Solar installations in India in Q1 2019 increased slightly at 1,737 MW, 4% growth compared to 1,638 MW installed in Q4 2018. Installations were down by 49% year-over-year (YoY) compared to 3,377 MW installed in Q1 2018, according to Mercom India Research’s newly released Q1 2019 India Solar Market Update.
Rooftop installations fell by 33% (YoY) with capacity additions of over 260 MW in Q1 2019 compared to 390 MW in Q1 2018. The slowdown was largely due to ongoing elections which made it difficult to get government approvals.
“Activity in the Indian solar market was generally subdued due to general elections. Auction activity also grounded to a halt during the model code of conduct period. Rooftop installations were especially affected,” said Raj Prabhu, CEO of Mercom Capital Group.
According to the report, cumulative rooftop solar installations reached 3,527 MW by the end of Q1 2019. Rooftop installations still only make up 12% of total solar installations and the country has achieved only 9% of its target capacity addition (40 GW by 2022). Lending has become challenging over the past couple of quarters, contributing to slower growth. Net-metering is still the biggest drag on the rooftop market as DISCOMs make implementation difficult due to revenue loss.
The state of Karnataka had the most newly-added large-scale solar capacity in Q1 2019 followed by Gujarat, Andhra Pradesh, Madhya Pradesh, and Tamil Nadu. Large-scale solar installations were concentrated in five states, which made up 99% of installed capacity in the quarter.
The report found that “Due to general elections, tender and auction activity slowed considerably in Q1 2019. Since the election commission’s approval is required for all the new projects, there have been fewer auctions during the model code of conduct period from March 10, 2019, to May 23, 2019.”
Mercom India Research forecasts India to install approximately 9 GW of solar capacity in the calendar year 2019. Mercom’s report estimates solar installations in India to reach 71 GW by the end of 2022, almost 30% lower than the 100 GW target set by the government. However, with an aggressive push and supportive policies, the goal is still achievable.
Tariff caps have been a challenging issue as government agencies have been canceling concluded auctions, leading to a lack of interest shown by developers. Nearly 800 MW of auctions were canceled in Q1 2019 citing high tariff rates. Government agencies have been unwilling to pay for the safeguard duty premium in auctions.
Module price changes in Q1 2019 were minimal quarter-over-over and Indian manufacturers have been performing better after the imposition of the safeguard duty. Chinese module prices have also held steady due to demand globally.
However, project costs declined for both large-scale projects and rooftop projects because of cost reductions in the balance of systems.
Larger domestic manufacturers are faring better as they are able to reduce prices to capture business while smaller manufacturers are struggling. It is unclear how the market will react after the safeguard duty drops to 20%.
More new coal capacity was added compared to solar or any other generation source in Q1 2019 with 58%. Solar accounted for 32% of new capacity added. The quarter is expected to be an outlier and solar is expected to bounce back in the coming quarters, according to the report.
“With the elections out of the way and NDA government coming to the office, we expect the administration to come out with bigger and bolder goals for renewables over a longer time horizon. Even though short-term challenges persist, things look brighter for the Indian solar market after the elections,” said Raj Prabhu, CEO of Mercom Capital Group.
Get the full report: Mercom India Research’s Q1 2019 India Solar Market Update.
is a Research Associate at Mercom India. Prior to Mercom, Pratheeksha was an Associate Analyst at GlobalData where she authored and published syndicated research reports in the power generation industry. She earned her bachelor’s degree in Electrical & Electronics from PESITM and Master’s degree in Electrical Power Systems from the Adichunchanagiri Institute of Technology at VTU University.