Solar installations in India to top 4.8 GW in 2016

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India has reached 2.8 GW in solar installations year-to-date and cumulative installations have reached 8.1 GW as of August 2016, according to Mercom Capital Group report.

In its quarterly forecast, Mercom has mentioned that about 4.8 GW of solar to be installed during 2016. The solar project pipeline in India is now approximately 21 GW, with 14 GW under development and 7 GW scheduled to be auctioned.

“Solar installations and its share of energy generation has picked up speed but distribution companies continue to be a drag on the sector and are showing reluctance to purchase solar in light of low power demand and cheap power availability on the exchanges,” Raj Prabhu, CEO and Co-founder of Mercom Capital Group.

This is an alarming development that the central government should address immediately to restore confidence among developers and investors,” he added.

Low bids are still a challenge and projects with bids below ₹5 per kWh have yet to close financing. Although bids stabilised somewhat, they fell again with the lowest reaching ₹4.35/kWh in the latest JNNSM Phase II Batch 2 auction in Rajasthan.

With solar panels making up approximately 60 per cent of project costs in India, China’s oversupply issue is a big boost for Indian project developers but not so much for Indian manufacturers.
Current incentives have not been enough to move the solar rooftop market forward.
According to a recent MNRE report, the Goods and Services Tax (GST) bill will largely be a negative for the solar sector. However, the details are not yet determined and it is still unclear whether renewable energy will be exempt. Developers expect the ‘change in law’ clause in PPAs to protect them from the negative impact of GST.

Consolidation activity has picked up in the sector, especially in the downstream segment. Welspun’s 1.1 GW project portfolio was acquired by Tata Power earlier this year for $1.4 billion (~₹9,380 crore). There are a number of other M&A deals in the pipeline.

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