The Indian solar market grew by 4.3 GW in 2016 – a performance that served to turn heads all over the world as the nation arrived at the PV top table.
However, compared to the Indian solar market’s potential this year, 2016 looks positively pedestrian. Analysts Mercom Capital Group have forecast in their new Q1 India Quarterly Market Update report that India will likely add around 10 GW of new solar capacity in 2017.
This prediction is based on a strong first quarter that has seen India boost its cumulative capacity to 12.8 GW. Of that total, 12 GW is utility-scale solar, with rooftop accounting for just 850 MW of capacity nationwide.
In a country of more than 1.2 billion people, there is incredible scope to boost rooftop solar deployment, and this is set to be the focus for many states and investors over the coming years as India accelerates deployment towards its 2022 goal of 100 GW of solar capacity.
However, of that 100 GW target, 40 GW is set aside for large-scale solar parks, and according to Mercom Capital’s analysis, the pipeline for ground-mount projects stands at around 12.6 GW of additional capacity. Further, there is more than 6 GW of solar tenders pending auction.
“Solar in India has come a long way and 2017 is forecasted to be the best year by far,” said Mercom Capital Group CEO Raj Prabhu. “Rapidly falling tariffs have resulted in solar closing in on parity with coal in recent auctions, which is expected to increase demand in the future. However, tender activity has slowed recently and the government needs to address transmission bottlenecks, finances of distribution companies and slowing demand for continued growth.”
In recent months India has seen record low bids in its reverse solar auctions, with the lowest price set so far at the 250 MW Kapada Solar Park in Andhra Pradesh, where the winning bid was $0.048/kWh. Earlier, the Rewa Solar Park auction in Madhya Pradesh attracted a bid of $0.0494/kWh. Prabhu believes that these record lows are being driven by pent-up demand from slowing tender activity, while ever-tumbling solar component costs also play a part, falling around 33% in the past 12 months.
Compared to Q4 2016, when 3.4 GW of capacity was tendered, Q1 2017 saw just 1.9 GW tendered, of which 1 GW was retendered capacity from previous tenders that were undersubscribed. This slowdown is causing some consternation among developers and manufacturers
Looking further ahead, Mercom expects annual installations in 2018 to match or slightly surpass 2017, with a greater proportion of rooftop solar PV added.
While the spread of solar deployment nationwide remains uneven, six states now boast more than 1 GW each of capacity installed. Some 20 states have already introduced net metering policies aimed at boosting rooftop deployment, but in many parts of the country hurdles to residential and C&I solar growth remain.
“Even with some of these challenges,” said Mercom’s MD of communications India, “we expect the Indian solar sector to remain one of the most important markets in the world over the next five years.”