Solar installations to increase 3-fold to reach 10 GW in 2021: Mercom
Mercom India Research is forecasting over 10 GW of solar installations in 2021 compared to 3.2 GW in 2020 - the year in which the installations declined by 56 per cent over 2019.
Bengaluru, February 23, 2021
Solar capacity addition is expected to reach 10 GW in 2021 - a 3-fold rise compared to 2020, according to the newly released 2020 Q4 & Annual India Solar Market Update by Mercom India Research. India added 3,239 megawatts (MW) of solar capacity in the calendar year (CY) 2020, a 56 per cent decline year-over-year (YoY), compared to 7,346 MW installed in CY 2019.
Large-scale solar projects accounted for 78 per cent of installations with 2,520 MW and saw a 60 per cent YoY decline. Rooftop installations made up the remaining 22 per cent adding 719 MW, a 35 per cent drop YoY. Andhra Pradesh, Rajasthan, and Gujarat were the top three states for large-scale solar capacity additions, representing around 51 per cent of 2020 installations.
Raj Prabhu, CEO of Mercom Capital Group, commented, “India’s solar installations in 2020 were the lowest in five years. While other top solar markets in the world have experienced positive growth, India, which had one of the most stringent lockdowns in response to the pandemic, took a while to get back up and running. However, we expect the industry to experience significant positive growth in 2021.”
While COVID-19 was a huge factor, another significant bottleneck in the market has been the difficulty facing government agencies to get distribution companies (discoms) to sign power sale agreements (PSA). This has left about 17-18 GW of projects without a PSA.
The Mercom report highlights other short-term challenges such as the rise in module prices, increased shipping and freight charges in the range of 500 per cent-800 per cent, and a surge in raw material costs. As a result, the average large-scale solar project costs increased slightly by 2 per cent quarter-over-quarter in Q4 2020. However, project costs were 2.5 per cent lower compared to the same quarter in 2019, adds the report.
Once economic activity resumed post lockdown, installations picked up in the second half of 2020. The pandemic has made solar more valuable to commercial and industrial (C&I) customers, noted the report. Rooftop solar is one of the cheapest sources of power for C&I customers considering the high retail tariffs. Booming sectors like agro, textiles, chemicals, pharma, hospitals, and education were some of the industries that have been pushing to go solar.
The rooftop solar market is experiencing a turnaround, with installations improving significantly over the second half of the year. Fourth-quarter was the strongest for rooftop installations, and the report predicts momentum to continue into Q1 2021.
The biggest uncertainty looming over the rooftop solar market is the new net metering policy, which restricts net metering to rooftop solar systems of up to 10 kW and mandates gross metering on systems above 10 kW. The provision has caused widespread anxiety among stakeholders who fear that it may decimate the Indian rooftop solar segment.
According to Mercom, India had a robust large-scale solar project development pipeline of 47.5 GW, with another 24.5 GW of projects tendered and pending auction at the end of Q4 2020.
Mercom India Research is forecasting over 10 GW of solar installations in 2021. “The solar industry has shown incredible resiliency amid all the chaos brought on by the pandemic. The market is on the verge of experiencing two of its best years-to-date in 2021 and 2022 unless further disruptions in the form of ill-conceived policies hurt growth,” said Prabhu.
The share of solar power in India’s installed power capacity mix reached 10.3 per cent, exceeding that of wind-based power sources (10.25 per cent) for the first time. Solar, with 48 per cent, accounted for the majority of new power capacity additions in 2020. Renewable energy sources accounted for about 78 per cent of the new power capacity added in 2020.
The Indian solar market added 1,505 MW in Q4 2020, a 244 per cent increase, compared to 438 MW installed in Q32020. However, installations were down by 21 per cent compared to 1,897 MW installed in Q4 2019.