India’s total installed solar capacity touched 34,154 MW on 30 June, 2019. This capacity is split between utility scale, rooftop solar and off-grid solar as 27,934 MW, 4,960 MW and 1,260 MW respectively. Total project pipeline – projects allocated to project developers and at various stages of development – stood at 19,698 MW as on 30 June, 2019.
Figure: Total installed and pipeline capacity at the end of June 2019, MW
Source: BRIDGE TO INDIA research, MNRE
Notes: ‘Others’ include projects executed under open access, REC and other miscellaneous categories.
Utility scale solar capacity addition had been slowing down in India for the last year and Q2 remained slow with only 1,104 MW of capacity addition against our estimate of 1,536 MW. The slowdown is attributable to many reasons – land and transmission bottlenecks, tight liquidity in the financial system, and increase in many input costs affecting profitability of many projects. Distribution Company (DISCOM) payment delays have also hurt the sector very badly. Rooftop solar remains a bright spot with capacity addition of 515 MW in Q2 2019. Capacity addition share jumped to 28% in 2018-19 from 6% just five years ago.
Figure: Utility scale solar capacity addition, MW
Source: BRIDGE TO INDIA research
Going forward, installation activity should pick up significantly. A total of 13,519 MW is due for completion in the next 12 months but we expect significant slippages due to reasons discussed earlier. Fall in safeguard duty to 15% in Jan-2020 and removal by Jul-2020 should ease concerns for the sector. But there is rising speculation in the market that the government is mulling further duties to protect domestic manufacturers.
Tender issuance has stayed robust with a total utility scale capacity of 10,296 MW issued in Q2 2019, although it was down 35% over the previous quarter. However, many recent tenders have been cancelled and/ or undersubscribed. Gujarat’s 700 MW Raghanesda tender was subscribed by 100 MW in May 2019. Solar Energy Corporation of India (SECI’s) 1,200 MW tender issued in June 2019, 2,000 MW tender issued in March 2019 and 1,200 MW hybrid tenders saw 50%, 53% and 25% undersubscription respectively. Recently, NTPC Ltd.’s 1,200 MW tender found no bidders forcing a deadline extension.
Ministry of New and Renewable Energy’s (MNRE) policy move to adopt an Approved List of Module Manufacturers (ALMM) to address quality issues in solar components is also likely to create further uncertainty in the sector. All installations starting April 2020 need to comply with this policy. There are concerns both about MNRE’s capacity to complete the necessary certification process in time and willingness of international as well as domestic manufacturers to hand over confidential data.
Conclusion and outlook
Capacity addition has been muted for over a year now but the project pipeline looks robust for Q3 and Q4, 2019. It is up to the government to take decisive action to address land acquisition, transmission connectivity and DISCOM bankability issues.
Rising incidents of tender cancellations and undersubscriptions have marred investor confidence, which has been further shaken up by Andhra Pradesh’s move to rescind the PPAs. Overall sentiment in the sector is highly stressed and all eyes are on the government if they can announce measures to revive confidence.