Installations in the Indian solar market increased by 4% to 1,737 MW in CY Q1 2019, a 49% year-over-year decrease but a 4% quarter-over-quarter increase, according to Mercom India Research’s newly released Q1 2019 India Solar Market Update. Rooftop installations, however, fell by 33% year-over-year (YoY).
A significant development in Q1 2019 was the decline in rooftop installations after four quarters of solid growth. Most of the decline can be attributed to the difficulty faced by installers in getting the required approvals due to general elections. The rooftop market is expected to bounce back in the second half of the year.
Mercom India Research forecasts India to install approximately 9 gigawatts (GW) of solar capacity in the calendar year 2019.
The large-scale solar project development pipeline for India stands at 19.4 GW with 31.7 GW tendered and pending auctions at the end of Q1 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.
Bucking the trend from recent years, more new coal capacity was added compared to solar or any other generation source in Q1 2019 with 58%. Solar, which has been the most added new capacity almost every quarter over the past couple of years accounted for 32% of new capacity additions.
According to the report, India’s cumulative installed capacity reached 30 GW at the end of Q1 2019. However, rooftop installations still only make up 12% of total solar installations and the country has achieved only 9% of its targeted rooftop capacity addition of 40 GW by 2022.
Tariff caps have been another contentious issue as government agencies have been canceling auctions after they have been conducted and winners announced. This has led to a lack of interest in some of the recent auctions. Over 800 MW of solar auctions were canceled in Q1.
Payment delays have cropped up again in the first quarter in Andhra Pradesh, Tamil Nadu, and Telangana. Some instances in Madhya Pradesh and at a DISCOM in Karnataka have also been reported to have payment issues.
With the increase in demand for domestic modules over the past eight months, the imposition of the safeguard duty has helped domestic manufacturers. However, starting in July 2019, the safeguard duty rate will drop to 20%.
According to the report, rooftop solar has plenty of growth potential but requires better policy and suitable financing mechanisms. Lending has become challenging over the past couple of quarters, which has contributed to slower growth. Net-metering issues and to a larger extent, financing difficulties, have also contributed to the slowdown in the rooftop solar market.
Larger domestic manufacturers are faring better as they are reducing their prices to capture business. Smaller manufacturers meanwhile are struggling. It is unclear how the market will shake out after the safeguard duty drops to 20%, said the report.
Module price changes in Q1 2019 were minimal quarter-over-over. Project costs declined for both large-scale and rooftop projects.
“With the elections out of the way and NDA government coming back 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.
Key Highlights from Mercom India Research’s Q1 2019 India Solar Market Update.
- Solar installations in India in Q1 2019 totaled 1,737 MW, up by 4% compared to 1,638 MW installed in Q4 2018 and down 49% compared to 3,377 MW added in Q1 2018
- In Q1 2019, large-scale installations totaled 1,474 MW (85%), while rooftop installations accounted for 263 MW (15%)
- Cumulative installed solar capacity in India reached 30 GW at the end of March 2019. Of this, cumulative rooftop solar installations amounted to 3.5 GW
- Over 12 GW of solar was tender, and 3 GW was auctioned in Q1
- Mercom forecasts India to install approximately 9 GW of solar capacity in the calendar year 2019
Solar accounted for 32% of the new power capacity added in Q1 2019
Renewable energy capacity additions continue to increase at a significant pace in India, accounting for approximately 22% of India’s power capacity mix cumulatively.
In Q1 2019, investments in the Indian solar sector totaled over $2.8 billion, 12% lower compared to investments made in Q1 2018.