The Indian solar industry did not fare as well as expected in 2019. The year saw some state-level policy upheavals, auction delays and cancelations, and a sluggish economy, among a range of other problems that thwarted the pace of solar installations. As the year comes to an end, Mercom looks back at the developments that got the most attention from our readers worldwide. Here are some of the top headlines from 2019:

35 GW of solar Installed, 65 GW More to go for India to Reach its 100 GW Solar Target

Total solar installations in India have crossed the 35 GW mark, according to Mercom’s India Solar Project Tracker. The country has a goal of reaching 100 GW of solar capacity by the end of 2022. Out of the 35 GW, ~31 GW of large-scale solar projects were in operation as of November 2019, while 4.1 GW of rooftop solar installations were recorded as of September 2019. India needs to install at a rate of over 20 GW a year to reach 65 GW of solar capacity in the next three years.

Accurate Forecasting of Renewable Generation a Tough Task for Solar & Wind Developers

Renewable energy generation, especially from wind and solar power, is variable, due to its dependency on the weather. The most critical scheduling input comes from weather forecasting agencies. Without accurate weather prediction, it is impossible for a renewable generator to submit accurate schedules. With the seasonal variations, the generation frequency of renewables changes drastically in a shorter period, which the grid operators do not have the visibility into since until recently, the wind and solar generators were exempt from any forecasting and scheduling responsibilities.

India’s E-Commerce Industry: Untapped Market for Rooftop Solar

The commercial and industrial (C&I) segment is growing at a faster pace due to attractive solar tariffs as compared to retail power prices. However, even this segment has slowed down this year as installers have struggled to obtain financing. The 1 MW net metering cap has restricted rooftop growth. While educational institutions are an attractive rooftop solar market and corporate social responsibility funds can be tapped for its growth, the e-commerce sector can also be an attractive potential market for rooftop solar.

Corporate Social Responsibility Funds Can be an Effective Tool for Solar Expansion

The concept of Corporate Social Responsibility (CSR) that was introduced through the Companies Act 2013 puts the onus on companies to formulate policies that will help uplift the community. As per the Companies Act, companies with a net worth of ₹5 billion (~$70.5 million) or more, or a turnover of at least ₹10 billion (~$141 million), or a net profit of a minimum ₹50 million (~$705,000), have to spend 2% of their average three-year annual net profit towards CSR activities in a given financial year. Even though the policy has been in place for years, compliance has been an issue, and the government is trying to enforce the CSR compliance aggressively.

Lack of Insurance for Solar Modules Holding Back India-Made Modules

Lack of insurance products for solar PV modules in India is a problem that needs to be addressed. Indian solar module manufacturers often point out that the Chinese government has made it a point to provide module insurance, thereby making it more attractive to solar PV project developers. Insurance generally backs up the warranty that’s extended by the manufacturers to their clients. The warranties generally are 10-year product warranty and 25-year performance warranty. The insurance companies usually inspect the manufacturing unit before extending the insurance offer for projects of 2 MW and above. They also offer export insurance. However, not all manufacturers have insurance.

Harsh Penalties for Deviation Settlement is Playing Havoc with Solar, Wind Projects

Due to the intermittent nature of wind and solar energy, forecasting and scheduling are essential for stable and efficient grid management. Over the past couple of years, central and several state electricity regulatory commissions have issued forecasting guidelines for the industry. These guidelines provide a methodology in case there is a deviation in the generation, and developers are required to pay penalties due to these deviations. This process is called deviation settlement mechanism (DSM) through which developers compensate electricity grid infrastructure providers for errors in forecasting and scheduling of power generated by their projects.

Land is Still the Biggest Impediment for Large-Scale Solar Development

Even with the headway made in the solar sector, large-scale project development is not easy. After hearing from solar developers, Mercom found that land acquisition, transmission, and successfully acquiring approvals remain a challenge to commission large-scale projects on time. Land acquisition is one of the single biggest challenges, and even the most experienced developers seem to have problems with it. Developers mentioned that solar park projects, where the government provides land, are also becoming increasingly competitive, forcing them to look at other state tenders. However, even the government is running into difficulties with respect to acquiring land and transmission infrastructure.

India’s NBFC Crisis Exacerbating Financing Challenges for Utility-Scale Solar Projects

Since September 2018, India’s Non-Bank Financial Companies (NBFC) have been in a crisis after Infrastructure Leasing, and Financial Services (IL&FS) admitted to defaulting on several payments to its creditors, consequently leading to a liquidity crisis. Broadly, the cause of the problem was how NBFCs had borrowed money from banks and investors to finance long term infrastructure projects stalled due to several reasons. This has essentially led to the drying up of funds in such financial institutions, making them unable to extend credit to infrastructure, housing, and retail sectors.

Serious Policy Push Needed to Get India’s Rooftop Solar Market to the Next Level

New policy ideas and implementation by central and state governments is the need of the hour as we are beginning to see some slowdown. Most of the growth in the rooftop segment is currently coming from C&I consumers, but residential rooftop has lagged due to financing challenges and unfriendly net metering policies in states where the policy exists mostly in name only. Net metering has always been seen as a threat by DISCOMs and has been a drag on the rooftop sector. Approval processes can be lengthy which can last anywhere between three to six months, discouraging most consumers.

Small Rooftop Solar Companies in India Struggle to Find Viable Financing Options

Financing residential rooftop for small businesses has been extremely challenging. Compared to the United States or Europe, where every company and individual has a credit risk profile, India lacks such a system making it extremely risky to lend. A new system or program is needed to finance such consumers and expand the reach of rooftop solar. The rooftop segment is still relatively small and new, and banks have yet to get comfortable lending to these projects.

Image credit: Solariaenergia