India: Q1/2020 Solar Installations Decline 39% YoY

With 1.08 GW Solar PV Installations In Q1/2020, COVID-19 Brings Down Quarterly Additions In India To Lowest Since Q4/2016: Mercom India Research Lowers 2020 Annual Forecast By 40% To Around 5 GW
03:52 AM (Beijing Time) - 21. May 2020
Annual-Presentation1

Mercom has brought down its annual calendar year PV installation forecast for the Indian solar market to around 5 GW in 2020, lowering it from 8.5 GW it expected previously. (Source: Mercom India Research)

Key Takeaways

  • Mercom India Research says Q1/2020 solar PV installations of 1.08 GW were down 39% annually mainly due to pandemic related shutdowns in China and India
  • It comprises 886 MW of large scale solar and 194 MW of rooftop solar contributing to a cumulative of 36.8 GW at the end of March 2020
  • Mercom has lowered its calendar year guidance for 2020 to around 5 GW, a 40% decline from previous estimate of 8.5 GW
  • Component shortage to impact the industry as will lack of enough labor for project construction or production which may push up labor cost
  • Next few months critical as further extensions may force it to further lower annual expectations

India is slowly lifting its lockdown that was imposed in the last week of March 2020 to curb the spread of COVID-19 pandemic. With the easing of restrictions, its manufacturing industry is getting back on track with several solar manufacturers having resumed operations as well. Other economic activities are also picking up pace.

However, the lockdown has left a negative impact on the country’s solar power ambitions, reported Mercom India Research. It believes supply disruption due to the shutdown in China and the lockdown in India were responsible for a 39% annual and 43% sequential solar demand decline in Q1/2020, when only 1.08 GW PV was installed. Mercom points out this is the lowest quarterly additions in the country since Q4/2016.

On quarterly basis, Q1/2020 additions declined by 43% from last quarter and are the lowest since Q4/2016, as per Mercom India Research. (Source: Mercom India Research)
On quarterly basis, Q1/2020 additions declined by 43% from last quarter and are the lowest since Q4/2016, as per Mercom India Research. (Source: Mercom India Research)

In its report Q1 2020 India Solar Market Update, Mercom explains the 1.08 GW capacity installed in Q1/2020 comprises 886 MW of large scale solar and 194 MW of rooftop solar, accounting for 82% and 18%, respectively.

Till the end of March 2020, India’s cumulative installed solar power capacity had reached around 36.8 GW. Mercom sees a 36.9 GW of large-scale project pipeline till the end of the reporting period along with 38.8 GW of tendered and pending auctions.

Making up 96% of India’s rooftop solar market, the C&I segment is the most impacted in the solar industry as offices and commercial activities had been shut. Mercom says the market expects the government to focus on and encourage the rooftop business while ensuring timely disbursal of subsidies to regain consumers’ confidence.

Challenges remain

As the Indian market slowly opens up, the solar industry is still facing component shortages as shipping from China is yet to resume while a lot of it is stuck at ports, as per the analysts. Other challenges facing the industry currently range from logistical issues and labor shortage as most of the working population has either left for their hometowns in far off villages or are on their way home. These factors impede the project construction or production part.

Shortage of workforce could shoot up labor costs in the short term, it warns, adding that once the supply chain bottlenecks ease, India could see a module oversupply and subsequent price declines.

“The lockdown in the country disrupted the supply chain, lowered power demand, resulted in currency fluctuations making component costs unpredictable, and has exacerbated the liquidity issues. We are cutting our solar demand forecast by about 40% from our previous estimates based on the COVID effect on the market,” said Raj Prabhu, CEO of Mercom Capital Group. The forecast for 2020 for the Indian market is around 5 GW due to project timelines extended or moved to 2021. In February 2020, Mercom had guided for 8.5 GW to be installed in calendar year 2020 (see 7.34 GW: CY 2019 Solar Installations In India).

Nonetheless, Prabhu believes that the next few months are critical as any further extensions due to the pandemic may force it to further reduce its annual forecast. “If the outbreak intensifies after re-opening, then all bets are off. But if things go as planned, the solar industry should be up and running fairly quickly,” he added.

The report can be purchased on Mercom’s website.

Anu Bhambhani

Anu Bhambhani is the Senior News Editor of TaiyangNews

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Anu Bhambhani