The surge of Indias solar sector in the past 18 months has seen the nation leap up the global table in terms of cumulative installed capacity, with analyst firm Bridge to India reporting this week that the country now boasts 8.1 GE of solar capacity.
In the past 12 months some 3.6 GW of new capacity has been added, the analysts said, representing an 80% growth in capacity during that time driven largely by the four southern states (Tamil Nadu, Andhra Pradesh, Kerala and Karnataka), which have accounted for 2.7 GW of new capacity in the past year.
According to Bridge to India, six states Rajasthan (1,307 MW), Gujarat (1,112 MW), Madhya Pradesh (756 MW), Tamil Nadu (1,368 MW), Andhra Pradesh (961 MW) and Telangana (923 MW) account for 80% of Indias installed capacity, against just 38% of the countrys overall power consumption.
Solar penetration is lower elsewhere, particularly in power-hungry states such as Maharashtra, Karnataka and Uttar Pradesh, meaning market growth beyond 2018 is likely to depend on fresh impetus emerging from these states in particular.
The current solar pipeline in India stands at 14 GW, of which more than half 55% – is to be located in just four southern states thanks to a growing power need and generous FITs. In Tamil Nadu, for example, the FIT of INR 7.01/kWh (US$ cents 10.4/kWh) has driven sustained investment and commissioning of solar and wind plants.
Recently completed tenders of more than 14 GW demonstrate that the southern states will account for around 60% (8.7 GW) of new solar capacity over the next two years, with Karnatakas pipeline at 3.3 GW the largest in the country.
However, writes Bridge to India associate director, consulting, Jasmeet Khurana, such heavy regional concentration of solar capacity addition raises two key issues. "First, where is future demand going to come from? This is a growing concern for the sector as India faces a unique problem of excess power supply and most of the big power consuming states seem understandably reluctant to set up new solar capacities."
Khurana added that grid balancing and management would become increasingly critical for sustainable growth of the solar sector. "The government is planning upgrades of transmission infrastructure through its green energy corridor program, but such projects take much longer than the 12-18 months it takes to commission a solar project."
Accordingly, says Khurana, states with high renewable penetration such as Tamil Nadu and Rajasthan are already facing grid curtailment issues, and thus are harming project cash flows and ROI expectations for investors.
For the calendar year, Mercom Capital expects India to add 4.6 GW of new solar capacity, and reports in its India Project Tracker that the solar project pipeline is 21 GW, of which 14 GW is under development. Developers are growing increasingly concerned that record low bids in the solar auctions are stripping projects of their profitability, despite falling Chinese module prices and an impending Chinese oversupply as that market enters a second half slowdown.