The Indian solar market suffered majorly from the impact of the COVID-19 pandemic due to lockdown related challenges. Annual installations suffered with 56% annual decline in calendar year (CY) 2020 down to 3.239 GW, compared to 7.346 GW in the previous year (see 7.34 GW: CY 2019 Solar Installations In India). This, Mercom Capital Group's CEO Raj Prabhu explained, is the lowest annual number for Indian solar in last 5 years. This is in stark contrast to several other solar markets, like Europe or the US, which were hit even harder than India but grew despite the pandemic in 2020.
After a steep drop in installations in India in Q2/2020, the pace picked up in H2/2020 with 438 MW added in Q3/2020 and 1.5 GW in Q4/2020.
In the market intelligence firm's 2020 Q4 & Annual India Solar Market Update, analysts say the 3.2 GW capacity came from 78% or 2.52 GW of large scale projects amid a 60% YoY decline, with rooftop solar adding 22% or 719 MW, dropping 35% compared to the previous year. The large scale capacity or 51% of the total, was added by the states of Andhra Pradesh, Rajasthan and Gujarat. The cumulative installed solar power capacity of the country at the end of 2020 was around 39 GW.
While COVID-19 was a constraining factor last year, there is the continued nagging problem of electricity distribution companies' unwillingness to sign the power sale agreements (PSA). Mercom calculates 17 GW to 18 GW of solar power projects in the country without such an agreement in place.
However, this year is going to be different, according to the report as it forecasts a strong year with more than 10 GW of solar power capacity to be installed in 2021, thanks to a 47.5 GW of large scale solar project development pipeline and 24.5 GW of projects tendered and pending auction at the end of December 2020. Several projects that were to be installed in 2020 were pushed over to 2021 due to the pandemic, adding to the current year's increased pipeline.
Rooftop solar is also set to experience a turnaround, as per the report, with C&I customers have woken up to this technology as one of the cheapest sources of power for them, especially those in the space of agro, textiles, chemicals, pharma, hospitals, and education. Nonetheless, the biggest uncertainty for rooftop solar market is the new net metering policy under which the government has restricted net metering to systems of up to 10 kW capacity, and those with over 10 kW range will have to go for gross metering. Mercom says this provision has caused widespread anxiety among stakeholders as it may 'decimate' this segment.
Prabhu added, "The market is on the verge of experiencing two of its best years-to-date in 2021 and 2022 unless further disruptions in the form of ill-conceived policies hurt growth." The report lists short term challenges for Indian solar such as a rise in module prices, increased shipping and freight charges in the range of 500%-800%, and a surge in raw material costs.
Recently Indian Prime Minister Narendra Modi said despite only 4 GW rooftop solar power capacity installed in the country, his government still aims to reach the targeted 40 GW for this segment in the next 1.5 years. The present administration has committed to reaching 100 GW of installed solar power capacity by December 31, 2022 under its National Solar Mission (NSM) divided between 60 GW of large scale and 40 GW of rooftop solar.
In a recent report on the Indian energy market, the International Energy Agency (IEA) stressed solar power is set for explosive growth in the country, out-competing existing coal fired capacity (see IEA: India's Energy Growth By 2040 Dominated By Solar).
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