Solar’s share of India electricity output grew 81% in last fiscal year

The rapid rise of India’s solar capacity is usually measured in hard gigawatts, but data from the country’s Central Electricity Authority (CEA) has revealed just how much of an impact solar has had on India’s electricity generation capacity in the last fiscal year (FY).

According to the CEA data, in FY 2016-17 solar contributed ~13.5 billion units of electricity – an 81% rise from the ~7.4 billion units generated in FY 2015-16. And while this means that solar still only accounts for just over 1% of total electricity generated in India, it places solar as the country’s fastest-growing new power generation source, says Mercom Capital Group.

A breakdown of India’s electricity generation makeup reveals that thermal remains the dominant source of power at 80.05%, with hydro – at 9.85% – a long way back in second place. Wind power generates 3.7% of India’s electricity, with nuclear at just over 3%.

This data starkly illustrates the long road ahead for India’s renewable energy revolution, while also highlighting the immense opportunity for solar to grow in lockstep with India’s own economy. After solar, wind power was the second-fastest growing source of electricity with 39% growth.

A recent report by the Institute of Energy Economics and Financial Analysis (IEEFA) revealed that Indian state utility the National Thermal Power Corporation (more commonly known as the NTPC) has become the country’s prime off-taker of privately generated renewable energy as it pivots slowly away from fossil fuels.

IEEFA also found that more than 13 GW of coal power projects have been cancelled in India due to increasingly low-cost solar power prices making large-scale thermal projects financially unviable. In May alone, Mercom Capital reports, five major coal projects were cancelled.

GST clarification
Despite solar’s rapid rise – growing close to 10 GW in 2016 alone – and the government’s avowal to support the sector through to its 100 GW target in 2022, a recent tweak of India’s Goods and Services Tax (GST) has spooked developers, with Mercom Capital finding that development activity has been virtually frozen in India since the government revealed that solar cells and modules would be placed into the higher GST slab of 18%.

However, rumblings are afoot that this uncertainty could soon be given clarification by government, with reports in India suggesting that the decision to place solar cells and modules in this higher tax band could be reversed at a June 3 GST Council meeting.

The new rates, if left untouched, would be implemented on July 1, but it has been reported that the Ministry of New and Renewable Energy (MNRE) has informally communicated to the solar industry that reports of a tax hike may, in fact, be an anomaly. If so, it is likely that solar cells and modules will be placed in the lower 5% tax slab, along with wind components.