of projects tendered awaiting auction at the end of Q3 2023.

Priya Sanjay explained, “Projects undergo tendering with a strategic approach – the key objectives being robust participation and the discovery of low tariffs. These two goals are intertwined; high participation leads to competitive tariffs. Achieving a sustainable, low tariff with profit margins depends on keeping project costs down, which is possible when component prices are low. While tenders signal a substantial market, auctions are timed for optimal participation and attractive, low tariffs.”

The main driving force behind the large-scale solar installations in the quarter was the projects for commercial and industrial (C&I) customers. The faster turnover and fewer complications make C&I projects compelling for most developers and lenders.

“With large-scale solar projects facing delays, particularly due to extensions, evacuation issues, and signing on power sales agreements, developers find C&I projects more attractive. These projects offer better tariffs, improved profit margins, and quicker execution,” Priya Sanjay said.

During Q3, Gujarat took the lead among all states, contributing to over 24% of large-scale solar installations. Karnataka and Maharashtra followed closely, accounting for more than 19% and nearly 18% of the quarterly large-scale capacity additions, respectively.

In terms of cumulative large-scale solar installations by the end of September 2023, Rajasthan maintained its position as the top state, having added nearly 17 GW, representing over 28% of the total capacity.

Karnataka and Gujarat followed, holding almost 16% and 11% of the share, respectively.

Between January and September 2023, India increased its power capacity by more than 12 GW, and solar constituted almost 46% of the total added capacity.

Due to commissioning challenges and project extensions, Mercom expects solar installations to be significantly lower in 2023 compared to 2022.

Commenting on the present power crisis and current market conditions, Priya Sanjay said,  “In high power demand situations and reduced hydropower generation due to insufficient rainfall, coal, a stable base load, becomes a preferred option. While solar remains a favored renewable source, the government will likely prioritize non-renewables in the next few quarters to ensure energy security. Thus, solar’s presence in the power mix might diminish temporarily, not due to a decline in solar installations but due to an emphasis on ramping up coal for energy security,” she added.

Mercom’s India Solar Market Update Q3 2023 report is 75 pages long and covers all facets of India’s solar market. For the complete report, visit:  https://www.mercomindia.com/product/q3-2023-india-solar-market-update