Indian Solar Industry Optimistic Going Into 2020

India installed 7,346 MW of solar capacity in the calendar year (CY) 2019, a 12% decline year-over-year (YoY), compared to 8,338 MW in 2018, according to Mercom India Research’s newly released Q4 & Annual 2019 India Solar Market Update.

Large-scale solar projects accounted for 85% of installations with 6,242 MW  (7% YoY decline) and rooftop solar made up the remaining 15%, adding 1,104 MW (33% YoY decline).

By the end of 2019, the cumulative solar installations reached almost 35.7 GW. Large-scale projects accounted for 31.3 GW (87.6%), whereas rooftop solar installations accounted for 4.4 GW (12.4%).

The report notes that the Indian solar market added 1,897 MW in Q4 2019, a 12.8% decrease from 2,177 MW installed in Q3 2019. However, installations were up by 15.6% from 1,641 MW installed in the same quarter of 2018. In Q4 2019, the large-scale solar projects came to 1,593 MW, and rooftop solar installations to 304 MW, an increase of 24.1% from 245 MW installed in Q3 2019.


Solar Installations by Quarter (MW)

Large-scale solar pipeline stands at 23.7 GW currently with 31.5 GW of tendered projects awaiting auctions at the end of Q4 2019.

After a dismal 2019, the solar industry is a bit more optimistic going into the calendar year 2020. Though the economy is yet to tick upwards and market fundamentals remain nearly the same, the optimistic outlook is primarily due to a stronger large-scale solar project pipeline.

“The demand outlook for 2020 looks better with a stronger project pipeline, and we should see the solar market resume year-over-year growth again. But a lot will depend on the economy and lending situation getting back on track, the impact of Coronavirus, and the outcome of the 20% basic customs duty announced in the recent budget,” said Raj Prabhu, CEO of Mercom Capital Group.

India Solar Demand Forecast (MW)

The sector is plagued with issues like delays in DISCOMs’ payment to developers, PPA renegotiations, power curtailment, difficulty in forecasting and scheduling power, access to financing, reimbursement delays, tariff caps, higher cost of participating in tenders, delay in tariff adoption, land and evacuation infrastructure availability, and the looming fear of the coronavirus derailing the supply schedules.

Recently, a basic customs duty (BCD) of 20% on the import of solar cells and modules was announced in the Union Budget of 2020-21 in a bid to protect Indian manufacturers from foreign suppliers.

While the exemption on this duty remains in place, the change has raised a lot of concern in the solar sector as this could potentially impact solar tariffs adversely. The move has led to speculation as to what would happen after the expiry of the existing 15% SGD on imports at the end of July 2020.

Rooftop installations declined for the first time in five years. The report pointed to the slowdown in the economy in 2019 as a significant factor, along with liquidity issues in the market following the NBFC crisis, which made it extremely difficult for installers to finance rooftop projects in a tough economy.

The state of Maharashtra, in particular, has been guilty of trying to discourage net metering and, consequently, the rooftop market. The state has now proposed a grid support charge for net-metered rooftop systems to discourage rooftop solar installations under the pretext of protecting consumers.

In Karnataka, rooftop installers are up in arms against a new rooftop order, which makes the DISCOMs the sole arbiter when it comes to consumers choosing their suppliers. The Karnataka Renewable Energy Systems Manufacturers Association has alleged that the shift from net metering to gross metering will deal a fatal blow to the viability of solar rooftop installations.

While 2019 was a lost year for India’s solar sector, Mercom India Research expects solar installations to rise by 17% YoY to approximately 8.5 GW by the end of 2020.

In 2019, Karnataka was the top state for solar installations, followed by Rajasthan and Tamil Nadu. Karnataka accounted for 29% of the total installed solar capacity in 2019. Karnataka, Rajasthan, and Tamil Nadu together contributed around 70% of the total solar installations in 2019.

“There are several challenges facing the industry but a few fixes that could immediately turnaround the sector would be to remove tariff caps in reverse auctions, getting government agencies to make timely payments and facilitate lending to get the solar market moving in the right direction again,” added Prabhu.

After five consecutive years of decline, coal accounted for a majority of the power installations with 7.8 GW and made up 44.1% of the installed capacity followed by solar with 7.3 GW. Wind accounted for 2.4 GW followed by small hydro and other renewables with 154 MW and 82.5 MW respectively. Even with coal installations rising, renewables collectively still made up a majority of the installations in 2019.

Mercom estimates solar installations in the 65-70 GW range by 2022 based on current market conditions. The government has set a solar installation target of 100 GW by 2022.

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

Get the full report: Mercom India Research’s Q4 & Annual 2019 India Solar Market Update.

Key Highlights from the report:

  • India added 7.3 GW of solar in 2019, a 12% decline compared to 8.3 GW installed in 2018
  • Large-scale solar installations in 2019 accounted for 85% with 6.2 GW, and rooftop made up the remaining 15% adding 1.1 GW
  • Cumulative solar installations reached 35.7 GW as of December 2019  
  • In 2019, Karnataka was the top state for solar with 1.8 GW followed by Rajasthan and Tamil Nadu
  • The top 3 states made up for almost 70% of the solar installations in the year
  • Solar accounted for 41% of new power capacity additions in 2019 behind coal which accounted for 44%
  • About 35 GW of tenders were announced by various organizations in 2019 (8% decline), with over 15.8 GW of projects auctioned (2% increase)
  • In 2019, investments in the Indian solar sector were 16% lower compared to 2018

 For the complete report, visit: https://mercomindia.com/product/2019-q4-annual-india-solar-market-update

 

Image credit: Azure Power