India installed 1.7 GW of solar capacity during the second quarter (Q2) of 2023, a 58% decline year-over-year (YoY), according to Mercom India Research’s Q2 2023 India Solar Market Update.

On a quarter-over-quarter (QoQ) basis, the installations fell by 10%.

Priya Sanjay, Managing Director at Mercom India, noted that multiple reasons impacted capacity additions during the quarter. The Ministry of New and Renewable Energy (MNRE) extended commissioning timelines for various solar and solar-wind hybrid projects until March 2024, thrice between December 2022 and June 2023. The module price fluctuations, supply constraints, and uncertainties around the Approved List of Models and Manufacturers (ALMM) added to project delays in Q2 and the first half (1H) of 2023.

Challenges in land acquisition, power evacuation, and power purchase agreement tariff reapproval from state regulatory commissions also contributed to delays.

MNRE also extended Central Public Sector Undertaking Phase II solar project deadlines to September 30, 2024.

The second quarter saw large-scale solar projects contributing to approximately 77% of the total capacity added, with the remaining 23% coming from rooftop solar installations.

During this quarter, over 1.3 GW of large-scale solar capacity was installed, reflecting a YoY decline of 64% and a QoQ decline of 7%.

In 1H 2023, 3.6 GW of solar capacity was added, signifying a decline of nearly 53% compared to the 7.6 GW installed during the same period in 2022.

As of June 2023, India’s cumulative solar capacity, encompassing rooftop solar installations, has surpassed the 66 GW mark.

The country’s pipeline of utility-scale projects in development stood at more than 67 GW as of June 2023, with an additional 62 GW of projects tendered and awaiting auction.

“Delays, extensions, and postponements have led to a substantial number of solar projects being deferred to the next year, making 2023 a year of setbacks for solar in India. Consequently, 2024 looks extremely robust. Rapidly declining solar component and project costs will be a catalyst for additional growth,” stated Raj Prabhu, CEO of Mercom Capital Group.

The lackluster performance of the first quarter persisted into the second quarter, resulting in a further decline in capacity additions.

Numerous projects situated in the habitat of the Great Indian Bustard (GIB) still await a Supreme Court order granting them access to transmission connectivity. The MNRE’s reversal of the blanket extension for projects in the GIB region also contributed to the challenges.

Given these factors, Mercom predicts solar installations in 2023 will be significantly lower than the record-breaking 13 GW added in 2022.

Top Solar States

In Q2 2023, Gujarat led among states, accounting for 41% of the total large-scale solar installations. Rajasthan and Karnataka followed, contributing 20% and 14% to the quarterly capacity additions, respectively.

Rajasthan maintained its position as the state with the highest cumulative large-scale solar installations, boasting over 16 GW by the end of Q2 2023, representing approximately 29% of the cumulative utility-scale solar capacity. Karnataka and Gujarat followed with 16% and 11% share, respectively.

Tender & Auction Activity

Q2 2023 saw a rise in tender activity, with multiple central and state agencies issuing tenders for a total capacity of over 14 GW. This marked a substantial 59% YoY growth and a 5% QoQ increase.

A total of 6.74 GW of solar projects were auctioned during the quarter, up 721% QoQ compared to 820 MW in Q1 2023. In the YoY comparison, auction activity increased 63% compared to 4.13 GW in Q2 2022.

Project Costs

Module prices experienced a decline in Q2 2023 due to various factors, including China’s increased photovoltaic production capacities, lower solar module value chain prices, and increased price competition resulting from the relaxation of the ALMM mandate in India.

“The plummeting prices prompted some solar developers to delay module procurement until the second half of 2023 in anticipation of further price reductions,” Sanjay added.

The average cost of large-scale solar projects followed a similar trajectory, decreasing by 8.1% YoY and 4.5% QoQ. This downward trend commenced in Q1 2023, marking two consecutive quarters of cost reduction after ten consecutive quarters of cost escalation.

In 1H 2023, India added a total of 8.4 GW of new power capacity, with solar contributing over 43% to this total.

Mercom’s India Solar Market Update Q2 2023 report is 82 pages and covers all facets of India’s solar market. For the complete report, visit: https://www.mercomindia.com/product/q2-2023-india-solar-market-update