The Indian solar sector is witnessing strong growth with cumulative installations reaching approximately 12.8 GW at the end of Q1 2017. Utility-scale projects account for about 12 GW while rooftop installations accounted for almost 850 MW of the installed capacity. The report forecasts 2017 installations to reach approximately 10 GW, a ~130 percent increase year-over-year compared to 4.3 GW installed last year as India becomes one of the top solar markets in the world after China and the United States. The pipeline of Indian utility-scale projects is currently ~12.6 GW and there are approximately 6.1 GW of tenders pending auction.
Six states now have installed capacity of over 1 GW.
"Solar in India has come a long way and 2017 is forecasted to be the best year by far. 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," commented Raj Prabhu, CEO and Co-Founder of Mercom Capital Group.
Extremely competitive reverse auctions fueled by pent-up demand from slowing tender and auction activity are continuing to drive bids to record low levels. Solar tariffs have declined by ~75 percent since 2010. In the recently conducted 250 MW Kadapa Solar Park auction in Andhra Pradesh, bids reached a new record low of Rs.3.15 (~$0.048)/kWh, following the Rewa Solar Park auction in Madhya Pradesh, where bids reached Rs.3.30 (~$0.494)/kWh (levelized tariff over 25 years), over a rupee lower than the previous low tariff of Rs.4.34 (~$0.065)/kWh (recorded in the state of Rajasthan in January 2016).
Tender and auction activity has been slowing down over the last couple of quarters. According to Mercom's India Solar Project Tracker, only about 1.9 GW of solar was tendered in Q1 2017 (1 GW of this was retendered), compared to 3.4 GW in Q4 last year. There were 1.3 GW of solar projects auctioned in Q1 2017, compared to 255 MW in Q4 2016. The slowdown in activity has been disconcerting to developers and manufacturers that have been positioning for much higher levels of activity based on India's solar installation goal of 100 GW by 2022.
Chinese module prices in India have continued to slide with average selling prices coming to $0.32 (~Rs.20.68)/W in the first quarter of 2017, an 11 percent decrease from $0.36 (~Rs.23.27)/W in Q4 2016. Chinese module prices have now fallen by about 33 percent in the last 12 months, enabling the recent low bids of Rs.3.30 (~$0.05)/kWh in Rewa and Rs.3.15 (~$0.048)/kWh in Kadapa.
Rooftop installations in India have totaled nearly 850 MW as of Q1 2017. The government is targeting 40 GW by 2022 through rooftop installations, but policy support currently is minimal. Over 20 states have some net-metering policy, but few have a functioning net-metering program. Other issues affecting rooftop installations include lower accelerated depreciation and the removal of the 10-year income tax holiday.
"Even with some of the challenges, we expect the Indian solar sector to remain one of the most important markets in the world over the next five years." said Priya Sanjay, Managing Director of Mercom Communications India.
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