In a surprising development solar power installations in India declined in Q2 2018. Reports say that investment into the sector is expected to decline further over the next few quarters.
The Indian government has some big plans for solar power generation in the country. Way back in 2015, the government set a target of generation of 100 GW of solar power by 2022. Later that year, during the Paris Climate Change summit India also committed to helping other developing nations in tapping the solar power by setting up the International Solar Alliance in partnership with France. Since then a lot of progress has been made in increasing the solar power capacity across the nation and several large solar parks have come up.
However, in a surprising development, new solar power generation installations in India plunged 52 pc to 1,599 MW during the second quarter of 2018, compared to 3,344 MW installed in the previous quarter. According to Mercom India Research’s ‘Q2 2018 India Solar Market Update’, this happened mainly due to uncertainties around trade cases and module price fluctuations.
“The solar installation decline in Q2 2018 after four consecutive quarters of growth was expected and can be attributed to uncertainties around trade cases, module price fluctuations, and PPA renegotiations after record low bids which contributed to the tender and auction slowdown in 2017. All of this resulted in a weaker project pipeline for 2018,” said Raj Prabhu, CEO and co-founder of Mercom Capital Group.
The report also noted that the installations during the quarter under review were down nearly 21 pc in comparison to 2,025 MW installed in the corresponding quarter of 2017. During the second quarter of 2018, large-scale installations totalled 1,184 MW as compared to 2,954 MW in the previous quarter and 1,800 MW in the corresponding quarter of previous year.
The report says that rooftop installations have been growing robustly so far but are expected to slow down until module prices decrease after the safeguard duty impact wears off. Large-scale solar power projects that account for most of the installations fell almost 60 pc from the first quarter.
Import duty on solar panels
The ministry of finance on July 30 agreed on a recommendation given by Director General of Trade Remedies (DGTR) to impose customs duties on imported solar cells and panels.
On July 16, the DGTR had recommended the ministry to impose a two-year safeguard duty on solar products, starting with a 25 pc duty in the first year reduced to 20 pc and 15 pc in the following six-month period. The safeguard duty on solar panels has been imposed on imports from China and Malaysia, as more than 90 pc of panels and modules used in Indian solar projects come from these two countries. It did so on the grounds that such imports were causing “serious injury” to domestic solar manufacturers. This will certainly raise tariffs of future solar projects.
As a result of the slowdown in project installation activity in Q2, the Indian solar sector received investments to the tune of USD 1.86 billion in the second quarter of 2018 according to Mercom. Investments declined 26 pc quarter-over-quarter compared to USD 2.5 billion that poured into the sector in Q1 of 2018.
India uses about 11 GW of capacity from solar panels each year as solar installations grow in line with the government’s objective to install 100 GW of capacity by the year 2022.
According to IBEF in April 2018, total installed thermal capacity in the country stood at 222.69 GW, while installed capacity in hydro and other renewable energy totalled 45.29 GW and 69.02 GW, respectively. Even though there are analysts that argue that solar installation in India are highest in world, credit rating agency ICRA recently argued that only about 80 GW might be available by 2022.
In the annual budget for 2018, the Indian government allocated USD 290 million for installations, up 23 pc from last year.
Reduction in solar panel output
According to a recent research led by the Massachusetts Institute of Technology (MIT), air pollution in Delhi reduced the power generation capacity of solar panels by 12 pc per year from 2016 to 2017, larger than the profit margins of some installations.
In Delhi alone, lost revenue from power generation from planned photovoltaic installations could amount to USD 20 million annually, considering its current installation targets and increasing air pollution, according to the study. The revenue loss is estimated to be about USD 16 million for Kolkata.
The research findings come at a time when the government is actively focusing on renewable energy and solar power installations targets. Earlier this year, the government announced that India would auction solar projects of at least 30 GW every year till 2028. Since most of these installations are planned in urban areas, the impact of the reductions in output could be quite severe, according to the researchers.