2017 Q4 & ANNUAL INDIA SOLAR QUARTERLY MARKET UPDATE – 9.6 GW Installed in 2017
Indian solar installations in calendar year 2017 grew exponentially with the addition of 9,629 MW in new large-scale and rooftop solar capacity. The installation total was more than double the 4,313 MW installed in 2016 and made 2017 the best year for solar installations in India to date. The robust growth boosted the country’s total installed capacity to 19.6 GW as of December 2017. However, despite the encouraging installation numbers, many completed projects were unable to get commissioned before the end of the year due to evacuation and grid connection delays.
Large-scale solar installations accounted for the bulk of total installations in 2017, nabbing about 90 percent of the total with 8,634 MW installed, while the remaining 10 percent came from rooftop solar additions totaling 995 MW. Rooftop installations grew by 56 percent year-over-year with cumulative installations totaling nearly 1.6 GW as of December 31, 2017.
In 2017, Telangana and Karnataka installed over 2 GW each and accounted for approximately 50 percent of all installations across the country. Telangana became the first Indian state to surpass 3 GW of cumulative solar installations.
India’s pipeline of utility-scale projects under development stood at approximately 10.6 GW at year-end 2017, with another 4.3 GW of tenders pending auction.
However, a host of challenges now facing the sector has Mercom forecasting total installations to decline by about 22 percent year-over-year to 7.5 GW in 2018. The lower forecast reflects a smaller pipeline of projects scheduled for commissioning in 2018. Auction activity was not very robust in 2017 and though there was a surge in activity at the end of the year, most of the projects that were tendered are not likely to be commissioned until 2019, a factor that is reflected in our five-year forecast.
Solar bids/tariffs stabilized around the ₹2.5 (~$0.039) per kWh mark since the lowest solar tariff of ₹2.44 (~$0.0370)/kWh was quoted by ACME Solar in Bhadla Phase-III solar park auction held in May 2017.
Solar accounted for approximately 45 percent of all new generation capacity added in India during 2017. This robust installation activity also made solar the largest single source of new power capacity additions in 2017.
There are several challenges facing the industry that threaten to slow installation growth in 2018.
In January 2018, the Directorate General of Safeguards Customs and Central Excise recommended imposing a 70 percent safeguard duty on imported solar cells and modules from China and Malaysia for 200 days. The Madras High Court placed a temporary stay on the recommendation but, in the meantime, the unexpected and aggressive recommendation has brought the industry to a standstill.
Also hanging over the industry’s head is the unresolved anti-dumping case, which had no major developments in the fourth quarter of 2017. The Directorate General of Anti-Dumping (DGAD) is expected to issue a recommendation in the second half of 2018.
The port duty is another hurdle causing issues for developers. The unexpected 7.5 percent (plus education cess) duty came after Indian ports abruptly began reclassifying solar modules in the second half of 2017. Though the government has stepped in to make it possible for developers to pay a bank guarantee or a provisional bond to have their modules released from port custody, the issue has not been fully resolved.
Chinese module ASPs (average selling price) increased for the second-quarter-in-a-row in Q4 2017 and caused pain for developers who won projects at extremely low bids. ASPs rose by approximately four percent during Q4, defying developer expectations that they would decline. Chinese module ASPs increased by a total of 19 percent in the second half of 2017.
The imposition of any additional duties would make solar more expensive and potentially scare away financially strapped distribution companies (DISCOMs) who are looking to procure the cheapest power generation source available.
On the positive side, more than 3 GW of large-scale solar projects were tendered in December 2017 alone. Once the cloud of uncertainty passes, most of these projects are expected to come up for commissioning in 2019 and beyond – a factor that is reflected in our forecast.
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