Indias cumulative solar capacity surpassed 8.1 GW in August as year-to-date installations reached 2.8 GW, setting the country on course to add 4.8 GW of new power capacity this year, according to a new quarterly update from clean energy research firm Mercom Capital Group.
The nations solar project pipeline has risen to around 21 GW, of which 14 GW is already under development and a further 7 GW scheduled for auction as the effects of Indias National Solar Mission (NSM) take hold. However, external factors are also playing their part in this PV push, not least the influx of record-low cost solar modules from China.
Mercom calculates that Chinese modules flooding the Indian solar market are currently available for around $0.39/watt the cheapest average selling price (ASP) anywhere in the world. Further price falls are expected as Chinas oversupply continues due to harsher market conditions in China prompting leading Tier-1 companies to look at next doors market for customers.
Solar developers operating in India are eager to snap up these affordable solar panels, which comprise 60% of project costs in the country. Local manufacturers, however, are not so buoyed by the current pricing and supply trends.
Low bids, DISCOM concerns
Despite nurturing a soaring solar sector that is among the most dynamic anywhere in the world, Indias solar landscape is not without its pitfalls and problems, Mercom reports. Low bids remain a challenge, and those that struck prices below INR 5 ($0.0746)/kWh are yet to close financing. In Rajasthan, the lowest winning bid in the NSM Phase II Batch 2 auction was INR 4.35 ($0.0649)/kWh, which suggests recent stabilization of bids was merely fleeting.
Distributed Companies (DISCOMs) have also played a role in suppressing solars wider adoption on the grid, preferring during periods of low power demand to purchase cheaper power on the exchanges in favor of solar projects in Tamil Nadu and Rajasthan. Mercom Capital CEO Raj Prabhu writes: "Grid connection and timely evacuation continues to be a big challenge considering solar project developers do not have the benefit of deemed generation," adding that this is an "alarming development" that should be addressed immediately by government in order to restore confidence among developers and investors.
Other lingering concerns include poor incentives in the rooftop sector, where accelerated depreciation is set to fall from 80% to 40% the financial year 2017-18. The governments goal of rooftop solar comprising 40 GW of the 100 GW 2022 target appears "flexible", Prabhu said.
Downstream, the acquisition by Tata Power of Welspuns 1.1 GW power project portfolio for $1.4 billion was noteworthy, while Mercom reports a number of other M&A deals in the pipeline as many debt-laden companies seek ways to consolidate and move into more downstream activity.
Despite these challenges, the overall picture is one of rude health for the Indian solar industry, and sure signs of maturation. The first energy storage tenders were issued in August for 300 MW of capacity, while the Solar Energy Corporation of India (SECI) has also announced a $224 million payment guarantee fund for project developers who build solar plants through the Viability Gap Funding (VGF) scheme.
"Mercom has been calling for a payment guarantee fund for all projects using National Clean Energy Fund (NCEF) for some time to help significantly improve the bankability of projects, reduce borrowing costs and development risks," said Prabhu.
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