Indian Solar Sector Contracts in 2018-19

The Indian Solar sector saw only 6,529 MW addition during the last financial year while Wind energy Sector too recorded a slump in growth.

According to the data supplied by the Central Electricity Authority, 2018-19 saw fresh capacity additions to a paltry 6,529 MW as against 9,010 MW in the previous year. The figures show that the Indian solar sector contracted.

Coming on top of a dismal performance by the solar’s sister, the wind industry, which also added a dismal 1,580 MW in 2018-19, the year was a forgettable year for the whole of the renewable energy industry, according to CEA.

The country today has 30.6 GW of solar power capacity, which splits as 26.7 GW of large, utility-scale plants and 3.9 GW of rooftop plants, according to the US-based Institute of Energy Economics and Financial Analysis (IEEFA). With just three years to go to meet the target of 100 GW, India would have to add 23 GW of capacity each year to 2022.

Industry insiders attribute the poor performance to policy uncertainties. One was the threat of a 70 percent ‘safeguard’ duty on imported modules, which was finally settled at 25 percent. This, according to the market research and ratings agency Crisil, increased costs by 10-15 percent.

Then there was the lack of clarity on the classification of solar modules, inverters and EPC contracts, for the purpose of GST.

And then came the ‘tariff caps’, or the highest price an energy company can offer to sell electricity at, in capacity auctions. To complicate matters further, the infrastructure for evacuating the electricity from the plants did not come up adequately.

It did help that module prices slid from around 32 US cents a watt in mid 2017 to around 23 cents now, but that benefit was eaten up by the depreciation of the rupee. The industry is now looking at the new financial year with hope again.

Ratings Agency Crisil is hopeful that things will improve this year. About 9 GW of capacities have been auctioned out and is up to the industry to execute projects. Crisil, in a March 2019 report, projected new installations of 8.5-9 GW for 2019-20.

The reason for the cautious optimism is that the safeguard duties are set to decline to 15 percent in after January 2020, and finally go after July 2020. IEEFA, which observes that “short mis-steps are getting in the way” of development of solar, expects another near flat year for utility-scale solar with 7-8 GW commissioned by March 2020.