Mercom Capital Group, a global clean energy communications and research firm,
today released its quarterly update on the Indian solar market.
Mercom forecasts about 2,150 MW in solar installations for the 2015
calendar year and expects installations in 2016 to reach approximately 3,645 MW,
a significant year-over-year growth.
“There have been a number of important energy related policy
announcements recently, with increased activity on the ground with tenders and
auctions beginning to occur more frequently” said Raj Prabhu, CEO and
Co-Founder of Mercom Capital Group.
Year-to-date, solar installations in India stand at 1,652 MW, with
cumulative solar installations in the country totaling 4,816 MW.
After several delays, The National Thermal Power Corporation (NTPC) has
begun calling for tenders under the 3,000 MW Phase II Batch 2 JNNSM program.
The first auction under this batch closed with SunEdison placing the winning
bid of Rs.4.63 (~$0.071)/kWh for a 500 MW solar project in Andhra Pradesh. This
bid is the lowest in India to date.
“Bids are falling faster than component costs and there is a concern
that this is a race to the bottom for solar bids in India,” commented Prabhu. “The
pent up demand due to auction delays is leading to aggressive bidding in an
effort to capture market share with an assumption that component costs will
continue to fall no matter what. This is a risky strategy considering the
global market trends over the next 12 months.”
There are about 5,500 MW worth of projects due to be auctioned off over
the next several months between the NTPC and the Solar Energy Corporation of
In one of the more positive developments over the last few months, the
Union Cabinet approved a new policy program, “UDAY” (Ujwal DISCOM Assurance Yojana),
focused on the financial turnaround of power distribution companies. The
government’s proposal would allow state governments to take over 75 percent of
DISCOM debt with a reduced interest rate for the remaining 25 percent. This policy
would work to help the distribution companies achieve solvency and improve
creditworthiness, addressing one of the biggest obstacles in the Indian power
sector over the past decades.
Interest rates for solar projects are beginning to fall after the RBI
rate cuts with rates in the 11-12 percent range compared to 13-14 percent a
year ago. Offtaker risk due to the weak financial health of utilities is adding
at least a percentage point in interest rates making it more expensive to
develop solar projects in some states.
Mercom’s latest updates indicate that 21 states have so far agreed to
set up a total of 27 solar parks with a combined capacity of 18,418 MW. These
projects are part of MNRE’s plan to set up multiple solar parks with individual
capacities of 500 MW or greater. Developers are concerned that solar park fees are
much more expensive than originally envisioned and are confident that they can
execute at much lower costs if the government sticks to facilitating land.
Uttarakand state’s solar auction held in October resulted in the
selection of 181 MW of PV projects with the lowest bid coming in at Rs.5.57 (~$0.086)/kWh.
Some states are facing up to three month payment delays, according to
developers and banks. The best states for timely payments currently are
Gujarat, Andhra Pradesh, Punjab and Madhya Pradesh.
“After three years of stagnantion, the Indian solar market is set to
experience strong growth over the next several years,” further commented
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Mercom Capital Group
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