Solar Fastest Growing New Energy Source in India: Mercom Capital Group

Global clean energy communications and research firm, Mercom Capital Group released its quarterly update on the Indian solar market on Monday, 6^th June. Mercom predicts approximately 5 GW of solar installations in India for calendar year 2016.

Mercom in its report states that cumulative solar installations in India crossed the 7.5 GW mark as of May 2016 with about 2.2 GW installed so far this year, more than all of the solar installations in 2015.

The solar projects in pipeline has surpassed 22 GW with ~13 GW under construction and ~9 GW in the Request for Proposal (RfP) process.

“The Indian solar market is growing in size but the question is: is it too much too fast, as infrastructure and systems have not kept pace with auction announcements. For the sector to move from 2 GW to a 10 GW a year market, work still needs to be done,” said Raj Prabhu, CEO and Co-Founder of Mercom Capital Group.

The government’s push towards solar has started to show results, at the end of FY2015-16, solar represented 2.5 percent of the net installed capacity in India, up from 1.4 percent a year ago, and was the fastest growing new energy source in the country said the r firm in a statement.

Solar accounted for 17.4 percent of all renewable energy generation in FY2015-16 compared to 10.5 percent in FY2014-15.

Low bidding levels have been a major concern at a time when the Indian banking sector is going through its own challenges, which could make borrowing much more difficult in the short-term. As per the Reserve Bank of India (RBI) data, bank loans worth Rs.7 lakh crore (~$103 billion) were under stress as of the end of 2015.

“There is no set rule which says tariffs below Rs.5 (~$0.0735) cannot be financed. Some banks are seriously looking at projects in the Rs.4.5-5 (~$0.0662-0.0735) tariff range, but financing depends on sound project economics, borrower credibility, a strong balance sheet and the developer’s ability to service debt,” said Raj Prabhu.

The report states that of the estimated $8 billion (~Rs.54,400 crore) collected under the Clean Environment Cess to date, only about $3 billion (~Rs.20,400 crore) is expected to be transferred to the National Clean Energy Fund (NCEF) and only 23% of the tatal amount collected under the Clean Enviornment will be allocated to MNRE.